Phila. Councilman Allan Domb’s lonely fight to kill DROP

Cutting back the infamous DROP program, which showers retiring city workers with windfalls, is proving to be nearly impossible with an election year approaching.

City Councilman Allan Domb introduced legislation in September that would eliminate the controversial pension perk for any new hire who is not represented by one of the major unions. But three months later, Councilwoman Cherelle L. Parker, who is in charge of the Committee on Labor and Civil Service, has not held a required hearing on the bill.

The Deferred Retirement Option Plan allows city employees to collect a paycheck and a pension at the same time during their last four years of employment. The pension payments are deposited into an interest-bearing account and paid in a lump sum when the employee retires. The perk, introduced as a pilot program in 1999, has been estimated to have cost taxpayers at least $237 million as of 2015.

Domb says he is worried about the future of the pension fund, which only has 45 percent of the money it needs to fully pay the pensions of 66,000 city retirees and employees.

"I want to make sure we live up to our promise to those 66,000," Domb said last week.

Introduced by then-Mayor Ed Rendell, DROP was designed to keep top employees on the job longer and allow the city to better plan staffing in critical areas. Eventually the program was opened to nearly everyone in government, including elected officials, and costs mushroomed.

Previous attempts to get rid of DROP, which were supported by Mayor Kenney when he was a councilman, were fruitless. And with both the mayor and Council members up for re-election in 2019, the political power of municipal unions makes it unlikely that Domb will succeed.

Since Domb introduced his bill to eliminate DROP for nonunionized city workers hired after Jan. 1, the city's two municipal-worker unions, AFSCME District Councils 33 and 47, have put on a full-court press against the bill. The Kenney administration has also raised concerns with Domb during two closed-door meetings.

At first, Kenney's top finance, pension and labor deputies told Domb that his bill wouldn't have much of a fiscal impact. It would save about $5.5 million to $7 million over the next 10 years. In less than three years, the city has hired 1,140 nonunionized workers, but the Kenney administration says that number doesn't take into account that people have left city government and that since 2016, the net number of nonunionized employees is only 410.

Still, the longer employees stay, the fatter their pensions and DROP payments get. Domb said he's thinking about the long term.

"I do think in 20, 30 years it will make a difference," he said. "I'm trying to avoid a major crisis."

(Kenney's chief of staff, Jim Engler, said negotiations for the current AFSCME contracts led to creation of a hybrid pension plan that would cap defined benefits at $65,000 for all new non-uniformed union and non-union workers. That change, in addition to increased contributions by all employees, is expected to provide some savings to the pension fund.)

In a three-page letter Pete Matthews, president of D.C. 33,  called Domb's bill "anti-worker, anti-union."

"It also sets the stage to take benefits away from new union workers and, eventually, all workers," Matthews said in the Oct. 30 letter.

Once the nonrepresented employees no longer have DROP, union leaders fear the city will use the  issue of fairness to try to bargain DROP off the table in contract negotiations.

In a second meeting on Nov. 9 arranged by Parker, Kenney's team and union representatives told Domb that his bill is contrary to the city's tradition of negotiating with unions first and then giving the nonrepresented employees the same benefits.

Domb said he would be OK with police officers and firefighters keeping DROP but doesn't think the nonuniformed employees should have it.

The city's pension plan allows those employees not only to take DROP but also to include overtime in their pension and DROP calculations. Once they retire, they, along with retired police officers and firefighters, are also eligible for another pension bonus that comes from the Pension Adjustment Fund. The city's fiscal watchdog, PICA, has recommended that the city get rid of both DROP and the adjustment fund, seen as drains on a starved pension fund.

"It is a Rolls-Royce plan and we are on a Buick budget," Domb said. "I think to the residents of the city — many who don't get a pension — it's a slap in their faces."

The public, however, is not likely to hear both sides of the argument on this bill. Parker is not scheduling a hearing for the bill any time soon, or perhaps ever.

"During and after the briefing, it became obvious that there were significant questions and concerns with Councilman Domb's bill, significant enough for me to realize that I need to do more work with the sponsor of the bill and all affected parties to ensure that these questions and concerns are addressed," Parker said.

Parker received substantial labor support, including from municipal unions, during her successful run for City Council in 2015.

Domb, who acknowledged he has no support from his fellow Council colleagues on the bill, said dropping DROP might be an easier conversation after the May primary election.

Correction: An earlier version of this story inaccurately reported the pension cap for new non-uniformed employees.