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Philadelphia Finds DROP a Big Drain

Philadelphia has had a Deferred Retirement Option Program (DROP) similar to San Diego's for 11 years. Under DROP plans, a city employees picks a retirement date a few years ahead; the city puts his or her pension payment into an interest-bearing account, as the employee continues working for regular pay. Employees leave with both the sum in the DROP account and retirement pay. When Philly adopted it in 1999, it was not to increase the city's cost. But a study by Boston College researchers shows that DROP has cost the city pension fund $258 million since its inception. "Under no plausible assumption is DROP cost-neutral," says Anthony Webb, lead author of the Boston College study. The current Philly mayor says DROP has to go, but employee labor unions are expected to resist.

San Diego has had a DROP plan for 13 years. It was to be cost-neutral, too. But a study to determine that has been delayed and delayed. One of the proposals in the pending possible sales tax increase is that this study would be finished and acted upon.

All along, critics have said that DROP is egregious double-dipping.

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Philadelphia has had a Deferred Retirement Option Program (DROP) similar to San Diego's for 11 years. Under DROP plans, a city employees picks a retirement date a few years ahead; the city puts his or her pension payment into an interest-bearing account, as the employee continues working for regular pay. Employees leave with both the sum in the DROP account and retirement pay. When Philly adopted it in 1999, it was not to increase the city's cost. But a study by Boston College researchers shows that DROP has cost the city pension fund $258 million since its inception. "Under no plausible assumption is DROP cost-neutral," says Anthony Webb, lead author of the Boston College study. The current Philly mayor says DROP has to go, but employee labor unions are expected to resist.

San Diego has had a DROP plan for 13 years. It was to be cost-neutral, too. But a study to determine that has been delayed and delayed. One of the proposals in the pending possible sales tax increase is that this study would be finished and acted upon.

All along, critics have said that DROP is egregious double-dipping.

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Comments
21

One of the proposals in the pending possible sales tax increase is that this study would be finished and acted upon.

=============

Here, I have an idea, why don't we give Anthony Webb-lead author of the Boston College study- a call. San Diego's fearless leader KFC Sanders can ask Webb to evaluate the San Diego DROP scam.

The fact of the matter is Mike Aguirre already did an analysis of DROP, and up until the date of that analysis-3 years ago-it has cost over $400 million.

Cost neutral my butt......

Aug. 4, 2010

Sp said: "Here, I have an idea, why don't we give Anthony Webb-lead author of the Boston College study- a call"

==========================================================

What a ridiculous suggestion.

Why get for free what we could pay $20 million for? We should give Kroll a call and have Arthur Levitt perform a "proper" study of the DROP program. It's the only legitimate way to find out what Aguirre (oops, I mean Anthony Webb) has already discovered.

;)

Aug. 4, 2010

Response to post #1: Of course Aguirre did a study. Of course DROP is not cost-neutral. Of course it is quintessential double-dipping. Of course it is a scam. For these reasons, of course, the City paid no attention to Aguirre's study and has done nothing. Of course it is not going to hire Webb and his Boston College crew. They know the truth. Best, Don Bauder

Aug. 4, 2010

Response to post #2: Yes, Kroll/Levitt could do what they did last time: copy Aguirre's study and then charge the City $20 million. Good thinking. Best, Don Bauder

Aug. 4, 2010

We should give Kroll a call and have Arthur Levitt perform a "proper" study of the DROP program. It's the only legitimate way to find out what Aguirre (oops, I mean Anthony Webb) has already discovered.

By paul

You left out Levitt's hourly rate-which he charged for his plane travel commuting time back and forth between NY (or was it DC??) and San Diego.

I believe it was $950 an hour if memory serves me correctly :)

Aug. 4, 2010

But no one makes a peep about a lawyer making $950 an hour sitting on his old tired ass flying cross country, probably in 1st class. Plagiarizing work already paid for by the taxpayers. Gotta love San Diego, its leaders and those of you who believe someone has a JD they've "earned" a license to steal.

Aug. 4, 2010

Response to post #5: The hourly rate of $950 sticks in my mind, too. I am sure I wrote it but I am too pressed to go back and look it up. Best, Don Bauder

Aug. 4, 2010

Response to post #6: Oh yes. Plenty of people make a fuss about legal fees. I know I do. Best, Don Bauder

Aug. 4, 2010

But no one makes a peep about a lawyer making $950 an hour sitting on his old tired ass flying cross country, probably in 1st class.

By JustWondering

I am positive Levitt flew 1st class and charged it to the City-that is standard operating procedure.

I think everyone was PO's about the hourly rate and the $20 million final price tag.

And I am pretty sure we are all speaking out against it again right now-does that qualify as a "peep"?

Aug. 4, 2010

Two salaries could provide income for two people. But with DROP, one person gets both. That is wrong. It isn't fair. It doesn't matter if it is cost neutral. We need jobs for more people. The scheme is set up by people who don't pay for it -- we pay for it. This is a guaranteed double income for five years, not likely to be found outside of government employment.

Aug. 4, 2010

Two salaries could provide income for two people. But with DROP, one person gets both. That is wrong. It isn't fair.

Same point I have made for years.......and the trough feeder reply will be they do not have to pay benefits for the second worker-and to that I say the current employee is being comped at twice the rate of a new employee so it would be cheaper to hire two employees, and that settles that issue.

Aug. 4, 2010

Response to post #9: He says you are chicken to make a peep. Best, Don Bauder

Aug. 4, 2010

Response to post #10: I don't know of such double-dipping in the private sector, although the pay and perks of CEOs are downright obscene, and are much worse on Wall Street. Best, Don Bauder

Aug. 4, 2010

Response to post #11: The Philadelphia study addressed that issue. You can find media reports -- and maybe the report itself -- on google. Best, Don Bauder

Aug. 4, 2010

Response to post #15: You are right. I am told, however, that the unions have been involved in the City's so-called "study" of DROP's efficacy. The results of that study may be completely distorted, unlike Philly's study. Let's hope not. Best, Don Bauder

Aug. 5, 2010

You are right. I am told, however, that the unions have been involved in the City's so-called "study" of DROP's efficacy.

By dbauder

But the public unions wouldn't LIE to feather their pockets woudl they Don?

I would be shocked, SHOCKED I TELL YOU !!!!!!!!

Aug. 5, 2010

Response to post #17: Do you know where the expression "I'm shocked, shocked!" comes from? I'll give you a hint: It's the same movie that the expression, "Round up all the usual suspects" comes from. It's Casablanca. This bit of intelligence comes from someone who sees about two movies a year and didn't see Casablanca until about ten years ago. Best, Don Bauder

Aug. 5, 2010

JW: You haven't answered my salary structure proposal over on the other thread

Aug. 6, 2010

Here's more food for thought ....

It Takes 25 California Private Sector Jobs to Support One State Employee Job

California Legislature

ASSEMBLY REPUBLICAN CAUCUS

MARTIN GARRICK, LEADER

In Last Five Years Private Sector Loses 1.3 Million Jobs as State Government Adds 38,000

SACRAMENTO – Assembly Republican Leader Martin Garrick, of Carlsbad, today released a compilation of job statistics titled Real Facts: California Private Sector Job Loss vs. State Employee Job Cost. These statistics reveal that the private sector is losing jobs as state government is growing, even though it takes 25 private sector jobs to fund one state government job.

“Legislative Democrats claim their opposition to any serious spending reductions is about saving jobs for Californians, but it’s truly about protecting state employee jobs. Bigger government is funded through higher taxes and costs far more private sector jobs than it creates,” said Assemblyman Garrick. “It takes 25 private sector jobs to support one government job. Yet, over the last five years California has lost 1.3 million private sector jobs while state government has grown by more than 38,000 positions. It’s no mystery that multibillion-dollar budget deficits persist when Democrats refuse to significantly reduce the size of government, while the private sector jobs that fund state government flee California.”

View Statistics: Real Facts: California Private Sector Job Loss vs. State Employee Job Cost

Real Facts: California Private Sector Job Loss

vs. State Employee Job Cost

12.3% - California Unemployment Rate

Source: California Employment Development Department

2.24 Million - Californians Currently Listed as Unemployed

Source: California Employment Development Department

-1,298,700 - Private Sector Jobs Lost in California Since 2005 Source: California Employment Development Department

+38,100 - More State Government Jobs Added Since 2005 Source: California Employment Development Department

$55,000 - Average California Private Sector Job Salary

Source: California Employment Development Department

$3,600 - Average State Taxes Paid by Each Private Sector Employee

Source: Franchise Tax Board / Board of Equalization

$90,000 - Average Cost to Taxpayers to Pay Salary and Benefits for Each California Government Job Source: California Department of Finance

25 - Private Sector Jobs it Takes to Support One Government Job Source: Franchise Tax Board / Board of Equalization

Aug. 6, 2010

Response to post #19: He doesn't believe either his salary or pension benefits can be changed, no matter what the financial condition of his employer, the City. Best, Don Bauder

Aug. 6, 2010

Response to post #20: Those are enlightening stats. Best, Don Bauder

Aug. 6, 2010

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