The scarlet letter on Shirley Franklin’s time as mayor, and on the current City Council, will be F for finances.
T for taxes would make sense to many Atlantans after the City Council last month approved Franklin’s request to raise the city millage rate for 2009 by three mills, a 42 percent rise from last year. The move will cost the average homeowner $240 this year. That’s on top of a 12.5 percent water and sewer fee hike that will cost the average homeowner another $200 this year.
But choosing T would ignore the root of the problem: P for pensions. The city’s pension obligation was about $56 million higher this year than it was in 2005. The city raised taxes this year to cover a $56 million budget shortfall.
You do the math.
It didn’t have to be this way. The city’s underfunding of pension liabilities is chronic, but as recently as 2003 the obligations were 70 percent funded. That was short of the accepted standard of 80 percent, but it was a golden era compared with today.
By 2006, Atlanta’s pension funds for police, firefighters and other city employees were only 55 percent funded, with a total deficit of $1.2 billion that was double the gap just three years earlier. We’re still trying to dig out of that hole. Atlanta taxpayers devote $100 million a year — almost 20 percent of the city’s budget — to pensions.
The city has made matters worse by increasing its pension obligations twice during the Franklin administration. In 2002 and 2005, the City Council voted to enhance retirement offerings to city employees — first to attract and retain police officers, and then to give similar benefits to firefighters and other workers.
Conservatives often talk about the disconnect in how the public and private sectors work. At times it may sound ideological or theoretical. Atlanta’s pensions offer an all-too real example.
This month, the AJC’s Russell Grantham has detailed how Atlanta’s biggest firms are freezing or overhauling traditional pension plans for many workers.
The private sector has long been shifting away from “defined benefit” retirements like a traditional pension, in which companies pay a predetermined amount to retirees. In their place, firms have set “defined contribution” plans like 401(k)s that instead commit them to setting aside a certain amount of money for retirement throughout a worker’s tenure.
Over time, employees may be able to create larger nest eggs in this way. But nothing is certain.
What really chafes taxpayers right now is being hit from both ends: watching their 401(k)s droop (temporarily, history suggests) amid a sinking stock market in recent years while their tax bills rise to pay for others’ city-guaranteed retirements.
No one begrudges them a good retirement. But put it in the context of other public servants: An Atlanta policeman who retires after 25 years gets an annual pension of 75 percent of his salary; a retired Marine gets 62.5 percent. Based on a $50,000 salary, the difference is $6,250 a year.
And if deliverymen and store clerks can manage their nest eggs and work later into their lives, policemen and firefighters can too. The greater inherent danger in the jobs of the latter can be accounted for in some other way.
Anyway, long-term obligations like pensions are an unwise way to recruit employees to fill short-term staffing shortages. Better to use wages or other means that can be adjusted to fit the vagaries of the city’s budget cycle.
Yes, those adjustments require political will. That’s why, in this year’s mayoral and City Council election campaigns, offering practical solutions to the pension problem is a good way for candidates to earn an A from voters.