MLA Compensation

The government has appointed a three person committee to review how MLA’s are compensated. Top priority should be given to reviewing MLA pensions.

The report on compensation after the 2006 election looked only at the cash portion and focused primarily on comparisons with other provinces. It rewarded MLA’s with a handsome increase of over 20%, to $79,500. With indexing to inflation in subsequent years it has now grown to $89,235. Party leaders, cabinet members, and others in leadership roles make considerably more.

There was no report on salaries after the 2009 election. But in 2011 a separate review was commissioned on the pensions that are provided to MLA’s. Nova Scotia was then even higher than the extremely generous pensions offered to MLA’s in other provinces.

The panel welcomed input and was heavily influenced by a robust array of submissions from present and past MLA’s. Unsurprisingly they did not want any change.

Although the 2011 panel trimmed the rate at which future benefits accrued they still left MLA’s with benefits worth perhaps twice as much as those available to civil servants and teachers. The benefits for civil servants and teachers are among the best available to Nova Scotians. Sixty percent of Nova Scotians have no pension plan at all.

The panel devotes quite a bit of its report to the demands faced by MLA’s. They rightly point out that, in addition to time spent in the legislature, MLA’s spend many nights and weekends talking to constituents and attending community events. Not all of the discussions are pleasant.

So while it is true that almost all MLA’s earn more than they ever had before, it is also true that most work extremely hard, in employment which has very low job security. We should not begrudge our MLA’s their salaries.

The 2011 report then talks about the challenges faced by former MLA’s as they reintegrate into the workforce. Here the panel lost its way:

“The retired MLAs who made submissions to the Review Panel frankly detailed the impact of the interruption on their careers when they tried to return to their pre-MLA work… Years served as an MLA… did not really serve as “relevant past experience” when attempting to reintegrate into the work force in their post-MLA life. For many, it was not an easy transition and it took a long time to return to the pre-MLA career level…”

The panel’s response to these no doubt sincere representations was deeply flawed.

The difficulty described might be quite relevant if the ex-MLA had given up a promising career as a rising corporate executive or partner in a professional services firm.

That is not the profile of MLA’s elected in 2009. There were no MLA’s with senior private sector leadership experience, no accountants or others with a substantial financial background, no doctors, architects, or engineers.

Out of 52 MLA’s there were fourteen teachers, seven who had always worked in politics, five small business operators, four journalists, three civil servants, and three health care workers. Almost 60% came from the public sector.

For most of them the transition back to previous jobs is relatively less difficult. Members of the Nova Scotia Teachers Union have a contractual right to resume their career no matter how long they have been away from it. So do civil servants if they only serve one term.

Secondly the need for support varies dramatically by age. A politician first elected at age 55 probably has no intention of going back to his or her previous job after politics. For younger retirees the pension is not relevant to transition. It is received long after the need for that support has come and gone

Thirdly, there are other supports provided to ex-MLA’s. They each receive a transition allowance of roughly one month’s salary for each year of service plus $7,500 for retirement or career counselling, or retraining services. This is the right kind of tool to facilitate re-entry to a previous career.

Perhaps the problem with the 2011 panel was that it was only asked to look at pensions, and therefor only had them to consider as a tool.

Fortunately the 2014 panel has a much broader mandate, including salaries, benefits, pensions, travel, and constituency allowances for MLAs.

The new panel should provide adequate salaries for our MLA’s, reflecting the substantial demands of the job. Secondly it should make sure that the transition supports for departing MLA’s provide appropriate support, having regard to age and circumstances.

Having done that there is no reason to provide an excessive pension. The cost of pension entitlements should be within the range provided in the public sector. MLA’s could participate in the civil servant plan or one of similar design.

The new approach should apply to all the newly elected members and to future accruals for returning members.

In response to the MLA expense scandals a number of good changes were made to MLA financial arrangements. To finish the job it is crucial that pensions be brought into line.


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Reference Material

Pensions in Crisis

Voters trying to understand the various positions being advocated for the Canada Pension Plan have every reason to be confused.

The initial incarnation of CPP required only 3.6% of pensionable earnings as contributions, and provided benefits to people well before they had been earned. This was eventually repaired in the nineties; otherwise, the plan would have gone broke.

Today’s CPP provides a pension at 65 of up to $12,780, for which employees and employers annually contribute a combined 9.9% of pensionable earnings. It is simple and cost-effective, but even when combined with Old Age Security (OAS) it does not provide an adequate pension.

After fruitless discussions with the federal government, Ontario proposes to go it alone. Details are not yet finalized and the scheduled start is not until 2017, no doubt reflecting a hope that federal policy will change and save them the trouble. Ontario’s plan, mandatory only for those not already in a pension plan, would require a worker to contribute for 40 years in order to receive an unreduced benefit. The only examples provided on the Ontario website are for employees who work the full 40 eligible years.

The Canadian Labour Congress (CLC) has one of the many proposals to increase the existing CPP. The CLC loves to quote a 2014 Nanos survey in which 88% of Canadians support “increasing the benefits Canadians receive through the Canadian Pension Plan.” Of course the survey does not mention the corresponding need for a substantial increase in contributions, nor the 40 year wait for unreduced benefits. (The same survey makes the shocking discovery that most Canadians would like lower taxes.)

The strongest support for improving benefits was from the oldest respondents, who would get only small benefit from the CLC proposal. There is one group who should actively oppose it. Low income workers are typically able to receive the Guaranteed Income Supplement when they retire, in addition to OAS and a small pension from the present CPP program. An increase in CPP will be largely offset by reductions in GIS. This needy group will be paying something for nothing.

As a result, some proposals for reform, otherwise similar to that of the CLC, do not require contributions or provide benefits on earnings below $25,200. These proposals have considerable merit as a cost-effective and comprehensive improvement to retirement savings for Canadians. 

But that virtue will be much clearer to actuaries and economists than to voters. Most Canadians, given a clear and detailed understanding of proposed changes, would be much more tepid in their enthusiasm for a program that takes so long to mature.

Hence, the rather vague communications from the three political parties. One can search their websites in vain for any indication of what they have in mind.

The Conservatives have argued, incorrectly, that CPP contributions are just another tax. Unlike unemployment insurance, the CPP funds have for five decades been operated entirely outside of government accounts and are only used to pay CPP beneficiaries. Having been opposed to any change, the Conservatives now say that they are willing to consult Canadians about a possible optional program.

How that might work is anyone’s guess. It appears to be just creating a different RRSP opportunity. Are there limits on how much can be contributed? Is it optional for employers too? Are contributions locked in until retirement as is the case for the base plan? This “plan” does not offer much.

The Liberals favour a mandatory program. Liberal Critic for Seniors John McCallum points out that changes would require the agreement of two thirds of provinces with two thirds of the population, so an agreement would have to be negotiated. Their position would tilt toward a large amount of excluded earnings to protect low income earners. Good.

More troubling is that they are not committed to adequate funding, which suggests that they might , as happened with the original CPP, cheat young contributors by paying older ones more benefits than their contributions have earned.

The NDP, which might be expected to follow the CLC recommendation, is so far silent about what exactly they have in mind—although it will clearly be a mandatory program. Caucus Press Secretary Greta Levy promises that “The exact figures on CPP will be announced before the election as part of an NDP government’s approach to retirement security.”

So voters actually trying to understand this complex issue don’t have much to work with.

The Conservatives are trying to fog the issue by musing about a no-hoper voluntary plan.

The Liberals appear to prefer a mandatory plan, but have not drawn any lines in the sand about how it must look. They may be willing to consider an irresponsible funding choice, or to be pushed that way by the provinces.

The NDP say they have advocated a CPP expansion for years—as well as strengthening GIS and reverting the age of OAS to 65. This adds to a growing list of expensive promises with no indication of how they are to be paid for.

Today’s CPP plan is appropriately funded and provides a cost-effective but modest portion of retirement funding. A long term reform is possible that would allow that portion to become more substantial.

The Conservatives have no real intention of making any changes. The Liberals and NDP say they do, but if they choose a wrong model they could do more harm than good.

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