Summary
An Ounce of Prevention: Managing the Ballooning Liability of Philadelphia’s Pension Fund analyzes the rapid increase in the City’s pension obligations, which grew from $194 million in FY01 to $342 million in FY06. The report warns that without significant structural changes, pension costs will continue rising at an unsustainable rate, limiting Philadelphia’s ability to invest in essential services. Key recommendations include modifying pension benefits for new employees, increasing employer contributions beyond the minimum legal requirement, and lowering the assumed investment return rate to a more realistic level. The study also highlights how the Deferred Retirement Option Program (DROP) and underperforming investments have exacerbated the pension crisis. Without decisive action, the City risks further financial instability, with pension costs crowding out other critical expenditures.