Atlanta city officials have finally begun to examine the budget mess, looking for ways to avoid either steep cuts in service delivery or a property tax hike. If those officials had immersed themselves as deeply in financial matters two or three years ago, they might not be in such a fix now.

Even after Mayor Shirley Franklin froze vacant positions and started laying off more than 400 employees, she offered the Atlanta City Council a budget with an estimated shortfall of $140 million. She proposes to fill the budget gap by raising taxes and fees.

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The council has balked, fearing a revolt from taxpayers already struggling with spiraling water/sewer rates — not to mention gasoline and milk hovering near $4 a gallon. Council members are at least putting on a good show of considering alternatives to a tax hike.

But their options are limited. The budget shortfall has its immediate roots in the economic slowdown; nearly 20 percent of the city's budget comes from sales taxes, which always decline when the economy tanks. There is little to be done about that. Nor should the city lay off police officers or firefighters.

Of course, City Council members should look for other places to cut. Employees whose jobs are less essential than public safety — such as aides to City Council — ought to be pared back significantly before taxes are raised.

But some of the more significant costs cannot be addressed with quick fixes. Both economic megatrends (spiraling health care costs) and political decisions (awarding generous pension benefits) have added up to hundreds of millions of dollars. City Hall will have to muster foresight, creativity and political courage to stave off economic ruin down the road.

Let's start with those pesky employee retirement plans. Atlanta budget officials have blamed sharply higher pension and health insurance costs for creating this year's fiscal crisis. They have pointed out that new federal rules require cities to set aside more money to cover retirement checks they'll have to write later on.

But the real problem lies with the pensions themselves. Years ago, City Council increased pension benefits — a ticking time bomb of exploding numbers. Most city workers now get 50 percent of the average of their three highest salaries as retirement pay, according to Atlanta Journal-Constitution reporter Eric Stirgus. (Pensions for police and firefighters are even more generous.)

With longer life spans, a city employee could retire at 55 and still live another 25 or 30 years. For employees who earned $60,000 a year in the last three years, homeowners would have to pay $30,000 a year for three decades. Now multiply that by thousands of retirees.

Given the huge costs, many corporations and local governments have ended their traditional pension — or "defined benefit" — plans. Fulton County stopped in 1999. Employees hired by Fulton County today participate in a "defined contribution" plan — a 401(a) (similar to the 401(k) but for public employees). The county makes a contribution, but the employee is expected to contribute more. That way, county taxpayers are not stuck with the entire tab for his retirement.

It was easy enough for City Council to dole out generous pension benefits before federal regulations insisted that cities own up to the staggering burden headed toward their taxpayers. It seemed a painless way to reward workers. But the piper is now demanding to be paid upfront.

That's as it should be. There's no point in creating yet another system that functions like the national Social Security program: When my generation retires and gets to the bank vault, we'll find nothing but a pile of IOUs. The so-called lockbox has been looted.

Now that Atlanta City Hall is staring at the real costs of its retirement plans, it ought to rein them in. If Franklin and City Council members refuse to do so, the resulting fiscal calamity won't strike today or tomorrow. But it will strike, plunging the city into ruin a decade or so down the road.

• Cynthia Tucker is the editorial page editor. Her column appears Wednesdays and Sundays.