After 10 years of an underperforming investment market that culminated in the Wall Street-fraud-induced economic collapse, public employee pension funds nationally are at underfunded levels not seen since the early 1980s.
Governments across the country that failed to fund pensions during years of high returns have struggled to restore funding levels, and some governors — most notably Wisconsin's Scott Walker and New Jersey's Chris Christie — have scapegoated public employees. But Atlanta Mayor Kasim Reed's proposed pension cuts make those Tea Party extremists look progressive.
Our Democratic mayor proposes to break constitutionally protected employment contracts with existing workers and unilaterally close their pension plans. Reed would replace them with defined contribution plans that would provide about half the benefits, make it impossible for firefighters and police officers to know when they could retire, and provide no line-of-duty disability or survivor's death benefits — provisions critical to public safety workers.
The proposals represent an unconscionable break of faith with the people who put themselves in harm's way protecting the life and property of Atlanta's citizens. For more than a decade, Atlanta's firefighters and police officers have worked for 30 percent below market wages, sacrificing higher salaries at suburban departments in favor of vested interests in their retirement plans.
No other Georgia municipality has made such a move. If passed by Council, Reed's proposal will inevitably go to court, creating animosity and costing money that could be used to address the pension shortfalls. It need not be so.
A recent report by a pension review panel appointed by the mayor found that Atlanta's pensions are average when compared to surrounding departments and that the much-maligned improvements made in 2001 and 2005 account for only about 15 percent of the unfunded obligation.
The $1.5 billion liability currently being reported is from the depth of the recession in 2008 and has already shrunk substantially as investment markets have rebounded. The mayor's dire prediction of a $4.5 billion liability is an alarmist's worst-case scenario. Pension plans are based on 30-year returns and there is no period in modern history, including the Great Depression, when the markets have failed to yield a 9 percent average annual return. The unfunded amount will continue to shrink as markets return to historic norms.
What's more, the defined benefit plans that fund more than 90 percent of public sector retirements cost much less — for the same benefit — than Reed's proposal.
Atlanta's problem is with revenue, not spending. We have a city of half-a-million residents paying taxes to provide services to almost a million commuters. Yet a majority of the sales tax revenues collected in Atlanta flow to the suburban and rural areas of the state.
Until we fix Atlanta's broken business model our citizens will not get the services they deserve and their employees will not be treated fairly. Possible revenue solutions include a nominal parking fee for nonresident commuters or a greater share of sales taxes returned to the city. Reed could use his much-advertised statehouse connections to address this festering issue, instead of betraying modest retirement promises made to city workers.
Atlanta Fire Captain Jim Daws is a 22-year department veteran and president of the Atlanta chapter of the International Association of Fire Fighters. He lives in Peachtree Hills with his wife and two children.
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