Binge benefits
Like infatuated schoolboys afraid of offending a sweetheart, past Philadelphia mayors have shied away from offending unions by restructuring the city's employee pension system. That's a sign of union clout within the city Democratic Party, which has been the affiliation of every mayor for the past 60 years. That reality makes it hard to believe that the next mayor will do better. But voters must choose someone who seems likely to try.
Like infatuated schoolboys afraid of offending a sweetheart, past Philadelphia mayors have shied away from offending unions by restructuring the city's employee pension system. That's a sign of union clout within the city Democratic Party, which has been the affiliation of every mayor for the past 60 years. That reality makes it hard to believe that the next mayor will do better. But voters must choose someone who seems likely to try.
The pension system hasn't adequately accounted for the diminished pool of city workers contributing to it or the huge bite that the 2008 recession took out of investments. The fund has dwindled to less than half the $9 billion it would take to pay retirees what they are owed.
The roots of the problem go back to the successive mayoral tenures, from 1962 to 1980, of James Tate and Frank Rizzo, who blithely exchanged pay raises and hefty pensions for union election support. Mayor Ed Rendell sold bonds to put more cash in the fund, but the interest was steep. Mayor John Street cut the city's contribution, increasing the fund's deficit, while City Council overrode him to pay out more benefits regardless of the system's health.
Mayor Nutter has done more than any of his predecessors to address the pension system's structural problems. He got the police and firefighter unions to agree to a 1 percent increase in future members' contributions to pensions. Those unions also agreed to offer every new recruit a cheaper, but optional, retirement plan that includes a 401(k). And after years of stalemate, Nutter also negotiated deals that included increased pension contributions from city workers in the white-collar and blue-collar unions.
But further moves to bring pension costs down must fall with the next mayor. A good start would be to increase all nonuniformed workers' pension contributions, which, at about 2 percent, are much lower than the national average of 5 percent. Five percent is also what most city police and firefighters contribute to their pensions.
The next mayor must somehow find the leverage to get the unions to mandate less costly "defined-contribution" plans for new employees. The voluntary 401(k)-type programs now offered by the police and firefighter unions are languishing because their members are opting to pay more for traditional "defined-benefit" plans.
With 34,000 retirees in the system, the city spends about 16 percent of its annual budget on pension benefits. The average pension is only about $18,000 a year, but the system is also paying out much higher sums - like the $130,000 a year going to former City Council President Anna Verna, who also received a bonus of more than $500,000 through the deferred-retirement program known as DROP, which Nutter tried to end.
The next mayor should revisit selling city assets such as the Philadelphia Gas Works to reduce the unfunded pension liability. That may mean a battle with Council President Darrell Clarke, who blew up Nutter's deal to sell PGW. At the time, Clarke was expected to run for mayor, which may explain his zeal to save the union jobs that might have been lost if the utility were sold. A mayor who puts the city's best interests first would be preferable.