If that finding holds in the final report, the avowed financial-reform mayor will be expected to eliminate or alter the program, and quickly, said Phil Goldsmith, managing director under former Mayor John F. Street.
"If it is a significant cost, I don't see how in God's name you support this, given the current financial climate in the city budget," Goldsmith said.
The Street administration tried to eliminate DROP in 2003 after the program's first four years. The Street administration argued that the program cost $7 million a year, but unions joined with then-Controller Jonathan Saidel in a Board of Pensions and Retirement vote to keep it. Street then joined the program and walked out of office in 2008 with $450,000 in DROP money to go with his $115,700-a-year pension.
The Rendell administration introduced DROP in 1999 as an incentive that allows retirement-eligible employees to amass pension payments at 4.5 percent interest, in addition to their salary, over their final four years.
The program's stated intent was to retain long-term, valuable employees who would otherwise retire, or encourage less productive employees to leave, while providing the city a valuable planning tool.
In theory, the plan should add little or no cost to the pension fund because the additional years of pension payments would be offset by lower payments because workers lock into benefits four years early. Over time, the city would save on lower annual payouts.
The four municipal unions continue to stand strongly behind DROP, which Fire Fighters' Union president Bill Gault on Friday called "the only way in the world a blue-collar guy can save any money."
But the $4 billion pension fund has been hit by the recession. As of July 2009, in the last official actuary's report, it had only 45 percent of the funding required to meet its obligations.
