A pension “double-dipping” program approved by voters on the premise that it would cost them nothing actually comes with a price tag of about $52 million, according to the first report to analyze its costs.
The Deferred Retirement Option Program, commonly known as DROP, gives veteran police officers the chance to continue to work with their full salary past retirement age while also drawing a pension. When they leave the program and retire, the officers receive a lump-sum payment for the pension benefits they accrued while in DROP.
The program is set to expire June 30 unless the Board of Supervisors approves a three-year extension. That extension hinges on whether the cost of the program is less than or the same as hiring new officers through Police Academy classes.
DROP was approved by voters in 2008 at a time when the Police Department was having trouble recruiting officers. That has changed dramatically with the faltering economy, according to Department of Human Resources Director Micki Callahan.
At the time of the ballot measure, then-City Controller Ed Harrington said that he believed the program would be cost-neutral and perhaps even cost-effective.
But a new controller’s report released Friday suggests that DROP is actually resulting in higher costs to The City. The report found that since the program went into effect, “an officer is likely to enter DROP earlier than they would have otherwise retired.”
According to the report, prior to DROP, approximately 12 percent of officers age 55 with 25 or more years of service would have been expected to retire. Since DROP, 33 percent of these officers have elected to retire or enter DROP.
That has driven the expected retirement costs up by an estimated $6 million a year, according to the report.
But if the program is discontinued, officers would face a June 30 deadline to enroll in the program and dozens of officers would join the program, according to Police Officers Association President Gary Delagnes.
That means hundreds of officers would be retired fully in two to three years and leave the department en masse.
The decision to extend the program is expected to come before the Board of Supervisors in the coming weeks.
615: Officers eligible to retire through DROP
169: Cops who retired by entering DROP
$52 million: Estimated accrued retirement costs under DROP
$6 million: Estimated annual increase in city retirement costs under DROP
Source: City Controller’s Office