As Atlanta officials still consider controversial changes to the employee pension plan, a lawsuit filed eight months ago may smooth the city’s path toward reform -- if it ever sees the inside of a courtroom.
John Sherman, president of the Fulton County Taxpayers Foundation, is still waiting on a court date for his 2010 suit that charges that the city illegally approved changes to the pension structure in 2001 and 2005.
Sherman argues that the changes were illegal because they were not supported by financial impact studies or actuarial studies. A judge will determine whether Sherman's argument is valid.
But there is little way to prove whether there were such studies, as Sherman’s attorneys have been unable to secure some documents from the city.
“We asked for those documents eight months ago,” Sherman said. “They said that they didn’t have them. But I don’t think they ever had such documents. The increases were pushed through by powerful lobbyists, and the council had no idea that the increases were unaffordable.”
However, The Atlanta Journal-Constitution was able to obtain a 2005 document, a letter in which the city attorney explained the pension changes to the City Council. Sherman has that document but says it still does not contain a financial impact statement.
According to the city’s own charter, any changes made to the pension plan must be supported by an “investigation by an independent actuary,” and include the actuary’s “analysis of the funding requirements relating to any such modification.”
In 2001, and again in 2005, the Atlanta City Council voted to increase the pension payouts to police officers, firefighters and general employees. They also made the increases retroactive, and now pension payouts account for nearly a quarter of Atlanta's annual budget, and about 70 percent of those payments go to retired employees.
“Now, years later, the city is in a state of bankruptcy, and there doesn’t seem to be a sense of urgency,” Sherman said.
Reese McCranie, a spokesman for Atlanta Mayor Kasim Reed, said the administration would not comment on pending litigation. Several City Council members also would not comment for the same reason.
McCranie said the city is looking for the documents that Sherman is seeking.
Mike Bell, a professor of practice at the Andrew Young School of Policy Studies at Georgia State University, told Channel 2 Action News it's essential to settle the question of whether the pension changes went through the proper procedure.
“We're already paying for something, and it would be very important to know whether or not it was legally approved,” said Bell, who also served as DeKalb County's chief financial officer for 15 years.
If Sherman's lawsuit succeeds, it would declare the two sets of increases invalid.
“That would give the city an option of starting all over again,” Sherman said. “Ours is the only legal case that will give them that authority.”
Throughout the pension reform debate, police and fire unions have threatened to sue if changes to the pension are implemented. If that happens, Sherman doubts that the city would win.
“And the case will be dragged around in the courts for two years while the unfunded liability continues to increase,” Sherman said.
Reed’s position on pension reform has been backed by two Atlanta law firms, who advised him that pension reform options are fully supported by the Georgia Constitution.
"The problem is whether they could legally sweep aside the existing pension laws," said Sherman.
About the Author
