The pension problem is real. Governments across the country are struggling to balance their budgets while also properly funding their pension plans. The Postmaster General claims that the problem is so bad with the United States Post Office that the organization has to make major reductions in service or risk going out of business.
In Columbus, the mayor and council are exploring various scenarios to address the pension problem the city faces. One idea is to create a two-tiered system which would allow current employees to contribute 4 percent of their salaries toward their pensions and have the ability to retire with up to a maximum of 60 percent, but would require new employees to contribute 6 percent of their salaries while allowing those employees the ability to retire with a maximum of only 45 percent.
Another idea is to create a different two-tiered system which still limits current employees to a 4 percent contribution, but requires new employees to contribute 8 percent of their salaries to the pension plan so that new and current employees alike have the ability to retire with up to 60 percent of their salaries.
Both plans treat new employees differently from current employees. Unfortunately, that is a necessary evil as pension fund investments have not yielded as much recently as they did in the past. Fortunately, all parties agree that current employees were made a promise and every effort is being made to ensure that the pension promised to our current employees, and the terms of that promise, remain materially unchanged.
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If the city's pension fund could yield higher returns, none of this would be an issue. The Georgia General Assembly passed legislation on the last day of the session that opens the door for "large retirement systems" to consider alternative investments. The success of the Retirement Systems of Alabama's alternative investments is legendary. As head of the system, CEO David Bronner invested a portion of the funds' assets in the Robert Trent Jones Golf Trail, the Battle House Tower and Raycom Media, among other things. As a result, RSA has had a buffer against many of the ebbs in the market experienced by other government pension funds.
The legislation passed by the Georgia General Assembly allows qualified pension funds to invest up to 5 percent of their assets in alternative investments like the ones chosen by Mr. Bronner at RSA. There is never a guarantee that an investment will succeed and there is no guarantee that governments in Georgia that invest in these types of opportunities will see the growth that RSA has seen.
However, if Governor Deal signs this bill and the Columbus Consolidated Pension fund qualifies under OCGA 47-20-84, perhaps investing a portion of our funds in strong alternative investments would make sense. Yes, they have higher risk. But they also have higher rewards and maybe those higher rewards can make it a little easier for the mayor and city council to fix our pension problem.
Karl Douglass, Columbus native and resident, is a frequent commenter on local, state and federal politics. Follow him on Twitter@KarlDouglass or facebook.com/karldouglass.