As Atlanta politicians address one of the biggest budget deficits in recent history, they frequently say high city employee pension costs are a major part of an economic storm buffeting the city.

But unlike the struggling economy or spiking health care costs, those pension increases weren't caused by forces beyond the city's control. The Atlanta City Council, with tacit approval from Mayor Shirley Franklin's administration, made key decisions to sweeten pensions for city workers that have put Atlanta in a budgetary bind that will take years to escape. The City Council is just beginning to tackle a problem — more than $1 billion in uncovered future debts to the pension system — that it helped create.

"The council dropped the ball on its oversight," Councilwoman Felicia Moore said last week. "The administration dropped the ball in presenting us with proper information."

Franklin and her spokeswoman, Catherine Woodling, declined to comment for this story.

Experts and pension watchers are forecasting tightened budgets, fierce political battles with unions and reduced city services as the city tries to get control of the pension mess. Higher property and sales taxes also are an option.

The council's votes in recent years to bolster pensions for all of its workers — moves intended to improve those workers' lives — already have contributed through poor fiscal planning to hundreds of those workers now being laid off.

To the applause of city workers, the council promised retirement benefits that only three years later it can't afford.

"They can't ignore the 800-pound gorilla in the room," said Atlanta fire Battalion Chief Gerry Rusinski, vice chairman of the Fire Fighters' Pension Fund.

Government pensions are something most people ignore; the subject is dry and complicated. But the city's three pensions are an enormous obligation for Atlanta, one that legally supersedes other needs such as more police or road repairs or even the council's public pledge to resist property tax increases.

When money is spent to cover pension costs, the rest of the city budget suffers, hurting taxpayers, businesses, employees and residents.

Minimum payments

City Council votes in 2002 and 2005 increased what the city owes its workers' pension plans dramatically. Meanwhile, a city ordinance from 1978 has made matters worse by imposing a financial deadline on the city to fully fund its pension by 2018. The council recently pushed the due date back to 2024. That may seem like a long way off, but city budget watchers already say the annual costs will increase unless the council dramatically extends the due date. As 2024 comes closer, larger amounts of money will have to be paid in part because the city has been making only minimum payments into the system for years.

"The willingness to understand this [on the council], so far it's just not there," said Charles Carr, the actuarial expert for the city's police and fire pension funds. "If everyone thinks these pension increases are bad, wait until we go another 10 years."

In recent years, the city has been losing ground on its pension obligations at an alarming rate. In 2003, the city's unfunded liability — the amount the city will ultimately have to pay to the three pension funds — totaled $620.5 million. The latest reports put the city's combined liability at $1.2 billion. And in a bad stock market year, that number likely will rise as the city makes up the investment shortfall.

By comparison, the city's entire budget this year was $570 million.

Atlanta's problems started at the beginning of the decade. The city was losing police officers because of low pay, a low pension payout and the fact that Atlanta had in the 1980s opted out of the Social Security system. Officers could make more money and get a better retirement elsewhere.

To keep cops, the council voted to increase police pension benefits by 50 percent and to reduce the amount of time it would take for an officer to qualify. It also made the changes retroactive. The changes in 2002 dramatically increased what the city owed annually to the police pension fund.

Other city workers began to lobby the council for similar upgrades. Three years later, they got it. The council voted to boost pension benefits for both firefighters and general employees. Firefighters got a 50 percent increase; general employees got 25 percent. But money wasn't set aside to cover the increases.

What went wrong? The people who ran Franklin's Finance Department say they provided detailed financial information on the consequences of raising pension benefits. But administration officials ultimately supported the benefit increases. Council members say they were not given enough information. Still others say many on the council didn't understand what they were voting on.

Franklin and her spokeswoman directed all calls to the city's Finance Department, which now is in transition. Janice Davis, finance director for years under Franklin, left her post during the current budget crisis to go work for the North Texas Tollway Authority. She declined to comment for this story. Ray Zies, her controller in Atlanta and now the city's interim director, is about to take a job at the tollway authority as well. He described his experience in Atlanta government as "a disappointment."

"The city needs to develop a long-term solution against the increasing pressure on the budget caused by the pension plans," he said.

Zies said the council didn't understand that increasing pension benefits for workers may have been politically convenient, but it would dramatically increase costs.

"You can give them stuff," Zies sighed when discussing the council. "But you can't make them read it."

Franklin set up a special advisory commission to look into pension reforms in 2004. The committee came out with a paper listing 10 recommendations in August of that year. But in 2005, the council only adopted the increased benefits, while doing nothing to rein in costs. Davis and others recommended that the council consider a two-year process for voting on any pension benefit changes, to give more time to consider the impact. The council ignored the recommendation.

Howard Shook, the current chairman of the council's Finance and Executive Committee, said the council's approach was like someone going through a cafeteria line. Shook, who was not on the finance committee at the time, voted for the changes as a council member.

"The city took six desserts and left the Brussels sprouts," he said.

Councilwoman Moore, who served on the finance committee throughout the period, said the council voted for the police pension increase to retain officers, and then voted for the other increases in 2005 "to be fair to all employees."

"I don't ever remember that there was ever any conflict with the administration saying don't do it," she said.

On June 15, 2005, Davis gave a presentation to the council's finance committee spelling out the increased costs. But Moore, who voted for the changes, said the council wasn't focused on what the changes would mean.

"We knew it was coming," she said. "We did not plan for the pension numbers."

In April, City Auditor Leslie Ward issued a report to the council recommending it overhaul pension funding. It hasn't done anything yet.

Any solutions will be long-term and difficult. Lou Arcangeli, longtime trustee of the police pension board, advised: "When you are in a hole, stop digging."

He said the council must stop increasing benefits, even though general employees are seeking parity with the police. Carr, the actuary, said the council needs to repeal the ordinance that requires the city to fully fund its pensions by 2024. He said none of the other dozens of governments with which he works across the Southeast has such a strict deadline, and it locks the city into massive pension payments over the next 15 years.

Lots of money will need to be spent on the pensions to get them fully funded. The city can increase the amount workers pay into the system, but that will be politically difficult and defeat the purpose of the benefits in the first place. Otherwise, the city can raise taxes to pay down the pension liabilities — a move no one wants to consider.

Shook said that with the "accursed budget" this year "what we are finding out is keeping those [pension] promises is a lot more arduous than making them."