This week, SF Weekly's cover story explored a program that allows veteran police officers to simultaneously earn salaries and pensions -- the latter of which is collected in a lump sum payment which can easily exceed $300,000.
While the Deferred Retirement Option Program (DROP) was enacted in 2008, its first cost analysis was released to the public less than an hour ago. And here's the money shot:
"With its current design, and with the demographics and behavior of eligible members to date, it appears that the DROP program represents a net increase in the City's liability and is not cost-neutral."
In other words, institutionalized double-dipping is costing the city money.
Yet just how much money the city is out -- if it's out any money
at all -- is "difficult to state with certainty." That's because
estimating the cost neutrality of a program like this involves combing
through demographic data and estimating how people would have behaved in a number of different scenarios, including the real world.
With DROP, cops can sock away pension costs for up to three years while they're working and then retire to lucrative pensions. So if an officer is induced by DROP to work past the age at which he'd have retired if the program didn't exist, he's only earning pension money he was going to earn anyway. This is cost-neutrality.
But if he enters the program years before his intended retirement date and then heads off to the Bahamas on that date, he has earned hundreds of thousands of dollars he wouldn't have gotten if DROP didn't exist to shower him with moolah.
The pool of cops who've entered DROP in the past three years is small -- only 169. But charting retirement behavior before, during, and after voters enacted DROP, the controller's report states that more cops are now retiring young. Before the program, just 12 percent of cops aged 55 with 25 years or more of service retired. Now 33 percent do. "It appears from the data that most members enter DROP before they would have retired if no DROP existed." This is not a point in the program's favor.
And while DROP proponents -- namely the Police Officers Association -- claim that keeping on older cops defrays the costs of hiring new ones, the controller's report makes that a shaky point to base an argument on. Yes, keeping on veteran officers could save the city up to $3.75 million a year in costs associated with new recruits. But "under any scenario, the City's possible savings are exceeded by the Retirement System's liability costs." In other words, you're spending more than a dollar to save a dollar.