Posted November 7, 2011
The panel charged with reviewing MLA pensions was confronted with a regime that was opaque, unfunded, and absurdly generous. Their report has not provided a satisfactory response to any of these problems.
- The proposed benefit accrual rate of 3.5% per annum is still almost twice the level of civil servants and teachers, who have among the most generous plans in the province. It is completely out of touch with average Nova Scotians, 60% of whom have no pension plan at all.
- In spite of funding at close to 20% of payroll by employees and taxpayers the teacher and civil servant plans have each developed deficits well in excess of $1 billion. For the civil servants this was addressed by benefit reductions and a $536 million bailout from taxpayers. The government failed to address the issue at all in its recent contract negotiations with the teachers. Given market conditions it is extremely likely that additional deficits will appear in the next valuations. Any plan to get our province back to balance must deal with these costs. How can the MLA’s do so while lining their own pockets so richly?
- The plan has hidden its costs from taxpayers by failing to set up any funding mechanism. The report does not provide a clear answer to the costs of its recommendations but if they were provided by a private sector employer they would be close to 50% of salary –say $40,000 per person per year for MLA’s , and much more for cabinet members and party leaders.
- The report argues that this kind of plan is necessary to attract capable people to run for office. The facts suggest otherwise. Thirty percent of our MLA’s are from the teaching professions. They have a contractual right to return to teaching when they finish as politicians. The next largest contingents include journalists and political aides, not well paid professions. For all but a very few MLA’s $86,000 represents a considerable improvement in financial circumstances. An absurdly generous pension plan is an unnecessary extra.
- The conservative government of Saskatchewan, the Liberal government of Ontario, and the NDP government of Manitoba have each taken steps to bring their costs for MLA pensions into line with their civil servants, either by reducing defined benefit accruals to similar rates or moving to a defined contribution plan. There is no evidence of a decline in candidate quality. These are the examples that the panel should have followed.
- Two of the panel’s recommendations deserve support. First, any changes should only apply to future benefit accruals, perhaps from the date of the next election. It is wrong to confiscate benefits that have already been earned. Secondly, it is entirely normal pension practice for benefit eligibility commence after two years. Of course members who have only two or three years of service will have earned very small pensions.
The panel’s proposal is far too generous. It lacks transparency as to cost. And it sets the wrong tone for the urgent task of dealing with the out of control cost of public sector pensions. Each of the party leaders must reject the report and call for a plan that is within the range experienced by Nova Scotian taxpayers. Nobody outside their caucuses will disagree.
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