Why this matters:
- The Georgia Supreme Court's decision affirms Atlanta's right to modify its pension plan, ruling that such a change does not constitute a breach of contract.
- The pension reform's 5 percent increase in contribution levels will remain.
- A ruling against Atlanta could have cost the city up to $50 million in restitution, according to estimates provided by city officials.
The Georgia Supreme Court has upheld Atlanta Mayor Kasim Reed’s 2011 pension reform, ending a two-year legal battle brought by city employees who argued it was unconstitutional.
The unanimous decision, which affirms Atlanta's right to modify its pension program without increasing benefits, could have broad implications for governments across Georgia grappling with looming pension liabilities. Separately, the decision could be the first step in healing a fractured relationship between Reed and public safety workers, who have been denied raises while the lawsuit was pending.
“Atlanta is one of the bellwether cities in the United States of America. The issue is going to come up again and again and again, and I think the Supreme Court’s decision and our work here is going to be looked at again and again and again,” Reed said Monday. “I believe we are going to be able to make the argument that our approach is the right approach.”
A handful of employees representing Atlanta fire, police and general workers filed a class action lawsuit two years ago in Fulton County Supreme Court, saying that a city ordinance requiring them to pay 5 percent more toward their retirement benefits was in violation of their contract and, therefore, unconstitutional. Such an increase, the plaintiffs argued, must also increase their pension benefits.
The lawsuit presented the “most grave financial threat” that Atlanta has faced, Reed said Monday. Had the court sided with the employees, the move would have dismantled the hallmark achievement of Reed’s time in office and left Atlanta on the hook for up to $50 million in restitution. The city also would have faced the potential for lay-offs, he said.
Fulton Superior Court Judge John J. Goger ruled in 2014 that the pension contribution increase is allowed under Georgia law. Last December, the employees appealed that decision to the state's highest court, which affirmed Goger's ruling on Monday. Atlanta attorneys Robin Shahar and Seth Eisenberg argued the case for Atlanta.
The pension reform “did not alter plaintiffs’ pension benefits, but rather modified their pension obligations, and in no manner divested plaintiffs of their earned pension benefits, so as to implicate constitutional concerns,” presiding Justice P. Harris Hines wrote in the opinion.
John Bell, the attorney who represented the employees, said that while he “felt very strongly” about the workers’ position, “We’ve got a Supreme Court of very bright judges who are very conscientious. They called it as they saw it.”
Still, he believes the opinion represents a shift in Georgia case law, which he says has historically been more protective of pension rights.
Vic Bennett, the vice president of the Atlanta Professional Firefighters union, said the organization respects the court’s decision, though it’s “disappointing for city of Atlanta employees, not just firefighters.”
Reed garnered national attention in 2011 for brokering a deal with the Atlanta City Council and union leaders to overhaul the city’s troubled employee retirement benefits program, which he described as a “sub-prime loan.”
Atlanta leaders have said the reform was critical to the city’s financial stability, and will help pay off a $1.5 billion unfunded pension liability. The mayor has argued that, without increasing contributions, the city couldn’t afford to pay the full benefits to workers and would have eventually gone into default.
It’s a problem not unique to Atlanta as city and state governments nationwide have struggled to address behemoth pension obligations.
“I think what we have done collectively is the most consequential step that the city of Atlanta has taken for its finances,” Reed said. “Anyone who disputes what I’m saying needs to look no further than Detroit, which filed for bankruptcy under similar circumstances to ours.”
Reed continued that Chicago Mayor Rahm Emanuel, a political ally, recently backed the largest property tax increase in that city’s recent history because of its pension burden. “This stuff is not stuff we’re making up or imagining,” Reed said. “When you look across America, cities are dealing with it.”
But while the reform has helped strengthen Atlanta’s financial footing, it has deepened rifts between Reed and many public safety workers, who have called for additional raises to off-set rising pension and benefits costs. Reed and the city council have given multiple raises to public safety in recent years, though many workers say it’s not enough.
The conflict worsened earlier this year when police, fire and corrections employees were left out of increases awarded to many others as Reed has refused to grant salary bumps while the conflict played out in court. In response, the firefighter union posted YouTube videos and a billboard portraying the mayor as uncaring toward public safety workers.
On Monday, Reed said he is ready to resume talks with public safety, though he made a point of requesting the fire union first remove the billboard.
Bennett — who noted that the billboard is still up, though in August the union only paid for one month — said he welcomes the opportunity to meet with Reed over salary and attrition concerns. Just last week, the former president of the firefighters union, who was also the lead plaintiff on the pension challenge, resigned to pursue a better paying job in the private sector.
In the meantime, the city council took the first steps toward resolving the public safety pay issues Monday by approving raises for lieutenants in the Atlanta Police Department.
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