Mayor Kasim Reed yesterday presented his long-awaited proposal to reform City Hall's ballooning pension program — and it hasn't been met with open arms from police and firefighters.
Reed's proposed a two-part strategy to address the pension program, which city officials say gobbles up 20 percent of the city's annual budget and, if allowed to fester, leads Atlanta merrily down the road to insolvency.
The mayor says the proposed reforms, which were crafted with the assistance of a panel including business leaders and city employees, would cut annual costs, reduce the city's financial risk and offer employees more retirement options. (You can view a PDF of the presentation the mayor delivered yesterday to the Atlanta City Council here.)
All that comes at cost to City Hall employees, including police and firefighters, who would have to see more of their paychecks go toward paying for their retirements — and watch their retirement benefits slightly reduced. And while public safety union reps agree that some changes are needed, they think the mayor's proposal, if approved by City Council, would break promises made years ago to city employees. Oh, not to mention violate the state Constitution.
The first part of Reed's proposal involves paying off the city's debt on the program with larger payments over the next 30 years — a move Reed likened this step to a homeowner paying off a 30-year mortgage from a lender.
The second part, which includes two options, proposes changing all City Hall employees' pension contributions. Under the first option, similar to a 401k, all employees would be moved to a defined contribution plan and contribute 6 percent of their salary, which the city would match. That move, the city says, is estimated to save between $27 million and $31 million in the first 5 years. All employees above a certain pay grade — including the mayor and his cabinet — currently use this plan.
Under the second option, all employees would be given the choice of joining Social Security, which, as Stephanie Ramage reminds us, the city opted out of back in the 1970s. If employees do so, the city would match their contributions up to 8 percent. If employees opt not to join Social Security, the city would match their contributions up to 12 percent. Reed says that option could save between $12 million and $18 million in the first 5 years.
Since both plans require greater contributions from employees, that means a bigger bite out of employees' paychecks and lower annual retirement benefits. According to yesterday's presentation, a 25-year employee making $45,000 who planned to retire at age 55, under the first option, would see his or her annual retirement income decline from $33,750 a year to $30,121 a year.
Said Jim Daws, president of the Atlanta Professional Fire Fighters Association, to the AJC's Ernie Suggs:
“This is the ultimate betrayal. The carrot that they put before us to keep us here has been pulled away[.] We feel the administration has been hard at work trying to denigrate and break us. They just looked at one solution — take back the promises that were made.”
You can see more of Daws' thoughts, via a press release, on the comments section of Ramage's post.
The police union isn't thrilled either.
"How they're doing it, first, I don't believe is a legal action," Ken Allen, an APD detective and president of the Atlanta Police Union (International Brotherhood of Police Officers Local 623), told CL. "Second, it's not fair to current employees' expectations [of their retirements]. There are other programs out there that better suit city employees."
Allen says police, fire and general employees' pensions are each different beasts and require tailored approaches — not a one-size-fits-all fix. Other police departments, he says, have looked at salary changes for higher-level employees and buyouts. More options should be explored before the city alters current employees' benefits, a move he says would violate the Georgia Constitution.
"There are a lot of schools of thought that need to be evaluated before we say, 'This is how we say we're going,'" Allen says.
But choosing to do nothing at all, the city says, isn't an option. Left unchecked, Reed says, the city's liability could reach as much as $4.7 billion by 2040 — leaving the city at risk for a financial crisis.
Peter Aman, the city's chief operating officer, says Reed wants to finalize the plans before July 1 to include the savings in next year's budget.
This is complicated, heady stuff. Financial wonks and labor attorneys, give it a close read and let us know if anything catches your eyes. City Hall gadflies, please weigh in as well. Once again, here's the link to Reed's presentation, which offers some numbers and data, plus a look at how some employees' benefits would change.
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