Report proves health of public pensions: unions
Alberta public sector pension liabilities dropped by more than $ 400 million last year, prompting labour leaders to say that’s proof the planned changes to the funds by former premier Alison Redford were never necessary.
In the fall of 2013, Redford’s Progressive Conservative government claimed reforms were needed to address a $ 7.4- billion unfunded liability in Alberta’s four major public sector pension plans. It proposed to get rid of early retirement incentives and guaranteed cost- of- living increases.
But labour leaders say the revelation in the provincial government’s recently- released financial documents shows Redford’s successor — former Tory premier Jim Prentice — was right to slam the brakes on the public pension overhaul last fall.
The amount set aside to offset pension liability last year was $ 1 billion less than the previous year due to a $ 404- million increase in pension assets, says the 2014- 15 Treasury Board and Finance annual report.
“The recovery was the result of an overall improvement in the pension plan deficits driven by strong global markets and also the result of paying down the pre- 1992 teachers’ pension plan,” says the 724- page report.
It lists the pension plan deficit for four main provincial pension plans at $ 3.2 billion and the province’s share of the liability at $ 796 million.
Alberta Federation of Labour President Gil McGowan said the numbers in the new report come as no surprise to government workers who successfully fought against the planned pension overhaul.
“What these new figures show is that both the Redford and Prentice governments were fearmongering when they said cuts to public pensions were needed,” McGowan said Tuesday. “The truth is the sky was never falling.”
He said the plans are getting healthier and time will bear that out.
Mike Dempsey, a vice- president with the Alberta Union of Provincial Employees, said that when Redford’s finance minister Doug Horner launched his controversial pension reforms, the plans were doing well.
“It just got members really upset at the time,” he said. “We’re happy to see the vindication. It’s no surprise.”
Dempsey, who sits on the board of directors for one of the pension plans, accused the Tories of “political opportunism.”
He said he believes they attacked civil service pensions to ward off a potential threat from the rightwing Wildrose, who were climbing in the polls.
The proposed changes triggered a major political battle at the legislature last year.
As an NDP MLA, Rachel Notley called the cuts “cold- hearted,” while then party leader Brian Mason said he believed the proposed reforms were more about reducing government expenditures than ensuring the viability of the plans.
Liberal Leader David Swann said at the time the Tories seemed to be raising “unnecessary alarm” about the sustainability of the pension plans.
He said this week the new figures confirms what his party believed last year — that the Tories needed to provide more evidence the pension plans were in trouble and they needed to consult more fully with plan members.
“We were not convinced that it was in the interests of workers or the pension funds to have these unilateral changes,” he said.
The changes, which the unions claimed would reduce benefits, would have taken effect Jan. 1, 2016.
Prentice announced he was killing the legislation four days after taking office last September. He subsequently lost the May 5 election to Notley’s NDP.
Alberta Finance spokeswoman Carolyn Gregson said the liability for pension obligations for the government, combined with the liability for its commitment towards pre- 1992 teachers’ pension obligations, dropped from $ 10.7 billion in 2014 to $ 10.3 billion in 2015 — an improvement of $ 404 million.
Wildrose finance critic Derek Fildebrandt said the pension plans are moving in the right direction, but they still have a significant unfunded liability that taxpayers will be stuck with paying.
“Those unfunded liabilities will move up and down with the performance of the market,” he said. “Investments were strong this year, but they are not strong every year. It could down again next year or it could go back up again.”
Fildebrandt said he believed the intent of Horner’s reforms was correct, but the former finance minister did not take “the wisest course possible.”
“What the Wildrose wants to see government sector pensions move to defined contribution plans while grandfathering the plans of current employees,” he said.
PC Leader Ric McIver said a pension plan requires “a whole string of good years — not just one,” and he urged the new NDP government to come up with a plan to address the unfunded liability in its pension plans.
“We should be constantly vigilant to ensure the plans will provide the money to pay the benefits,” McIver said. “Government should be very concerned and those who work and earn benefits from those plans should be most concerned.” Check out today’s Calgary Herald tablet edition.
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