A Fulton County Superior Court judge began mulling Thursday a decision that could overturn Atlanta Mayor Kasim Reed’s historic 2011 pension reform.
A handful of union workers representing Atlanta fire, police and city employees sued the city last November, claiming the pension reform that forced employees to pay 5 percent more toward their retirement benefits was in violation of their contract, and therefore unconstitutional. Such an increase, the employees argue, must also increase their pension benefits.
But Reed and city officials say the change is allowed under Georgia law. The mayor, who championed the reform in his first term, has long said overhauling the employee retirement benefits program was critical to the city’s financial stability, and will help Atlanta pay off a $1.5 billion unfunded pension liability.
Without increasing contributions, the city can’t afford to pay the full benefits eventually owed to workers.
Judge John Goger heard arguments from both parties Thursday and will decide between dismissing the lawsuit or ruling in favor of the city or workers. The employees previously received class-action status, with about 5,000 workers named to the suit, attorneys said.
If Goger sides with the employees, the decision would reverse roughly $48 million they have already paid in pension contribution increases, and negate all future pension savings.
Atlanta officials say that would create a devastating hole in the city’s budget.
“This would be catastrophic, so we’d certainly be back here appealing,” City Attorney Cathy Hampton said.
Stephen Borders, president of the Atlanta Professional Firefighters union who is a plaintiff in the legal challenge, said the city is “shouldering its deficit on the backs of employees.” He worries officials will continually raise contribution limits to fund pensions.
Under terms of the pension plan, city employees are entitled to up to 80 percent of the salary they received in the last three years of service. Beneficiaries can receive up to 75 percent.
“We need the court to decide if this was a legal change, and if it was, that means it can happen again,” Borders said. “It’s a huge game changer as far as the limit on what they can and can’t do.”
While the Reed administration says the city was on a financial collision course without increasing pension contributions, attorney John Bell, who with Lee Brigham represents the unions, isn’t convinced.
Bell also questioned whether raising contribution levels from 7 percent to 12 percent (or 8 percent to 13 percent for those with a designated beneficiary) was the only solution. Local government could raise taxes to fulfill pension obligations, he said.
“Sometimes you have to tax more if you have made a promise or guarantee,” he said. “If you sign a note, you have to pay it, don’t you? … They’re changing the bargain in the middle of the game.”
Bell also said the pension contribution increases amount to a “cut back” in benefits, as employees are paying more, but not receiving more.
Hampton balked at the suggestion the city would raise taxes to fund its pension obligation. After all, Reed has long touted both pension reform and not raising taxes as successes of his leadership.
Hampton also disagreed with assertions the changes amount to cut-backs.
“It would be a cut back if they received less,” she said.
Attorneys for the city assert employees who join the pension program give consent to future changes allowed under state law.
The court hearing comes one day after a public clash between Reed and unions over the lawsuit and pay raises.
Several police officers and firefighters came to the city council finance committee Wednesday to continue talks over what they say are pay inequities in their respective forces.
They hope the problem can be resolved before the Atlanta City Council approves its annual budget next month. But union leaders say despite promises of resolution, the talks have stalled.
Reed, in a forceful appearance at the meeting, said he won’t discuss salary changes while the city remains embroiled in the lawsuit.
“I am not going to approve any budget with a raise while we are being sued for $48 million,” said Reed, noting he’s previously given raises to public safety workers. “You’re not going to rob the train and shoot the conductor in the head at the same time, and that’s what you’re trying to do here.”
Ken Allen, president of the International Brotherhood of Police Officers Local 623, said the lawsuit is seeking clarity on whether the city had the right to increase pension contributions without giving additional benefits.
“This is not to unravel work that we’ve done, not to bankrupt the city,” Allen said. “It’s for us to get that question answered.”
In rare agreement with Reed, District 9 Councilwoman Felicia Moore said she was unhappy the unions are challenging the pension deal. Moore played a key role in reaching an agreement with the unions over the reform, which passed with unanimous support from the Atlanta City Council.
“I’m really disappointed that we’re doing a full circle on this,” Moore said. “You’re (cutting) off your nose, not only to spite your face, but your whole body.”
No matter how the judge rules, the losing party is likely to appeal to the Georgia Supreme Court for a final ruling, Bell said.
“The city needs an answer to this, and these employees do, too,” Bell said.
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