If you live within Atlanta’s city limits, as I do, you are by now used to hearing about the $1.3 billion deficit for the pension plans for city employees. But if you read the first installment of the AJC’s series on public pensions in the area, the number that should have jumped out at you is the one for Atlanta Public Schools: $532.5 million more, pushing the total tab for city taxpayers to nearly $2 billion. And that’s on top of our share of Fulton County’s shortfall.
APS serves a student population of around 50,000 students, and its pension plan doesn’t even cover teachers (they’re in the state’s pension system, which is in far better financial shape). Yet, its pension deficit is larger, both in absolute terms and as a percentage of its liabilities, than any of metro Atlanta’s counties.
As bad as the deficits are, there’s a problem with focusing only on the deficits when looking at the pension plans. The more immediate threat is the enormous amount of money each jurisdiction spends each year just to keep from falling further behind.
At APS, that figure this year is $39 million, or about as much as the salaries 557 teachers. The city government spends another $125 million a year on pensions, pushing the total for city taxpayers well north of $160 million each year.
All told, almost 20 percent of the property taxes Atlanta residents pay each year goes not for wages for police or firefighters or teachers, not for parks or libraries or school buses, but for pensions. And all of that money simply maintains the status quo — it doesn’t reduce the deficits.
As the economist Herb Stein once said, if something cannot go on forever, it won’t. This is one of those things.
Atlanta Mayor Kasim Reed has proposed a pensions solution that he says will lower unfunded liabilities and cut the city’s annual payments by $40 million to $50 million. Does it amount to a less rich plan for city police, firefighters and other workers? Absolutely — but then, the plan they have now is about as rich as these things come. And Reed’s plan doesn’t attempt to claw back some of the unfunded, retroactive pension boosts from 2001 and 2005 that really put the city’s pensions in the hole (although that could happen anyway if a lawsuit by the Fulton County Taxpayers Foundation is successful).
But the city employees — and school system employees, if APS ever tries to overhaul its retirement system — would be wise to consider this question in reacting to Reed’s proposal: Is it better to receive a lesser promise that can be kept, or a better one that can’t?
– By Kyle Wingfield