Declared Uncle Gnarley, “there is a larger issue at stake with this pension business”.“Nav”, he said, pausing, until he was sure he held his attention, “I have ‘Statement IV’ on page 5 of the Budget Details for the current fiscal year right in front of me. Do you have any idea how large the ‘Unfunded Pension and Retirement Benefits Liability’ will be at the end of this fiscal year?” Nav feigned ignorance, knowing that he would soon be reminded anyway. “Would you believe me, if I said $5.6 billion? Yep, $5.6 billion”, Gnarley repeated for emphasis.
“Know what else, Gnarley demanded? It did not even get mentioned in the Minister’s address; you have to dig for it in the budget details. When the Minister of Finance says the public debt is $8.7 billion, he knows that figure is actually much higher…what’s the phrase we economists are fond of, ‘lies, damn lies and statistics’. Fits what this Minister is saying perfectly, growled Gnarley. This fiscal year, alone, he ranted, the unfunded pension and the post-retirement benefits liabilities increased by a net figure of $467 million. He was clearly frustrated. And, the public sector unions let him get away with it! There must be a ‘turnip’ allegory here, suggested Gnarley, and I’m not the one who fell off the turnip truck!”
“Funny enough, the Minister was forced to note how much money was committed to Nalcor for Muskrat Falls, but not the unfunded liability to public sector workers. Dammit, why would the Unions to be so silent, given the level of risk associated with Muskrat Falls?” he wondered.
“Now Nav, there are two other parts to this story. One, if I were a public servant, I would not feel too secure if my pension fund were left entirely to the discretion of future Finance Ministers and their brand of politics. What would prevent a future Minister from doing his “sorry” routine, as Corner Brook Paper still might. Oops, maybe I shouldn’t even mention Corner Brook Paper; last time a critic of Muskrat Falls did that, the Minister of Natural Resources pilloried him, suggesting he wanted the Mill to close down so that the power could be used for another purpose. Well, Nav, the Minister don’t scare ‘ol Gnarley!”“Can you just hear the Minister of Finance now: ‘oh, well, we planned to pay you, but since the oil money is not rolling in, as it used to…we’re sorry, we have to spend your pensions on health care’, or, ‘sorry folks, we overspent on that dog, Muskrat Falls; forget those pension payments. We’ll help you get a job at The Home Depot’”!
“In my book, Gnarley continued, a promise to pay, not backed up with money that can be called upon regardless of the fiscal position of the Government, is a fundamentally dishonest promise”. That’s quite a statement, Uncle Gnarley, Nav was forced to interject. Don’t you know there are only peaches and sunshine in our economic forecast. If you aren’t careful, you are going to be labelled a ‘naysayer’ for sure, Nav jibed, “They can call me anything they wish, said Gnarley. Certain things need to be said in this Province and I am intent on saying them. If the only penalty I suffer is to be called a ‘naysayer’ by Jerome Kennedy or the Finance Minister, I’ll accept that is not a bad price for opening a few eyes, he growled. What’s more, don’t think, for a minute, that the Unions are lily white in all of this, either”.“If I were a public servant, said Gnarley, I would be pissed at NAPE and CUPE. I think I would be saying to them: you are not supposed to be politicians…deal with the real issues! Winning a salary increase of another couple percentage points may look good now, but it will be a hollow victory, in the end. It is my view, if the public servants, most of whom are well educated, intelligent people, don’t say that to their Unions, they will likely get more than what they have bargained for. You can’t blame Jos Arnell, but many of the others ought to know better!”
You said there were two parts, said Nav. “Yes”, Gnarley replied: “Next, if I were the tax payer, I think I would be concerned, that over one-half billion dollars is added to the public debt, annually, for public service pensions”. “Are you quite certain”, Nav enquired, thinking that perhaps Gnarley had inadvertently let a drip from his golden glass run onto a critical part of the Budget documents? His quick look at the ‘offending page’ produced a reminder that Uncle Gnarley is seldom wrong. If this is going to continue, there is trouble ahead!”“Governments”, Gnarley continued, “are likely the only employers left that still engage in ‘defined benefit’ pensions…these are pensions, he explained, where the retiree understands, from day one, how his/her retirement package will be calculated, but the contributions made by that employee may be a mere fraction of the ‘benefits’ committed to him upon retirement. That may have worked, suggested Gnarley, when interest rates were high. Now that they are close to zero, all the tables prepared by the so-called experts, the ‘actuaries’, have been sent for re-cycling. That, my friend, is something the tax payer ought to know and the government has a responsibility to tell them!”
“Not surprisingly”, said Gnarley, “the private sector is well ahead of governments in this arena. Interest rates have been low for several years. Now, virtually all private sector companies have converted to ‘defined contribution’ based pensions. Why? Simply because they are unable to guarantee the other kind; these companies tie benefits upon retirement to ‘returns’ which pension funds earn from the financial markets. That system might hold a little more ‘certainty’ than ‘hope’, which is the basis of our provincial government’s system. It may appear, at first glance, to be less attractive, but is it?” argued Gnarly, rhetorically. Wouldn’t you want to know what is in your retirement plan; would you really want your plan to be based upon the ‘hope’ that government will pay you”? Growled Gnarley, “I’d choose certainty, any day”.Nav, said Uncle Gnarley, grimly, “this is a ticking time bomb. One day it will blow”.