Atlanta’s budget to build stability

As other cities — not to mention states and countries — struggle with fiscal solvency, Atlanta’s proposed budget for fiscal year 2011 will increase the city’s cash reserve, reduce the city’s pension liability and invest more resources in public safety.

Developed by Mayor Kasim Reed in collaboration with Atlanta City Council members under the leadership of Finance Committee Chair Yolanda Adrean, this budget deserves final passage at the City Council’s meeting Friday.

City officials estimate the city will end the fiscal year with a remarkable increase in its cash reserves from $7.4 million to more than $40 million, thanks to aggressive fiscal management by Mayor Reed as well as a 2009 three-mill property tax increase (supported then by eight of 15 City Council members) and cost controls begun under Mayor Shirley Franklin’s administration.

The proposed FY 2011 budget is projected to add another $27 million, contributing to Mayor Reed’s goal of increasing the city’s reserves to $100 million. This goal is crucial to improving the city’s credit rating from its AA2 by Moody’s, which influences the cost to the city of the money it borrows, like any government or business, to fund its ongoing operations.

With an affirmative vote Friday, the City Council also takes a first step in the arduous task of reducing the city’s pension liability. The change will only apply to employees hired after July 1 of this year, returning the pension benefit to its 2000 level.

The salary multiplier will roll back from 3 percent to 2 percent for firefighters and police officers and from 2.5 percent to 2 percent for the city’s general workers — and the vesting period will increase from 10 to 15 years for a city worker’s pension. This change is expected to save $5.4 million for the city in the first year — the equivalent of more than 50 police officers.

Even with this change, the city has a fiscally unsustainable pension liability. The city’s general fund contributed about $70 million in fiscal year 2010 to pension funds, 13 percent of the city budget. The city’s annual pension contribution has also risen 13 percent per year over the past 10 years, and is projected to continue to grow. In one of his first acts, Mayor Reed appointed a blue ribbon pension panel, chaired by John Mellott, the former treasurer of Cox Enterprises and former publisher of The Atlanta Journal-Constitution, to develop options to tackle this fiscal crisis. The panel should have options for the mayor and City Council to consider this fall.