"What's black and white and read all over?"

Wednesday, January 23, 2008
Posted 8:43 PM by

Philly facing financial trouble, again

Is that William Penn atop City Hall or a city taxpayer preparing to jump?As fast as you can say "Yo," new Philadelphia Mayor Michael Nutter will soon be facing the first major financial test of his young administration, a new report finds.

Pension and health insurance costs for city workers will soon overwhelm Philly's budget, consuming about one-quarter of all spending by 2012, according to the "Quiet Crisis" report released Wednesday by the The Economy League and The Pew Charitable Trusts.

Among its findings:

  • The number of city pension recipients is now higher than the number of active city workers - 33,907 claimants in 2006 versus 28,701 employees. And that disparity will only increase in the coming years as more and more city workers reach retirement age.

  • The average annual city pension ranges from $29,000 for municipal employees to $42,000 for firefighters - comparable to other cities. But Philadelphia's employees contribute less of their own money into the pension fund than in other cities.

  • For many years in the 1970s and 1980s the city paid little to nothing into the pension fund. In 1999, right before the dot-com bubble burst, the city issued $1.25 billion in bonds to pay for the unfunded liability, driving pension costs even higher. Nine years later, the city's pensions remain just 52 percent funded.

  • Three of the city's four unions do not require their employees to make any monthly contribution for insurance coverage. Meanwhile, health insurance costs have risen 80 percent from fiscal year 2002 to fiscal year 2007. This year the total costs rose to $374 million or nearly 10 percent of the city's total budget.

  • Philadelphia is unique among major cities in that it does not directly control its workers' health care costs and thus cannot compel changes in coverage or undertake cost-saving measures. Instead, the city pays each labor union, which in turn negotiates its own coverage with private health insurers.

Given the sweetheart deals the unions have gotten in the past, it's more than ironic that Nutter has postponed releasing his first proposed city budget from next Thursday to Feb. 14 - Valentine's Day.

Nutter said he needs the extra two weeks to factor in how much more money police will need to tackle the city's just-declared crime emergency, even though the city's murder rate climbed precipitously under the eight years of his predecessor, now-retired Mayor John Street.

In 2003, Street wanted to end the city's Deferred Retirement Option Program, which allows long-time employees to pick a retirement date four years down the road, then amass pension payments while still working and collecting salaries. A year later, after he won re-election, he applied to be part of it.

Under that program, Street exited office on Jan. 7 with a $563,000 lump sum and an annual pension from the city of $115,700.

The new report says the DROP program "does not appear to be meeting its mission of keeping experienced workers on the job longer in a way that is cost neutral."

No kidding.
 |  0 comments  |  |  RSS Feed | Add to Technorati Favorites

This Week's Rants | The Daily Rant Archives

Creative Commons License
The Daily Rant by Dave Ralis is licensed under a Creative Commons Attribution 3.0 United States License.