Report: Atlanta must cut pensions

By Cameron McWhirter and Eric Stirgus

The Atlanta Journal-Constitution

A new Atlanta City Council report recommends that the city slash the retirement benefits it pays for future employees and look into having the city join, for the first time since anyone can remember, Social Security.

The long-anticipated report was released by the City Council’s Select Committee on Pensions, created last summer to look at the city’s pension obligations — its future debts to cover benefits for workers and retirees. Last year, those obligations totaled almost $1.2 billion, dwarfing other city costs. This year, after the world recession, pension costs are expected to increase because all the pension funds have lost money in the stock market and other investments.

“What we have is not sustainable,” said councilman Howard Shook, who co-chaired the committee.

The report comes as the city administration is hiring outside consultants to make pension reform recommendations.

Greg Giornelli, the city’s COO, said Mayor Shirley Franklin’s administration plans to submit a plan to City Council before Franklin leaves office at the end of the year. Shook said the council would not pass pension reform legislation during this election year, but he hoped the council report would serve as a guide for talks between the city and employees next year.

Meanwhile, irked city pension board members said the council committee did not include them in any of its meetings or discussions.

“How are you going to fix something if you don’t go to the people who deal with it all the time?” said Gerry Rusinski, vice chair of the firefighters’ pension.

Shook, who also chairs the City Council’s finance committee, said the pension board members will be included in future talks. He predicted fireworks because pension changes would mean “a diminution of their authority.”

“It’s going to be a raucous, fun discussion,” he said dryly.

The 24-page report recommends:

● Changing retirement benefits for new employees so the city is responsible for about 50 percent of retirement income. If the city joined Social Security, its direct responsibility for retiree benefits would drop to 25 percent. Currently, police officers can get up to 80 percent of their pay from the pension at retirement. Firefighters and general employees get less.

● Looking into joining Social Security. For at least three decades, Atlanta has not paid into the federal system. As a result, city workers do not get any Social Security benefits when they retire.

● Studying whether “a new, hybrid plan” — a mix between a pension and a 401(k)-type plan — would work for workers and possibly lure pensioned workers into a new plan. The overall goal is to reduce what the city has to pay every year into the pensions. In 2009, cash-strapped Atlanta paid about $136 million into its pensions.

“We can’t fix our finances without first fixing pensions,” Giornelli said via e-mail.

Under law, the city is required to provide pay into police, firefighter and general employee pensions. Both the city and workers pay into the plan but unlike a 401(k), the worker’s payments and benefits are guaranteed. The city has to make up any shortfall.

Atlanta’s pension problems developed for two reasons. First, Atlanta does not pay into Social Security, so workers are not entitled to those benefits, making a good pension more important. Second, the city decided in 2001 to increase pension benefits for police. In 2005, the council voted to increase benefits for firefighters and general employees, too, which added millions of dollars of obligations to plans the city had been underfunding for years.