Not all the action today is Crossover fun at the Gold Dome. Down the street, Atlanta Mayor Kasim Reed has released his pension reform proposal to reform city employee pensions and fix the under-funded pension plan. From WXIA-11 Alive news:
The first part of the proposal commits the city to pay off its debt over the next 30 years. The city’s current pay-off plan will result in the pension liability almost doubling in 30 years without any debt being paid off. The city currently pays only interest on its unfunded pension liability, while the principal continues to grow — an untenable financial arrangement, Reed’s office noted.
In the second part of the proposal, Reed outlined two different options for the Atlanta City Council to consider. In Option 1, all employees would be moved to a defined contribution plan (similar to a 401K in the private sector) in which employees contribute 6 percent of their salary and the city contributes 6 percent. This option reduces the city’s annual required contribution to the pension fund by between $27 million and $31 million in the first five years. City employees above a certain pay grade – including Mayor Reed, Cabinet members and almost 1,000 other employees – have been in such a plan since 2001.
In Option 2, all employees would have the individual choice to enter into the federal Social Security system. The city would match up to 8 percent of employee contributions for those who opt into Social Security or up to 12 percent for those who opt out. This second option reduces the city’s annual required contribution by between $12 million and $18 million in the first 5 years.
Reed estimated that taking no action would result in a pension liability of between $2.7 and $4.5 Billion over the next 30 years.
This is a big improvement, but both options as offered to the city council should be structured to cost the same. Otherwise you know they’ll go for option 2.
I see the savings stated in each option, but do you have any idea of the costs over and above what the city is now paying toward the current pension system?
Not yet. This is true “breaking news”, and all I’ve had time to do is scan the 11 Alive web post. It’s something I look forward to looking into.
Is Mayor Reed more conservative than Rep Mark Hatfield by taking on this tough issue while Hatfield ignores a simular problem which is much larger statewide with healthcare and instead he is chasing a mythical birth certificate issue?
I can hear the whirring of Mr. Williams bowtie spinning! This is such positive news, let’s see Thursday before GA Gang tapes, check..
Good point, Harry!
It has to be asked. If this is such a good idea (which it seems to be) then why hasn’t it been done before? Usually when I ask that question, it reveals a catch.
But maybe in this case, it was just a lack of foresight and political courage. Hope so.
Because the previous mayor used the pension as a method to buy votes for her re-election. She not only didn’t “fix” the problem, she’s the one who broke it. Atlanta’s pensions have been sweetened twice in the last 10 years (I believe Campbell was responsible for the other time), with the most recent tweak granting larger benefits retroactively.
Because of this, the city’s pension went from a program that was 80% funded (benchmark) to now 53% funded. By the end of Reed’s 2nd presumed term, projections are that if nothing is done, we would be at 35% or less of required funding.
I’m the first to admit I’m not the best resource on City of Atlanta finances, but I am trying to brush up quickly. If any better informed experts (paging Thomas Wheatley) have better or more clear data/explanations than above, please revise and extend on my behalf.
So option 2 (politics) as I figured. Like I said, let’s hope Mayor Reed can sustain. Remember both Dollar Bill and Millilou (Shirley Franklin’s internet handle) both started out gangbusters. It’s always the cursed re-election that takes Atlanta Mayors sideways.