NCPA - National Center for Policy Analysis


January 25, 2008

Philadelphia's soaring pension and health-care costs are outpacing revenue, which could threaten the city's ability to tackle its other problems, according to a study by the Pew Charitable Trusts and the Economy League of Greater Philadelphia.

According to the study's authors:

  • City pension and health-care costs are projected to rise to more than $1 billion by 2012.
  • Such an increase would claim 28 percent of the city's budget, up from 16 percent ($403 million) in 1998.
  • The city's health insurance expenses alone rose 80 percent from fiscal year 2002 to fiscal year 2007, and another increase this fiscal year will bring costs to $374 million, or 10 percent of the city's budget.


  • Philadelphia's pension obligation costs are projected to climb from $252 million in 1998 to $613 million in 2012.
  • The city's pension obligations are 52 percent funded, one of the lowest levels in the country, and far short of the 80 percent considered healthy by most experts.
  • City employees contributed less of their own money to the city's pension fund than employees in all but one of the cities studied.
  • In addition, it appears the city's Deferred Retirement Option Plan is not reaching its goal of keeping experienced employees on the job longer by cost-neutral means.

Lastly, Philadelphia, which pays a negotiated or arbitrated amount directly to each individual labor union, paid more per capita -- $13,030 per person this year -- than all but one of the nine cities examined.  By comparison, the private sector in the mid-Atlantic region paid $4,292 per capita and state and local government paid $9,082.

Source: Athena D. Merritt, "Report warns of Phila.'s rising pension, health-care costs," Philadelphia Business Journal, January 23, 2008.

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