Philadelphia Mayor Michael Nutter is expected to veto City Council’s efforts to reform the controversial pension program known as DROP. Nutter says the Deferred Retirement Option Plan has cost Philadelphia more than $250 million.
Philadelphia’s pension plan, which is “severely distressed,” has less than half the assets needed to pay its obligations to retirees. But bit by bit, it’s getting better. Once its assets go above 50 percent of its liabilities, it will then be considered “moderately distressed.” It must to reach 90 percent before it’s taken off the distressed list.
State law requires pensions be paid, no matter what.
The executive director of the Public Employee Retirement Commission, which oversees Pennsylvania’s municipal pensions, said many towns and cities across the country are in the same boat as Philadelphia because tax revenues are down.
“And because I now don’t have the money to spend, I have to look more closely at how much I’m going to allocate to different public purposes,” said Jim McAneny, describing the scenario many municipalities face. “The fact that I have this obligation that has to be paid first, staring me in the face, makes the pension issue more problematic to the budget makers.”
McAneny, who said the majority of the Pennsylvania’s municipal pension funds are not distressed, said Philadelphia is not the worst. Pittsburgh’s pension fund is only 30 percent funded, and is under threat of a state takeover.