The Atlanta Public School Pension Fund Task Force will meet for the first time today at 12 p.m. [time corrected]. The Task Force is led by Co-Chairs Jason Esteves and Nancy Meister. The objective of the Task Force is to make recommendations to the Board regarding the resolution of the approximately $530 million unfunded pension liability in the City General Employees’ Pension Plan .
As background, the unfunded pension liability in the City General Employees’ Pension Plan goes back decades due to the underfunding by prior Boards. However, the significant underfunding became more prominent when back in the 1970’s when the teachers in City Plan moved to the Teacher Retirement System (TRS). TRS required that the transfer of the teachers to their system be “fully funded”. As a result, a substantial amount of the pension assets were transferred to TRS and, at that point, APS’s share of the City Pension Plan was woefully underfunded. Since at least 2002, APS has made payments ranging from $39-46 million on an annual basis and the annual required payments will escalate significantly over the next several years.
The pension liability payments are currently coming out of the General Fund and the annual payment represent 7-8% of total General Fund spending. The current annual payments are approximately $1,000 per student and the payment amounts could go as high as approximately $1,600 per student in future years. As such, these amounts cannot be spent for educational purposes.
In the past couple of years, the payments have resulted in some controversy as to who is responsible for sharing in the payments. The administration has contended that the charter schools must bear their share of this expenditure that arose many years before the charter schools came into existence. The charter schools argued that the methodology being used by the administration to calculate the charter schools share of “local revenues” was not in accordance with State law and that they should not bear any of the cost of the underfunded pension. The GA Supreme Court has agreed with the charter schools (see here).
This is a tough issue and impacts the core mission of APS as it reduces the amount of funds available to educate students. And unfortunately, due to the irresponsibility of prior Boards (going all the way back for decades) the problem has never been resolved. Further, the problem APS is facing now is the same pension liability underfunding that many local and state governments are facing across the country – and that has resulted in several local governmental units going into bankruptcy.
In addition, this issue is similar to the one Mayor Franklin had to address regarding the city’s decimated outdated water and sewer infrastructure several years ago. In that case, under Court consent decrees, the city had to incur over $3.9 billion in costs to correct the problem and the water and sewer rates for current residents skyrocketed to pay for past mismanagement by prior city officials (see here)
I applaud the Board for taking on this issue and look forward to moving to a resolution that results in funding being restored to the education of the current students in the system.
Note – I will be serving on the Task Force as an outside member and therefore I will have a conflict of interest in reporting further on this Task Force’s activities. As such, I will only post on this Task Force’s activities with the express approval of both of the Co-Chairs of the Task Force.
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