OEDEL: Consolidation savings? Not if we stay on the path to least resistance

Special to The TelegraphJanuary 13, 2013 

Last July, Macon-Bibb voters approved city-county consolidation based in part on the claims of some sponsors that consolidation would produce 20 percent cost savings. Simultaneously, the expectation was also cultivated by sponsors that all present employees will be retained, service levels continued, and pensions perpetuated.

Can this all add up?

Though the math sounds problematic, consolidation does provide a chance for meaningful savings through possible pension reform and harmonization. If pension reform is carefully, legally and comprehensively done, it may be possible to retain all employees and maintain service levels, while still realizing serious savings and fairly securing for all employees the benefits they’ve already accrued under their respective plans.

Right now, most county and city employees are getting Social Security benefits administered by the federal government, as well as additional benefits through two separate “defined benefit” pension plans. One plan for city employees and an even more generous one for county employees. Meanwhile, Macon police and fire employees are presently getting the most robust, expensive defined benefit plan of all, in part because they (and the city on their behalf) have opted out of federal Social Security, and will rely in retirement on that third plan absent other savings or benefits.

Under Georgia law, pensions provided by public employers may be analogized to contracts, and to the extent that the contract analogy holds instead of a property analogy, those pensions cannot lightly be impaired thanks to the federal Constitution’s Contracts Clause. Therefore, any harmonization or change to any of the three existing pension plans should ensure that accrued benefits are locked into place, guaranteed, and not impaired. That basic understanding is also reflected in Section 25 of the Consolidation Act.

Initially, though, the consolidation transition committee seems inclined just to take the path of least political resistance, leaving all three expensive old plans in full and costly force after consolidation, and even adding a fourth plan for new employees. The committee seems ready to saddle the new government with a multiplicity of archaic, overly lavish and disparate pension programs, while squeezing any meager savings out of retirement benefits for a few new workers.

Existing public employees vested in the plans are well connected politically, and can make life difficult for politicians. That may help explain the transition committee’s initial reluctance to address the massive pension expenses that Macon and Bibb are continuing to rack up despite real economic shifts in most other sectors of the economy.

Macon Mayor Robert Reichert is acting so far as if Section 25 of the Consolidation Act prohibits the consolidated government from harmonizing and revising the various pension plans into a single, more modest, more affordable plan, but the language of Section 25 says otherwise.

It’s true that the act guarantees employees will “retain those pension rights, if any, which had accrued to them” before consolidation, in keeping with the Constitution. But employees have no legal right to count the hoped-for benefits that might accrue to them after consolidation on the chance that the existing plans won’t change with the times.

Section 25 indicates that the existing plans’ remarkably generous terms can indeed be cut post-consolidation. It states that the new government’s assumption of previously accrued obligations to pension plan participants “shall not create any obligation on the part of the commission or create any right which did not exist” before consolidation -- like an imaginary right to no future downward adjustments. Moreover, Section 25 expressly contemplates “unification” or “revision” of the plans so long as benefits earned and accrued as of consolidation day aren’t lost.

The consolidation transition committee is the public’s steward. The public undoubtedly wishes to be scrupulously fair to any and all beneficiaries, crediting them for the full present economic value of every retirement benefit that they will have accrued up until the day the new government is created.

But shouldn’t the new government be urged to treat all its employees the same, and on a basis that is sustainable and fair? What else does it mean to have a new government?

All options should be on the transition committee’s table.

The committee should carefully quantify the long-run costs of Mayor Reichert’s proposal to fund and administer all three existing pension plans as is, practically forever, meanwhile introducing a fourth plan for new, likely younger folks.

If the consolidation committee takes the path of least resistance, costs for expensive, archaic pension plans will continue to be charged to the public’s weary credit card; a caste system will be enshrined for decades that will pit new employees against old employees and old employees against one another; and the opportunity to generate meaningful savings while retaining jobs and maintaining service levels will be lost.

If consolidation is really going to mean less confusion, less clutter, more savings and market-like employment practices, now’s the time to get serious about the potentially over-extravagant pension expenses of the new government.

Let’s start fresh with a sensible, fair, solvent, uniform system for retirement benefits -- one that our public can sustain, and our public employees can live with.

David Oedel teaches constitutional law at Mercer Law School. Before becoming a lawyer, he served for four years as a personnel manager for a manufacturer that has since moved off-shore because of high U.S. labor costs.

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