Kasim Reed has been quite active since taking office as Atlanta’s mayor last month, and one of the most important task forces he put in place — on the city’s exploding pension costs — releases its first public report today. There’s every indication that Reed understands this knot has to be untangled before the city can act substantially on any other area.
The panel will report on the current state of the city’s pension plans and will outline some possible paths forward. It will not, however, make recommendations about those possible paths forward. That’s a political question that has to be decided by Reed and the City Council.
That debate will certainly be a raucous one, with taxpayers pushing for reducing the city’s commitments while employees try to keep as much of what they have as possible. The taxpayers are right, because the city simply can’t keep the promises it made to employees when it increased benefits in 2001 and 2005.
Atlanta is far from the only city having this fight. Every day I get an email from PensionTsunami.com with references to news stories about public pension problems, and every single day there are about a dozen links. Most of them are in California (in part because that’s where PensionTsunami.com is based) but the problem is widespread.
Reason.com’s Nick Gillespie explains that it’s no coincidence that so many governments happened to get their pension plans wrong. The problem is with the model:
The basic bargain about public-sector work, hammered out decades ago in a very different world, is supposed to be: You give up status, upward possibility, and compensation now for job security and payoffs later in retirement. That has never really been true and is certainly less so now. Yes, public-sector jobs ofer more security than their private-sector counterparts, but compensation is also higher on average and the benefits, especially in retirement are gold-plated to the nines. That bargain, which is unsustainable economically, is going to hit the rocks. The only question is: Who is going to pay? Taxpayers or the public-sector workers?
I don’t have numbers on total compensati0n for Atlanta’s police, firefighters and general employees (the city has a separate plan for each group). But I have written before detailing that the city’s pensions are richer than even those for retired Marines, and that pension benefits are the least flexible form of compensation and thus the biggest strain on the budget.
Check back later to see what the panel reports. Update following this afternoon’s meeting, in bullet-point form:
As I said before, the question now is how to move forward. These figures make it extremely difficult to see how Atlanta can keep the status quo on pensions and keep its head above water.
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