October 03, 2008
The budget squeeze Georgia-style
Local governments in Georgia, like those in New York, are struggling with red ink. Some are using a financial tool not available to New York municipalities; they are restructuring pension plans for new employees.
"Government jobs no longer safe haven," proclaims a headline in the Atlanta Journal-Constitution this week. The story highlights efforts of Georgia local governments to balance their budgets with layoffs, pay freezes, increasing employee share of health insurance costs and reducing pension costs.
The city of Atlanta
...is looking at slashing pension benefits for new employees and other ways the city can contain costs for existing workers and retirees. Why? The city simply can't afford the burden of benefits it already owes retirees.
Earlier this month, Cobb County joined in with new pension rules that require new employees to contribute more and work longer before they are eligible. DeKalb County made a similar change three years ago.
(snip)
Gwinnett County has blocked new employees from joining the county pension for two years. It also cut its match for its defined contribution plan.
Howard Shook, who chairs the finance committee of the Atlanta City Council, says "We have people now who are living in retirement longer than they worked for the city. We can't afford that."
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In New York, municipalities and school districts lack the power to make cost-saving changes to their pension systems for new employees, such as introducing a new pension tier, changing vesting rules or switching to 401(k)-like plans.
Such changes can only be made by the state Legislature. Pension benefits cannot be changed for current employees, only for newly hired workers.
Public employees outside New York City belong to the state retirement system or the teachers retirement system. New York City has its own retirement system.
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