A day after Atlanta Mayor Kasim Reed challenged the city council to meet his June 30 schedule on implementing pension reform, City Council President Ceasar Mitchell released a schedule that could possibly delay a decision until September.
At stake could be millions of dollars in retirement benefits, as well as the city’s ability to stave off bankruptcy.
But also on the table is political capital of both the mayor and the city council, who have finally engaged in their first all-out public conflict since Reed took office over 16 months ago.
Reed said Thursday that he has been getting angry responses from both the police and fire unions who oppose any change to the current pension system.
“There have been statements made at me directly,” said Reed, who was elected with union backing. “They have been aggressive about pulling their support, but if you think that we are not going to have an up-or-down vote on this, you are wrong. That is not going to happen and I am not going to be intimidated.”
Mike Bell, a former financial officer for both Atlanta and DeKalb County, said the mayor is navigating rough waters.
“If the mayor is feeling pressure, the council is feeling pressure,” Bell said. “The issue is that the people who work for the city -- police and fire -- are organized. Their retirement income is the city of Atlanta’s pension program. That is why there is so much glare on this.”
The closer Atlanta gets to Reed’s June 30 deadline, which coincides with the ratification deadline for the city’s proposed $545 million budget, the hotter the glare seems to get. Atlanta, like several big cities in America, is desperately trying to reform its pension structure that many agree is crippling the city’s finances. What Atlanta does could have ripple effects throughout metro Atlanta and the state, as other municipalities seek to reform their retirement plans as well.
Currently, 20 cents of every dollar in the city’s budget goes toward pension payments. Atlanta also faces a $1.7 billion “unfunded pension liability,” which means the city has promised $1.7 billion in retirement benefits that it has yet to cover. Reed hopes his reform plan can keep that figure from growing.
Reed said passage of pension reform prior by June 30 will allow the city to calculate reduced pension savings and restore many of the currently proposed cuts and layoffs.
The city is facing an $18 million spending gap in the 2012 budget and Reed had proposed laying off 200 employees, a projection made with the expectation that there would be no changes in the pension.
Reed’s proposed two options to reform the city’s pension program. Although neither plan would affect any retirement pay a worker has already earned, Daws has argued that any changes at all to the current pension plan breaks a contract firefighters and police officers were hired under.
“Allowing the city’s unfunded pension liability, already a staggering $1.7 billion dollars, to grow while critical city services and more than 2,000 employees have been laid off is unconscionable and an abdication of fiduciary duty,” Reed said.
On Wednesday, Reed unveiled a modified pension plan that would freeze the city’s current defined benefit plans and proposed employees contribute 6 percent of their salary toward a retirement savings plan. The city would add a 7.2 percent match. All employees would be eligible as would all future sworn Atlanta Police Department and Atlanta Fire Rescue Department employees.
Jim Daws, president of the Atlanta chapter of the International Association of Fire Fighters, has already vowed to sue if reform is approved. Daws declined comment Thursday. Ken Allen, president of the International Brotherhood of Police Officers, could not be reached for comment.
“I think he is doing what he has to do. He is doing what the financial posture of the city dictates,” said Bell, a professor of practice in the Andrew Young School of Public Policies at Georgia State University. “Now, where it is going to go? I am concerned all of this could end up in court for years to come.”
Bell said that Reed is moving on pension reform under the assumption that changes the city made in years past, like increasing pension payments to city workers, were legal. Currently, the Fulton County Taxpayers Foundation trying to fight those changes in court, claiming that they were made without proper financial study.
Reed held a stinging news conference Wednesday, where he pressed the city council to approve a plan by June 30, which would free up city-wide spending. Several members of the council balked at the demand. On Thursday, City Council President Ceasar Mitchell laid out the remaining schedule for pension deliberations, indicating that the council will take the necessary time to fully vet all reform proposals.
“The mayor knew before [Wednesday] that we were going to consider a schedule that takes us to September,” Mitchell said. “I am not trying to delay anything. I want to give the council an option of evaluation. I do believe that we need to set expectations of ourselves.”
Mitchell’s schedule would begin with meetings with accountants and actuaries on June 2 and could theoretically push discussion and a final vote to Sept. 6. But the plan also has several outs that would allow the council to vote before September and as early as July 5.
But Reed said Mitchell, as the second highest ranking elected official in the city, should already understand the choices before the council.
“For him to say he hasn’t had time to review this means that he hasn’t been paying attention or he hasn’t been doing his job,” Reed said. “Where has he been the last 16 months?
“This is the undeniably the largest problem facing the city, short term and long term. And we are going to see where the people stand. It is crystal clear where the city council president stands,” Reed said. “He wants to delay [solving] a problem he helped create and it is disappointing and a failure of leadership that he would choose to block reform under the false guise of needing more time.”
But the council is still decidedly split on when to push through reform. Councilman Howard Shook fears the current pension plan will continue to eat into fundamental service delivery needs if it is not reformed by June 30.
“I believe the mayor is to be commended for unflinchingly addressing this crisis. Does that mean his plan is the best alternative? Perhaps not, but I am committed to supporting a fair and affordable compromise and the sooner, the better,” Shook said. “We must have the courage to act now.”
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