Atlanta pension lawsuit is a first step

Call it the first shot of the pension wars.

After watching Atlanta’s pension costs nearly triple over the past decade, the Fulton County Taxpayers Foundation sued the city last week. The plaintiffs argue that the city didn’t follow its own procedures when it increased retirement benefits in 2001 and 2005, and they want a Fulton County judge to nullify those richer benefits.

This showdown between Atlanta’s employees and its taxpayers has been building for years, and it will be the No. 1 issue for the city until it is resolved. But it’s no accident that the hostilities began Monday.

One week earlier, a pension review panel appointed by the new mayor, Kasim Reed, reported its initial findings. The short version: Things are even worse than we thought.

The unfunded liability for the city’s three funds — for police, firefighters and general employees — is $1.5 billion. That hole is almost five times as large as it was in 2001, when the plans were considered well-funded; today, the liabilities are double the assets.

The panel offers a detailed breakdown of how Atlanta came to this low place. As many people expected, the poor performance of the stock market over the past decade had a sizable impact, representing about half the problem.

The other half relates directly or indirectly to the plan changes of 2001 and 2005. The direct effects include a larger payment for each year a pensioner worked, and the fact that the city applied these increases retroactively.

The indirect portion relates to how employees reacted to the benefit changes: Since 2001, 90 percent of police officers and firefighters have retired by age 55, about twice the rate that actuaries expected.

Now, it’s possible that the actuaries’ estimates were just wildly wrong. But common sense suggests that many officers are retiring earlier than expected because 20 years’ service now gets them the same pension they previously needed 30 years to earn.

Take away those direct and indirect effects, and the city’s pension payments would have been some $73 million lower last year — still an increase from 2001, but a much more manageable one.

Worse still, we are talking only about retirees’ pensions, not their health care expenses. Add those, and the unfunded liability could reach $3 billion. And the city would have to devote $240 million a year — almost half its current budget — to all retirement benefits.

The next step for Reed is to design some choices for addressing these soaring costs. Standing still is not an option, and Reed said after receiving the panel’s report that he would not raise property taxes to pay for pensions.

Legally, the city can’t unilaterally change the plans for existing workers. It can do so for future hires, but that wouldn’t begin to fill today’s shortfall. State law precludes cities from declaring bankruptcy, which would allow Atlanta to restructure its benefits. That leaves negotiating changes with workers, who will defend their pensions like the Alamo.

And that’s where this week’s lawsuit comes back in. The plaintiffs won’t comment publicly on their suit, and it’s hard to predict its odds of success.

But the suit can accomplish two things even if it loses in court: It’s a first legal step (challenging the retroactive nature of the ’01 and ’05 changes is an obvious step two), and it serves notice to the city that taxpayers expect real reductions in pension obligations.

86 comments Add your comment

97degreeyogurt

March 5th, 2010
9:09 pm

“This showdown between Atlanta’s employees and its taxpayers has been building for years, and it will be the No. 1 issue for the city until it is resolved”.

FYI Kyle–not all city workers have traditional pensions, some of us have 401(a) accounts. But revealing that fact would take some of the “us vs. them” hysteria out of this story wouldn’t it?

Duga

March 5th, 2010
9:52 pm

Excellent opinion article. Write on!

joan1

March 6th, 2010
12:20 am

It boggles my mind–that people can get pensions for working 20 years! I have worked well over 40 years, at jobs that offer no pensions, and I will keep working until I simply can’t. I am almost 70 and working. What is it with people who provide pensions for “kids”? Why was that done? It is insane. Just figured out why Obama is pushing Healthcare so hard and fast–he wants to pass it, so it can move on to pass the amnesty bill, and restore the voter base that his Democratic congressmen will lose with this vote. I bet he has assured him that if he gets this passed, that is what he will do, as a bribe to vote against their constituencies’ will. Just watch.

John Woodham

March 6th, 2010
1:09 am

I am co-counsel for the Plaintiffs in the case. The reason for no public comment, basically, is that the legal pleadings speak for themselves, and this matter will be decided before a trial court and then likely by an appellate court, not in the press. Having said that, read Section 3-507 of the City Charter governing pension law modifications. The City does not appear to have much of a legal defense, notwithstanding the public comments of the Acting City Attorney.

Cutty

March 6th, 2010
1:32 am

The first poster is right. All new city employees over the last 5 years are in a defined-contribution plan.

Michael H. Smith

March 6th, 2010
1:52 am

I have worked well over 40 years, at jobs that offer no pensions, and I will keep working until I simply can’t.

Ouch, that strikes a nerve!

Ronin

March 6th, 2010
5:57 am

The idea that you can work for 20 years at a position and then collect a payment for the rest of your life as well as medical coverage is not only financially insane, it’s unsustainable. Start at age 21 and “retire” when you are 42, with a life expectancy of 77 years, that’s 35 years of benefits collected, far exceeding the pay earned during time on the job. Few companies can afford the this type of program.
As a result, the defined benefit plan (DBP) has been replaced by the 401k or 403 program. This allows the employee to fund the majority of the program, with additional contributions by the employer. While it’s not impossible to retire after 20 years of self funded retirement savings, only a very small number of people are able to do it.

As far as the pension fund for the City of Atlanta, it will continue to be a major drain on the budget for years to come. It may be time to change State law to allow the city the option to declare bankruptcy and start over. The people who work and live inside the city limits are paying the bill for retirees every day for the next…… well, forever.

Buzz G

March 6th, 2010
7:57 am

That Atlanta would even be in this position speaks loudly about past management of the city and the spineless nature of it’s elected politicians. Like many other major cities in the U.S., it will eventually get what it deserves.

At least...

March 6th, 2010
8:16 am

The good news is, maybe once all of these losers retire afte their 20 years of disservice, they’ll be replaced by somebody with half a brain!

Card Carrying Member

March 6th, 2010
8:40 am

Wow, joan1! That’s quite the conspiracy theory. And it’s all planned by the Bilderberg Group and the Trilateral Commission! Just watch.

Tina Trent

March 6th, 2010
9:09 am

Gee, “Card Carrying Member” (presumably of the A.C.L.U.), it’s fascinating how people who claim the mantle of free speech are such quisling cowards when it comes to putting their names to the ugly slurs they throw at others (here, crude and unnecessary accusations of prejudice hurled from behind a wall of anonymity). If you really oppose prejudice, or support free speech, why don’t you put your name to your words? It’s not like it actually takes much courage to endorse such routine, commonly held, mainstream beliefs.

In other words, you mistake the economics of the “free” part. Attacking anonymously isn’t merely extremely cheap: it’s worthless. Too bad that ACLU card you’re hiding behind doesn’t double as a spine.

As many predicted

March 6th, 2010
9:50 am

The Reed administration is just the 3rd Franklin Administration. Shirley treated employees disrespectfully. Her commissioners and department heads cheated employees. Oh, it is politically dangerous to take money or benefits from police and fire fighters but general employees have been the whipping boy for the financial mismanagement of the last 12 years. Morale is horrible. Now, Reed’s administration is going to start a propaganda campaign that ALL employees were overpaid or that the City was “too generous”. Of course, this is intended to make City employees look greedy or ungrateful.for wanting the benefits they were promised when they were hired and for which they have legitimately performed work.

Just remember . . . loyalty is earned (or lost) in many ways and a boss that treats you like a slave isn’t one you’re likely to be loyal to.

MrAttitude

March 6th, 2010
10:00 am

Please tell me who was the braintrust that developed the plan to award pensions after only 20 years of service? Even in the military, you only get a certain percentage after 20 years of service and its nowhere near what the city of Atlanta did.

Everyone knows what the problem is and instead of all the grandstanding, studies, focus groups, let’s find some people with backbone and take action.

Jess

March 6th, 2010
10:41 am

What is really amazing is Official’s claims that they didn’t see this coming. Each year there is a review of pension plans by actuaries who then tell the city what it needs to pay into the plan in order to stay “well funded”. I would have also assumed a study was done to tell them what the plan changes would cost if they made the changes. So at most Atlanta knew the hole they were digging one year after the 2001 changes. Still, they went ahead with the 2005 changes, and once again they would have known the problems as early as 2006.

Why did this only come out in Franklin’s last year. Why didn’t the Mayor raise a red flag, why not the city council. This to me sounds a lot like Kyle’s post yesterday. The city knows a train wreck is coming and prefers to turn their back. Obama and Congress know a train wreck is coming, and chooses to jigger the numbers rather than tell the truth.

The Tar and Feathers Party

March 6th, 2010
10:47 am

Walk away, all citizens with money who live in the crooked city should just walk away, let it and the crooks who run it rot. I would not open a business, or relocate a business to the crooked city, and any consultant who recommends the city of Atlanta as a corporate headquarters is either incompetent, crooked, or some combination of the two. OTP is still ok, but the State had better not bail the crooked city out of its suicide pact with the union scum.

The Tar and Feathers Party

March 6th, 2010
10:56 am

If the State AG has a lick of ethics, he will file criminal theft charges against each and every member of city council who voted to increase the union scum’s pension benefits in 2001 or 2004. Lock the thieves up forever.

The Tar and Feathers Party

March 6th, 2010
11:00 am

Or the citizens of Atlanta could just round up the city council scum and tar and feather them on their own. A good tarring and feathering does wonders for keeping politicians honest. We need a “Vote with your Feet Party,” the one Ronald Reagan recommended.

Jess

March 6th, 2010
11:36 am

Pensions are supposed to be a funded liability. Social Security, although many people think otherwise, is an unfunded liability or entitlement.

Can you imagine the mess this country will be in in ten to fifteen years when Social Security and Medicare go broke.

And what is our government’s response to this known problem? Create more and larger entitlements.

The Tar and Feathers Party

March 6th, 2010
11:51 am

Jess, it will not be even 10 years. SS has been a cash machine for the politicians over the last 20 plus years, with the surplus appearing to reduce the deficit each year by the amount of the surplus. Even Clinton’s alleged surplus disappears if you count the non negotiable treasury bonds that were placed in the alleged lock box called the SS Trust Fund. The actual cash was spent by Congress on waste and corruption. The problem is the surplus funds are no longer flowing in, some of the interest earned this year on the trust fund must be spent to pay benefits. That means Congress no longer has the cover of a SS surplus to hide the actual size of the budget deficit. I expect a crisis in the next couple years, one in which Congress and the President will try to cheat some of the Giant Generation out of their SS benefits. We will fight back, we are 70 million strong, and we will take no prisoners, lest of all political. We will destroy the career of ANY politician who tries to cheat us.

feeling cheated

March 6th, 2010
12:30 pm

Half the budget to fund retirees? HALF the budget? OMG. The welfare state is real and it’s starting on the city level and working it’s way up to the state and federal level.

There is the very real danger that our beloved will evolve into worker bees and retired bee; a country of bee keepers. There won’t be any money for killer bees to fight the war on bears.

Gosh, it looks like the conservatives were right all along.

Who’d a thunk? It’s a downright revelation!!

Giant Generation

March 6th, 2010
12:39 pm

Yes, feeling cheated, we own you….now fetch my double jack on the rocks, and make it snappy – or Mr. Cat-of-Nine-Tails will teach you a lesson. chop chop

Blair

March 6th, 2010
1:28 pm

**Of course, this is intended to make City employees look greedy or ungrateful.for wanting the benefits they were promised when they were hired and for which they have legitimately performed work.**

And liberals say the same thing about the baby boomers who invested in social security only to have the fund raided by the feds. The difference is the vast majority of baby boomers’ efforts were contributing to the overall economy, not just the government’s.

Giant Generation

March 6th, 2010
2:09 pm

Unless the city workers were hired after 2001, the bloated benefits were not part of the retirement package they signed on for when they were hired….They were added via election year blackmail of the city government by the union scum in 2001 and 2004. As blackmail loot, it is fair to steal it back from the union scum. Make it so……Let there be no survivors…..

Ragnar Danneskjöld

March 6th, 2010
3:04 pm

While I do not disagree with the intent nor the economic-substance of the suit, I think it is a loser as a matter of law. The funding legislative body agrees with the actions of the executive. The court has no meaningful say when the other two fundamentally agree. Noting unconstitutional here, just irrational economics.

Banned By Cindy

March 6th, 2010
3:07 pm

The downfall of America. What a show to behold. Thank you government. Thank you so much. Only you could enable this reality.

Giant Generation

March 6th, 2010
3:08 pm

It is time for the major downtown corporations to vote with their feet and leave the crooked city, let it rot in place.

leeh1

March 6th, 2010
3:51 pm

The increases were based on a tradition of eight years of peace and prosperity under Clinton. Then came the Bush economy, and everything fell apart.

The under-funded pensions were cut during all the ballyhoo about Republicans cutting taxes for the rich, and so the poor Atlanta employees get the shaft nine years later.

If the city can’t run their personnel system any better than they have been, they should be voted out and reasonable people put in. But that doesn’t fit in with everyone’s politics, so the problem will only grow. It is more powerful to yak about it than to fix it!

MrLiberty

March 6th, 2010
3:53 pm

This problem is plaguing virtually every government in the nation. City councils, county commissions, and the like have all screwed the productive class of society to buy votes and campaign contributions from government employees. It has bankrupted every single one of them and the fallout will be nothing short of chaos.

Every government employee is paid via the theft of monies from folks in the productive, voluntary sector of society. The services these folks provide are not chosen by anyone in a voluntary manner in an open and competitive marketplace. Even police and fire services are a protected government monopoly and not subject to the kind of competitive pressures that private businesses are. Lord knows the list of services that government claims it needs to provide that nobody would be willing to pay for is enormous.

So where is this gargantuan waste of money and unfunded liability going to lead? Are those of you who get your salary courtesy of the theft government commits on your behalf going to show up at our houses to demand your salaries when we all finally stop paying? Or are you going to be willing to finally step out from behind the government monopoly that protects you from the competition of the voluntary marketplace and compete with the rest of us for voluntary payment for your goods or services? These are serious questions that will forced upon everyone who feeds at the government trough in the coming years of this depression. Governments are bankrupt as are the host they have been parasitically living off of. They have no money of their own and they do not produce any goods.

Many wonder how we have gotten to this state, but the answer is clear. We have given our willing support to the parasite. What will happen when that support is withdrawn?

atlmom

March 6th, 2010
4:54 pm

MrLiberty: that’s a little unfair. Unless you want anarchy, you need to have some sort of govt. Do you really want that?
Tarandfeathers party: Um, well, you’re going to have quite a feat getting other generations just to work for your retirement benefits (all the while voting to put people in govt who created this mess) – we’ll just stop, I suppose. Why bother working if your generation is just going to take it from us? Um, we’ll ‘rise up’ and start to vote in the people who will tackle the problem
Cause seriously – the age of benefits for social security being 65 is obscene (as is being able to retire from the city after 20 years – okay – fine if your pension is funded – but you shouldn’t be able to start receiving it til you’re 70 or something like that) – the age of soc. sec benefits needs to rise to something like 80 or so – but the politicians are such idiots that they keep leaving it for the next guy….

midtownguy

March 6th, 2010
5:18 pm

I have been on the verge of moving to Decatur for years. It is safer, cleaner, with better city services. A property tax increase to pay for pensions would put the For Sale sign in my front yard.

The sewage increase to pay for the repairs based on the value of your house verses the amount of sewage you use almost did it (that is the stick-it-to-the-folks-north-of-ponce Atlanta way). When property values go down due to the exodus, the plan will backfire. Mayor Reed should be weary of killing the goose that laid the golden egg.

A Realist

March 6th, 2010
5:24 pm

Why do we have such a hard time believing that pensions for City of Atlanta Retirees (you’ll notice I said Retirees, not workers) have increased. This is just another example of blacks enriching blacks just because they can……they’ve been doing it in Atlanta for the past thirty five years.

Waldo

March 6th, 2010
6:12 pm

The cops, firemen and general workers must’ve learned how to arm twist the politicians from their cohorts up in Connecticut. You should see the pensions up there. How about cops getting over $115,000/yr pensions. This has to be stopped now, or Atlanta will be history.

luckydog

March 6th, 2010
6:32 pm

If you lived in Atlanta and you voted Democrat, you approved all the city pensions, so shut up. If you voted Republican you have reason to complain. However Republicans knew this was comming and should have moved out of Atlanta. I did.

atlmom

March 6th, 2010
6:36 pm

luckydog: there are no political affiliations with the city elections. a candidate doesn’t declare his or her ‘affiliation’ with any party – which is why the parties (typically) don’t get involved.

Waldo

March 6th, 2010
6:41 pm

Massachusetts is the worst. How about troopers making $250,000/yr and retiring in their ealry 40’s at $125,000/yr. Not to mention Boston city cops making over $200,000/yr. The stealing will go on until someone breaks up the government unions. They’re too powerfull and deal with corrupt politicians.

Waldo

March 6th, 2010
7:56 pm

This one will get you. The Bureau of Labor Statistics shows cops and firemen don’t even have dangerous jobs. Their public relations mouthpiece tells you they have dangerous jobs. But it just isn’t so. Check it out at BLS.gov.

Sam

March 6th, 2010
8:19 pm

This is what happens when the population elects a bunch of idiots based more on race than substance. The only thing that has mattered in Atlanta politics over the past 40 years is skin color so we’ve ended up with a bunch of politicians worried more about welfare programs and building million dollar parks in ghettos rather than funding infrastructure, police, and fire. And of course if the people elected are idiots, it stands to reason that the people they hire to make decisions about things like pensions are idiots too.

Sam

March 6th, 2010
8:21 pm

Waldo, tell that to the cops at the Pentagon, or the famlies of the officers shot at the coffee house in Washington a few months ago.

John Konop

March 6th, 2010
9:04 pm

Pew Study Finds States Face $1 Trillion Shortfall in Retiree Benefits

And this does not include Federal liabilities like Medicare, Social Security…….

watch

http://controlcongress.com/economics/pew-study-finds-states-face-1-trillion-shortfall-in-retiree-benefits

Dilly Dally

March 6th, 2010
10:11 pm

MY DAD ALWAYS SAID AFTER SAM MASSELL LEFT OFFICE ATLANTA WOULD GO DOWN THE CRAPPER====
TOO MUCH MONEY , TOO MUCH POWER, TOO MANY IDIOTS TO CONTROL IT.
HE’S BEEN DEAD 17 YEARS AGO LAST MONTH AND DAMN IF HE WASNT RIGHT.

Billy O

March 6th, 2010
10:22 pm

Hey Sam….you’ve got it right. This is what happens when liberals (progressives) are left in charge. Atlanta is a example of what is going on nation wide….and it’s going to get worse. Just think what is going to happen to Atlanta when the county of Milton is recreated and Atlanta loses all those tax payers north of the I285.

Rush

March 6th, 2010
11:24 pm

I’m sorry..I’m too zoned out on Oxycontin to be of any value in this blog. Other than that, darn! I wish I had just signed on as an employee of the City of Atlanta 30 + years ago! Oh yeah, I would have been furloughed years ago before I could have reached the retirement age because I am not black and have a surly attitude for anyone who is not a “bro”. Is Atlanta even allowed to hire non-blacks? After a walk through city hall I would say the answer to that question is a resounding NO.

MrLiberty

March 6th, 2010
11:52 pm

Government is simply that which possesses the monopoly on force in a given geographic area. Tell me again why we need that?

People can cooperate very well without any permanent organized gang of thieves running their lives. They can come together, choose leaders to organize tasks and then disband their gathering until another grouping is required. There is no need for any permanent group that must be funded by force, must be obeyed under penalty, or must exist for the sake of anyone’s safety, health, or prosperity. Government is the opposite of those things.

Government is no more than people. If there is the belief that we need government because people cannot be trusted, then how can we trust government since it is just people? The logic is too sound to be disputed. The individual is just that. With the power and force of organized government they can become Hitler.

In the last century government killed over 200 million of their own citizens, and that does not count those they killed of other countries in WWI, WW2, Korea, Vietnam, the first Gulf War, and all the other hundreds of conflicts. Even worst serial killer pales in comparison to these feats of depravity.

No individual can ever be handed the power of government and be expected to police themselves. That is exactly how the supposedly limited government that was founded in 1789 eventually became the monstrocity we have today.

Yes, the criticism of government is completely fair. I always have the power of my wallet that I can exercise to withdraw my support from a private business. If enough join me the business will be no more. If only such a thing were possible with government. But we all know what happens if you don’t pay what they demand. Tell me again how government is necessary?

Bill

March 7th, 2010
12:22 am

So Mr. Liberty. Do they actually allow you patients to utilize computers at the hospital? This statement is nothing more than the rantings of a delusional person : “People can cooperate very well without any permanent organized gang of thieves running their lives. They can come together, choose leaders to organize tasks and then disband their gathering until another grouping is required. ” You’re not very well read it seems ; this type of societal scenario ALWAYS leads to things like mass killings and ethnic cleansing. Must have missed Mein Kampf, or perhaps Lord of the Flies. Uncontrolled populaces without laws and enforcements portends lunatics with weapons to take control and force their will upon the general public with random violence and horrors. Did you miss Bosnia or Milosevic back in the ’90s? Good God man, pull your self together.

Turning a Battleship

March 7th, 2010
8:08 am

Macro changes occur slowly. Atlanta has attracted a lot of businesses over the past two decades due to transportation and cost-of-living advantages. Much of that growth has occurred outside of the city limits. If the pension cost issue is not resolved, the city of Atlanta will begin to lose residents and commercial businesses. And as the numbers of taxpayers decrease, the burden on those that remain will soar. The end result will be Detroit.

I have spent thirty years in this city. I’ve enjoyed the boom and culture. I am not, however, intending to commit financial suicide by staying here. Atlanta can address this problem quickly — I’m hoping that the lawsuit is successful — or I will leave the inevitable collapse to the suckers who can’t do basic math.

shirley

March 7th, 2010
8:17 am

For decades, nmaybe as far back as Mayor Hartsfield, the city didn’t fund pensions adequately. The decision to forego Social Security may have been a mistake decades ago, though there is plenty of debate about the financial stability of that system too. City employees worked for years at below market salaries (no longer the case in most job classifications) and the pension benefits were but one part of their compensation package. Whether John Sherman is right or not, Atlanta needs to stay the course by investing in the pension, push for state revenue sharing in GA cities as is common, some would say best practice, for at least 45 of 50 states, modify the current plan for new employees to decrease city costs and seek to improve pension investment income (which is down like every other investment since the Wall Street collapse). Some pension plan improvements (see the Council’s recommendations in November 2009) and the sale of the jail to Fuulton County would relieve some of the financial pressure in fiscal year 2011 ( some estimate up to $18 million) as the economy and therefore, investment income, recovers. FCTA likes the media splash and attention but rarely has a clue about public policy best practices or how to improve efficiency and effectiveness in local government services. Check the record. As the saying goes ” big hat, not cattle”. This case is no different.

A Realist

March 7th, 2010
8:45 am

Unions, at one time in our country’s history were needed; however, they long ago outlived their usefullness and are now corrupting and bankrupting our country……they should be outlawed, now. I’m not speaking just of the policeman’s and fireman’s unions, I’m talking all unions…..they are a major cause of production of goods going elsewhere and driving up costs of goods still manufactured here, i. e., autos and trucks……see GM, Ford, Chrysler, they’ve been losing market share for years and it will continue because of the union mentality.

RIGHT ON, BROTHER....

March 7th, 2010
9:19 am

Wasteful spending, inept leadership, the load carriers, corrupt government, crooked law enforcement, unqualified mayors . Should I go on and on…
No wonder Milton broke off and left. If the rest of the state of Georgia could disassociate itself from atlanta it would also.
What a cesspool of a place it has become.DeKalb, Fulton and even Clayton counties are in the mix too.Why do you think people have left in mass exit from these places??

It’s because it’s much more unsafe than they tell you.

RIGHT ON, BROTHER....

March 7th, 2010
9:20 am

…oh and I totally agree with ‘Dilly Dally’.

Left of Center

March 7th, 2010
9:31 am

Tell me, who would want to be a cop in Atlanta anyway?