A day after approving a plan to save the city millions of dollars annually in pension payments, the Atlanta City Council ratified a $547 million spending plan the administration promises will immediately reflect some of those savings.
The council spent more than nine hours Thursday weeding through more than 15 proposed amendments to restore millions of dollars in cuts. For taxpayers, some of that will be seen quickly through restored services, such as additional police officers.
Scores of city workers also will keep their jobs, and others won't face cuts in pay.
“This budget is a clear signal that Atlanta, operationally and functionally, is going in the right direction,” Mayor Kasim Reed said.
John Sherman, founder of the Fulton County Taxpayers Foundation, was not impressed, although he stopped short of calling for tax cuts.
“What they are doing with the change in the [pension] plan will still keep the taxpayers on the hook for a lot of money,” Sherman said. “But they will never have a tax cut. They will have a tax increase before they do that.”
With the heavy shadow of a pension overhaul taken care of a day earlier, the council was able to pass a budget free of heavy cuts, similar to what it dealt with last year.
By helping close an unfunded pension liability of $1.5 billion that consumed 20 percent of the annual budget, the overhaul is expected to solve a huge problem for the city, a problem shared by other local governments in the metro area and some major U.S. cities. Actuaries have said savings from the overhaul should total about $25 million a year. The city expects that to free up dollars for often neglected projects and programs.
“What we are seeing generally is that pension challenges facing cities are larger than the challenges facing states because a larger portion of the budget is going toward personnel,” said Keith Brainard, the research director at the National Association of State Retirement Administrators.
Human Resources Commissioner Yvonne Cowser Yancy said of the 112 jobs proposed for elimination, 64 of them have been restored. The remaining 48 positions were vacant and will be abolished. In addition, about 300 employees making more than $80,000 a year -- mostly managers, directors and people in the Law and Finance departments -- will not have to take a 3 percent salary cut.
Yancy said the budget also restored vacant positions in Public Works and Water departments.
One amendment that failed would have created a $1 million fund to provide merit-based raises for city workers. It would have been a thank-you to workers for agreeing to increase their contributions to their retirement plans by 5 percentage points to preserve their benefits, a key measure in getting the pension overhaul approved.
Instead, the council set aside $2.3 million from the pension savings for worker compensation that will come at a later date -- after the results of a pay study are released.
“They helped us bring this whole pension piece to a decent and humane level," Councilman C.T. Martin said of the workers. "We have to support them.”
Part of the argument for the pension overhaul was that with the financial restraints the city was dealing with, it would become increasingly tougher to provide raises and other incentives for workers.
Reed said raises will come -- eventually.
“For the last three years, between 75 and 300 people have been fired at every budget,” Reed said. “That has been our culture. This is the first budget in three years no employees have been fired. We are stabilizing our ship. ... This is how we will get to a position where we are strong enough to give pay raises.”
The council voted 13-1 to approve the $547 million budget for the 2012 fiscal year, compared with $560 million last year, while closing an $18 million gap.
Restored services achieved in the budget include an additional 100 sworn police officers, bring the city closer to Reed's goal of at least 2,000 officers, which he said will happen this year.
The budget also restores key elements within the city’s Parks Division. At least eight positions have been salvaged, particularly in areas around maintenance and groundskeeping. Also, a proposal to eliminate security from Piedmont Park was cut.
"It felt good this year to have money to talk about spending. It was a different process than last year," Councilwoman Keisha Bottoms said. "We were generous in the appropriate places and conservative in the appropriate places, as well. This just goes back to how important it was to pass pension reform."
Pension plan
The city of Atlanta, in sweeping fashion Wednesday, unanimously passed an overhaul of its pension system by shrinking pension liabilities and establishing a 401(k)-type plan for workers.
How the pension works
If you have already retired from the city of Atlanta:
The legislation makes no changes to the benefits of retired city employees.
If you were hired by the city before 1984:
The legislation will not have an impact on your benefits at all.
If you are a current city employee in the Defined Benefit plan (police, fire and general employees):
The legislation allows you to remain in a traditional pension plan.
- Your contribution of compensation to keep your existing benefits increases by 5 percentage points -- 13 percent if you have beneficiaries and 12 percent if you don't.
- Your multiplier, the rate at which employees accumulate future pension benefits, will be 3 percent for police officers and firefighters; 2.5 percent for general employees; and 2 percent for anyone hired after July 1.
- You will have a 10-year vesting period, but if you were hired after July 1, the vesting period will be 15 years.
- You can retire at the age of 55 if you fight fires or crime. Otherwise, you retire at 60.
- You will have no minimum retirement age, but you will be penalized for retiring early.
- That penalty will be 6 percent per year for the first five years before normal retirement age and 3 percent per year thereafter.
- Your cost-of-living adjustment will be 3 percent.
- Your salary calculation will be based on the highest consecutive three-year average.
If you are a new city employee:
- You will be placed into a hybrid plan composed of both a reduced traditional pension and a 401(k)-type plan, similar to those offered to private-sector employees.
- In the traditional pension portion of the plan, you will have a 1 percent defined benefit multiplier and an 8 percent mandatory employee contribution.
- In the 401(k)-type plan, you will have a 3.75 percent mandatory employee contribution that will be matched 100 percent by the city. You will have the option to contribute up to an additional 4.25 percent, which will also be matched 100 percent by the city.
- In the Defined Benefits plan, your vesting period is 15 years. In the 401(k)-type plan, your vesting period is five years.
- Unlike current employees, you have to wait until you are 57 to retire if you are a firefighter or police officer. If you are a general employee, you have to wait until you are 62.
- If you want to retire early, you have to be 47 if you are a firefighter or police officer and 52 if you are a general employee.
- The city will take 6 percent per year if you want to retire early.
- Your cost-of-living adjustment will only be 1 percent.
- Your salary calculation will be based on the highest consecutive-10-year average.
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