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Fair Pensions For All

Now more than ever pensions have become a major issue for our society. This crisis has been building for several years. This blog is an attempt to stay on top of the current issues surrounding pensions. Our main feature is a regular update of the news he

Updated: 2016-09-08T00:24:43.816-04:00


The Agenda - Steve Paikin


.The Canadian election is nearing completion and one of the big issues has been pensions. Steve Paikin covered the issue on his show, The Agenda. I have posted the video below. The show is an excellent discussion but completely neglected the 800 pound gorilla in the room... public sector pensions. Pensions have been discussed in the current election but the big issues have been neglected. As Catherine Swift recently Tweeted:Gonna be one interesting election. Unfortunately the big issues continue to be ignored - healthcare, public sector pensions unsustainable. After the election public sector pensions will be back on the agenda. They are unsustainable and as taxpayer awareness grows people are becoming more resentful and envious. Public Pensions, Once Off Limits The New York Times notes that public sector pensions are on the agenda in a big way. Please see the article below it is a good read. Public Pensions Face Budget Cuts.When an arbitrator ruled this month that Detroit could reduce the pensions being earned by its police sergeants and lieutenants, it put the struggling city at the forefront of a growing national debate over whether the pensions of current public workers can or should be reduced.“These things do tend to be herd-oriented,” said Sylvester J. Schieber, an economist and consultant who studies pensions.The mayors of some hard-hit cities have said that the high costs of pensions have forced them to lay off workers: Oakland, Calif., laid off one-tenth of its police force last year after failing to win concessions on pension costs.Elsewhere there is pension envy: some private sector workers, who have learned the hard way that their companies can freeze or reduce their pensions, resent that the pensions of public workers enjoy stronger legal protections. But government workers, many of whom were recruited with the promise of good benefits and pensions, say that it would be unfair — and in many cases, very likely illegal — to change the rules in the middle of the game. Avoid Change At All Costs Despite the fact that Ontario will pump a record amount into it's public sector pensions, unions will jump up and down denying there is a problem. This year the top 3 Ontario pension plans will attract $4 Billion in taxpayer payments and employees will contribute the same. In addition there are several more pensions requiring taxpayer money such as universities, colleges and the Ontario Hydro and OPG giants, all sucking up huge taxpayer dollars for pensions. Many argue the money that the union members have to put in their contribution came from taxpayers too. The union tactic will be to deny that changes to pensions can be made. This is wrong but it gives them time to postpone pension changes as they try and take the issue into the courts. Changes cannot be made to past pension accruals but pensions can be changed going forward. A good example of pension changes was brought to my attention in a article from Kansas. Little relief for Kansas pension woes seen for 10 years Kansas has two proposals in front of it, one from the State Senate and one from the State House. Comparing the plans is a good exercise in investigating and understanding pension plan change options.  A full detailed report on the plan change options is covered in a Fiscal Impact Report.The report details the changes investigated by the Senate which actually would worsen the state's pension situation and the House changes proposed.Note that the Kansas pension has $11 Billion in assets for 277,000 Kansas teachers, state and local government workers, and police officers, fire fighters and judges. The plan has a had an unfunded actuarial liability of $7.7 billion and a funded ratio of 64%.Contrast this with Ontario Teachers plan which has $107.5 Billion for 295,000 active and retired teachers in Ontario. It has a $17 Billion pension shortfall. You can see how badly Ontario taxpayers have been taken to the cleaners by our public sector pensions. Yet the unions jump up and down denying there i[...]

University Pensions Driving Tuitions Higher


It appears that Dalhousie is suffering from the same financial problems as many universities across the country. The pension costs for an aging workforce are killing them. Dalhousie spending big bucks on university brassWe are now seeing the conflict plaguing all government organizations. The gold-plated defined benefit pensions that the staff in the public sector enjoy have melted down and are no long sustainable without large injections of cash. It creates a choice between more services for students or more gold-plated benefits for management and staff. The large increases in tuition are expected to generate an additional $14.6 million in revenue. It happens to coincide with a $11 Million injection (Note C)  into the pension staff planned last year. This is on top a regular annual pension contributions of $19 Million. It appears that the pension fund is short in excess of $100 Million and the administration is worried about being able to retire in comfort. In 2002 the university contributed $4.7 Million into the pension fund and it has increased every year since then and last year the regular pension payment was $19 Million. Despite more than $135 Million of taxpayers money going into the fund since 2002 it is still woefully short. The employees contributed $91 Million over that same period. The Economist this week featured a report on pensions of the kind offered at Dalhousie. They noted "A pension promise can be easy to make but expensive to keep. The employers who promised higher pensions in the past knew they would not be in their posts when the bill became due" Well the bill is due and at most universities the numbers of retirees is reaching record numbers. These easy promises are becoming expensive. The pensions plans are not sustainable and it is unfair to ask students to pay more or suffer less services to pay for these gold-plated plans. Pension contributions on the plan are woefully short and they will suffer shortfalls for many years to come. That is why the request to the government for solvency relief is so important. Solvency relief is like a mortgage that is amortized over 30 years instead of 10 or skipping a payment on your credit card. Why not have employees pay their fair share? The taxpayer (university) funds 16% of employee salaries into the pension fund and the employees only have to come up with 6.15%. The CD Howe has estimated that the true cost of these pensions are 34% of annual salary. The shortfalls are built in at these contribution rates. Even worse, as salary costs skyrocket so do pensions. Pension funding is like trying to chase a rocket, unless pensions are capped it will never happen. The pensions are based on 70% of the last 3 years of salary of the retiring employees. The faculty at the university is earning an average wage over $100,000 per year,  this means a pension in excess of $70,000 per year including CPP. Many of these employees are eligible to retire at age 55 and will earn this pension for the rest of their lives. If they live to age 80 this will be over $2.3 million in pension income when indexed for inflation. To fund a pension like this takes pool in excess of $1 Million. Then there are the Super Sized pensions, those of the senior administration staff. The article mentions that one income is at $360,000. This income level will generate a pension in excess of $250,000 for life and will require a pool of  $4 Million. Its time to change these pensions. Firstly, convert them into defined contribution, the kind most taxpayers have. Limit them to a reasonable amount say $80,000 per year, twice what the average wage earner makes. Make the employees pay their fair share and not rely on the generosity of taxpayers who will never see a pension close to this. Why allow workers to retire at age 55 when government around the world facing the same crisis are raising the age of retirement? Our students deserve better than this, its time for a change.  Bill Tuft[...]

Rising gas prices sandbag economy


Rising gasoline prices are having a dramatic effect on the Canadian economy.  A $1 rise in the price of gasoline will suck $32 Million a day out of goods and services that Canadians would otherwise be spending money on. This adds up to over $11 Billion  a year. 

There is a multiplier effect on this money as Canadians decide to use their car less and stay home When they stay home they are not spending money in restaurants, amusement parks, cinemas or other places we go to for entertainment. Alternatively for some markets there may be a rise in spending as Canadians choose less costly alternatives for spending their money. For example, MacDonalds over a full service restaurant. 

My contention is that overall the cost of gasoline will be a big drag on the economy as it sucks money from other areas of spending. If that money was spent in a restaurant for example, the restaurant will be using it to pay salaries and food and beverages. This would all contribute to the growth of our GDP. True the money spent on gasoline will be considered part of our GDP, but how much of it will truly go back into the economy. will gas stations be hiring more staff or building more stations? Probably not. 

Some interesting information for this analysis come from Statscan - Motor vehicle fuel sales and Gas Buddy. Canadian spend about $4 Billion a month eating and drinking outside the home Food services and drinking places

Bill Tufts
Fair Pensions For All

The media is starting to get it.


One of the key purposes of this blog is to bring attention to the growing pension problem and to try educate those who make policy (politicians) or report on pensions (media). It is a complicated issue that has concepts and a language that is difficult for many to understand. In interviews with other pension experts one of the interesting aspects of pensions is that most employees who have defined benefit pension plans have no idea of the value of the plans. Clarity is required to have a well educated public discussion on pensions.To try an bring about clarity the CNPA association for newspapers in California focused on the issue at a recent conference. The coverage of the conference was reported on in Publishers preview pension problems The article pointed out:  • Public employee unions want to deny the problem but the truth is dawning on them and their members.• Many politicians underestimate the problem either because they don't understand it or don't want to tell the voters they have to cut services and raise taxes to correct a problem they didn't see coming when they gave away the store.• Some politicans do get it. They are bargaining hard with unions and pushing reforms. They are having luck reducing the pensions of employees who will be hired in the future.At the pension portion of the conference one presenter was Dan Borenstein. Dan is a veteran in the pension battles reporting for the Contra Costa Times. He has brought to light many pension problems in the state of California. There continues to be a litany of problems for public sector pensions. Not only in the US but here in Canada as well. In Canada we need reporters who will become pension crusaders. Until that happens the issue will remain under the sight lines of most Canadians and politicians who hate the issue will continue to sweep it under the carpet until there is a rising crescendo of taxpayer voices that demand to be heard. In the meantime the problem will float merrily along with more and more lip service being paid to it, without any real action being taken.In the meantime we hope that more article like this one will be seen in the Canadian media. There was no recession for gov't pensions. The article points out that: Only government-employee union officials at this point are denying the reality of California's pension crisis, as public pension debts estimated as high as a half-trillion dollars are crushing state and local governments and threatening to increase the burden on already hard-pressed California taxpayers. Meanwhile, the disparity keeps growing between government employees, who retire with guaranteed cost-of-living-adjusted benefits that too often top $100,000 a year, and private-sector employees who must rely on 401(k)-style plans supplemented by the increasingly shaky Social Security system.As you are aware the issue is as big a problem in Canada. A 401K is the US version of our RRSP. Lets hope the media gets on board with a thorough discussion of pensions and begin to address the issue more. Oh well, maybe when the election is done. We remember Kim Campbell stated, an election campaign was no time to discuss serious issues!BIll TuftsFair Pensions For All [...]

The Roadmap for the Future


As our book nears completion and the last details are put in place and polished up there is some apprehension about whether we have covered all the necessary material bases and whether the concepts that we have developed and the ones we have used are appropriate. It is nice to be vindicated with news that covers some of our ideas and adds strength to our concepts.A recent article in the Financial Post garnered much attention over the past week and was mentioned in the Daily Reckoning newsletter in the article from Bill Bonner. I recommend you sign up for the free newsletter from the Daily Reckoning. It is focused on investing but also provide great political and social commentary and how it relates to our investments. Bill Bonner noted an article from Christopher Caldwell in the Financial Times called, A Bankrupt Nation Wakes Up. In the article Caldwell quotes an up and coming new Republican from Wisconsin who is ringing the alarm bells about the sustainability of  social security, pension and healthcare costs:Mr Ryan views debt as an “existential threat”, a great drama whose cause is self-indulgence and whose end is enslavement“We face two dangers: long-term economic decline as the number of makers diminishes and the number of takers grows and, worse, gradual moral-political decline as dependency and passivity weaken the nation’s character.”In retrospect, the story of the past half century is that Americans found a way to extract money from future generations and leave them with the bill. What they have been enjoying is not prosperity but luxury. As Mr Ryan sees, they face the serious and open question of whether they are morally capable, over the long term, of living within their means. Please check out Ryan's program and analysis called Road Map for America it is an excellent work that outlines the dangers of the  coming demographic timebomb. You will be hearing lots about it in the months to come!Bill Tufts Fair Pensions For All [...]

Total government spending on Wages and Salaries


In dong some research for my upcoming book I found some interesting statistics about the total cost of government employees.

In 2010 the Province of Ontario spent $118 Billion. Of this amount $71.2 Billion went into the wages and salaries packet of provincial employees. This means that 60% of the total spending in the province of Ontariowas for wages and salaries. Does this include the benefits and pensions as well? I suspect not.

The province spent another $ 9.5 Billion or 8% of its money on debt service. This means that the operating budget on discretionary items in the province was $110 Billion. This moves the wages and salaries up to 65% of spending and then we can add in another $8 Billion in pensions this year. So it appears the government spending amount for the compensation package of it's employees is in excess of 70% of total spending.

I guess we know where Drummond has to look.

You can find this information here. Statscan Tables by Subject

Laurentian Medical College makes cut backs on staff to pay for pension


There was an article in the Sudbury Star that shows the increasing danger of gold-plated pensions.

24 jobs cut at Northern Ontario School of Medicine. 

NOSM is operated by Laurentian University in Sudbury. It is unacceptable for the people of Ontario at a time when there is a strain on our health system and a shortage of qualified health care employees to be cutting back staff to pay for gold-plated pensions.

This came out on the same day that the province released its Sunshine List and shows over 240 staff at Laurentian earning over $100,00 per year. This is up from just 180 in 2008. Each one of these positions comes with a pension worth 70% of this income.

One manager at the University earns $304,000 which does not take into account the gold-plated pension. A manager will be entitled to a pension valued at $212,000 per year or 70% of his final salary when fully qualified. This type of pension has a cash value of about $3.4 Million.

Last year the college contributed $ $11.7 Million into their staff pension funds. This amount is up from $5.9 million in 2008, an increase of $5.8 million or 98%. If used to hire additional administration staff at $50,000 per year, this amount would allow for an additional 116 staff members.

Management decides to allocate this money in pensions and benefits rather than hire more staff. This was not money going into enhanced student services but to bolster the personal pension accounts of managers.

We are now seeing the conflict plaguing all government organizations.   It is the choice between more services for students or more gold-plated benefits for management and staff. Being forced to cut back and create savings where do you think the money will come from, compensation packages or services.

It appears that the students and taxpayers of Ontario will lose on this one.

Bill Tufts
Fair Pensions For All

Is the Air Canada pension plan too rich?


In 2009 the Air Canada pension plans were short $2.9 billion despite the fact between 2004 and May 2009 the company had pumped $1.7 Billion into the plan. 

Now they are requesting money from Canadian taxpayers. With Ministers, high level officials senior government officials and Members of Parliament. All of whom have gold-plated pensions funded by you. 

What do you think their response was? I you know please send me an update.

See the video here.

The Conversation Continues

Bill Tufts 

Ontario Teacher's Pension to Hit the Wall in 2014.


From the archives a member of the Ontario Secoundary School Teachers Federation (thanks Joe)

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Despite hefty contributions and huge asset accumulations there is a crisis and it will hit in 2014 with a vengeance!

Bill Tufts
Fair Pensions For All

Working on pension issues


I have not had much time to be posting news to my blog. Does someone want a job? 

It is a very sad week for me as my brothers wife passed away unexpectedly yesterday. She was the mother of 5 boys. May she rest in peace and God be with my brother and his  family.

Pension News

It was a busy day today. I got a call for a CHML radio interview from an article written in the Hamilton Spectator. Then there were two other editorials, one in the National Post and one in the St John Telegraph Journal. Then just now another request for interview from a show in Halifax on the MLA pension issue in NB.

Here is a copy of a radio interview on a local radio station CHML 900 in Hamilton

There was a live radio interview the Rick Howe Show from Halifax.  It was on teh new New Brunswick pension proposal.

It was referred off this editorial in the St John Telegraph Journal

Also there was an editorial that was printed in the National Post.

Hamilton Spectator

Your keeping busy blogger 

Bill Tufts
Fair Pensions For All

UK pension comparison


 Chart from Statscan 2007 Note: RRSP assets in Canada total about $700 Billion I received an excellent analysis and comparison of pensions in Canada and the UK. Bob Parsons had written to me in response to the blog I wrote about the Hutton pensions report that was released in the UK. There are big difference between the public sector plans in Canada and those in the UK.The UK pensions are not pre-funded and are paid on a pay as you go basis. This has created huge problems for the UK as the economy has slowed down and there has been a choice to be made for politicians between services and the compensation packages of the public sector.It feels like the taxpayers is losing as the public sector and politicians dictate where our tax dollars go. Most taxpayers feel it is going directly into the pockets of the elected officials and the civil service.As I am doing some research for my book I ran across a report from the BNAC back in 2009 that provided a good comparison between the UK, USA and Canada. Basically all systems are in trouble and the UK is the worst off of all. British-North American Committee (BNAC) reportOne of the reasons that the systems has gotten out of balance was described in this short editorial letter Market Balance Needed On to Bob's letter. Thanks for sending this excellent letter BobAfter seeing the post you made on Lord Hutton’s pension report I became curious to find out what type of pension plan public servants in the UK have compared to our federal government pension plan.I printed off the nuvos pension scheme guide pamphlet. Here are some of the things I discovered.1. In the UK employees can opt out of their pension plan. We can not do this in Canada. (Section 5 Do I have to join nuvos?)2. They only pay 3.5% we pay over 7% for superannuation and CPP which in my case last year was resulted in me paying  9.25%. (Section 9 How much do I pay?)3. They build up pension value at 2.3% a year compared to our 2% for the Canadian Federal Government public employee pension plan. (Section 17. How do you work out my pension?)4. They use the Retail Price Index which provides a much higher rate of increase than the Consumer Price index we use. (Section 18. Will the pension I have build up in value?)5. They can earn a pension up to 75% of base salary while we can only earn up to 70%. (Section 21 Is there any limit to the size of my pension?)6. They base their pension the highest ofa) Your pensionable earnings in your final year, orb) your highest pensionable earnings in any of the last 10 scheme years: orc) your highest average of three consecutive years’ pensionable earnings.Ours is based on the best 5 years. (Section 21 Is there any limit tp the size of my pension?)7. They allow you to take part of your pension as a tax free lump sum. We can not do this (Section 22 Can I take a tax-free lump sum?)8. They are allow to collect their pension while continuing to work, although you have to 75 to do this. We can not do this. (Section 29 What if I want to work beyond my pension age?)Even with Lord Huttons recommended increase in contributions for employees they will be paying far less than we are here in Canada.Some other factors you have to take into account is that we have started to fund our pension plan since 2000. We have build up net assets of over $50 billion. The fund has being growing at a rate almost twice as much as the federal government is paying for public service pensions on an annual basis. I believe the UK is still a pay as you go scheme. So we are in much better shape.In 2009 federal government paid 1.01% of total government expenditures on public sector pensions. (Public Accounts 2009, Public Service Pension Plan Report 2009). In terms of GDP it is below .2% of GDP. Your [...]

Net worth continues to climb - but for whom?


There was an article today in the Globe and Mail that shows that Canadians are still in deep trouble on household debt Net worth continues to climbWealth in Canada continues to rebound from the great crash.  Overall household net worth increased 2.2 per in the fourth quarter to $6.2-trillion, following on the third quarter's 3-per-cent climb, Statistics Canada said today.  On a per capita basis, that's an increase to $181,700 from $178,200. "The gain in the Standard and Poor's/Toronto Stock Exchange composite index of about 9 per cent in the fourth quarter was reflected in rising values of household equities (including mutual funds) and pension assets, albeit at a slower pace than the previous quarter," the statistics gathering agency said.This is good news for those Canadian who has some savings and pensions but for the great unwashed masses this really means nothing. The last Statscan report on Inequality in wealth shows some pretty grim statistics. Although the numbers were from 2005 not too many Canadians who has seen much of an increase in their personal wealth. The trend is the wealthy continue to get wealthier and the rest... well not as well. Between 1999 and 2005, the median net worth of families in the top fifth of the wealth distribution increased by 19%, while the net worth of their counterparts in the bottom fifth remained virtually unchanged.As a result, the top 20% of families held 75% of total household wealth in 2005, compared to 73% in 1999 and 69% in 1984.Part of the growth in net worth among families in the top 20% of the distribution was fuelled by increases in the value of housing.In both 1999 and 2005, the vast majority of these families (at least 95%) owned a house. During the six-year period, the median value of their principal residence rose a solid $75,000, reflecting sharp increases in housing prices.In contrast, the value of holdings on a principal residence changed little among families in the bottom 20%. At most, 6% of these families owned a house during this time.Here is a chart from Statscan chowing that the top 10% of Canadians control almost 60% of the total wealth of the country.  I am afraid that this will part of the reason for social unrest in North America. Maybe this is what Michael Moore was ranting about in this video from the Wisconsin protests.  Michael Moore says 400 Americans have more wealth  Please listen to Part 2 of the video as well, it comes on automatically. Here he is interviewed in a very interesting video on The Rachel Maddow Show. Last Saturday there were in excess of 100,000 protesters in attendance at the Capital Hill in Wisconsin  As we do research for our upcoming book there are more and more instances of commentators suggesting a complete meltdown of our economy. One similar to what has happened in Japan. But the chances are we will not be able to borrow to the extent of 200% of GDP that Japan has. Japan has borrowed this money to sustain their standard of living.The Japanese stock market is down 75% since it's highs in 1989 Courtesy Seekingalpha.comHang the rich: Great war inevitable, pundit predictsRichard Worzel - Revolting Civil ServantsStephen Gray  -Are we seeing political treason? Bill Tufts Fair Pensions For All [...]

Landmark Report on Public Sector Pensions


In the UK a special report on pensions looking into the sustainability of public sector pensions has been released.  Pensions Commission Lord Hutton a former Labor minister in the UK released the report that shows that the current system of public sector employees pensions is not fair to taxpayers or adequate for employees in its current form. He is urging that profound changes be made to the system for it to be sustainable in the long-term.  His point of view is that we cannot continue on as were are and major changes are required. The UK has a pension system that is very similar to the one that Canada has for its public sector employees. It is based on the same plan design and very similar pension formulas. The report would be the star of a good road map towards changes here as well. Hutton examined whether the current system is fair to employees and fair to taxpayers. What he discovered is that taxpayers are responsible for most of the future risk associated with these types of plans. These risk include investment; inflation; salary; and longevity risk. There are also several gaps in fairness between what the public sector gets in pensions and what government workers get or should I say don't get.  The two major recommendations were made in the report. ·         The public sector should move from a final salary pension scheme to one that is based on a career average·         The age of retirement should be the same for all taxpayers both in the private sector and the public sector. The UK has seen a similar trend in pension coverage. In 1997 about 30% of employees had access to a DB plan with overall coverage including DC edging 50%. By 2010 those numbers had dropped dramatically with only about 10% of employees in DB plans and overall coverage about 35% including DC plans. About 80% of the public sector in the UK has a defined benefit final salary pension plan.   The report outlined several key principles along with extensive discussion on each of the main points. Affordable and sustainable - As employees get closer to retirement age their wages rise dramatically and the value of their pensions do as well. A greater cost falls onto taxpayers as the wage levels rise  In final salary schemes, members will have paid contributions to the scheme based on something similar to their average salary, but will receive benefits based on their final salary. Taxpayers will pick up the cost of the difference between average and final salaries and members will benefit where final salaries are higher than average salaries. This effect will be particularly visible where people have experienced rapid salary growth. In average salary schemes, members bear more of the risk – salary levels throughout a member’s career will determine their income at retirement as well as their contributions to the scheme. Adequate and Fair - There is a big gap between those at lower pension wage level in the public sector and those at higher levels. This is unfair because high income employee receive almost twice the value of their contributions than lower income employees do. The report points out the there are many risks associated with pensions over the long term including investment risk, inflation risk, salary risk and longevity. The current system puts most of the risk on taxpayers for future funding . Supporting productivity:- It is interesting that the report points out the "golden handcuffs" created by defined benefit plans prevents labour mobility within the economy. It recommends that more flexibility would be better for t[...]

Tuitions rising over the cost of sky high salaries


 This picture is the scene in Thunder Bay over rising tuitions. I have been very busy the past few weeks writing with Lee Fairbanks our upcoming book on pensions. Our deadline for completion of the original manuscript is April 1st. Therefore I have not had much time to devote to my blog.There were a series of articles about education that caught my eye. All about rising salaries and compensation paid the staff at universities.It highlights the cost to society of having a shadow workforce that gets high and a large benefits package but never has to show up for work. These are retired public sector employees. Students were protesting over the rise in tuition at Lakehead University. There are some very interesting insights into the situation written by someone from the next generation. The very ones saddled by the cost of this shadow workforce, paid very handsomely by taxpayers and do not work.                                       So what do we do now?                                                                          Board ignores alternatives to tuition hikes                                        University faculty demand salaries, forcing tuition rates through the roof.                                       No really... we are fairly paid ... except for that double a few years ago                                        From the same Victoria newspaper This all ties in very well with the excellent video on the sidebar with Bill Gates talking about the current challenges to education. I urge you to watch it.Bill Tufts Fair Pensions For All [...]

Leo's Pension Pulse


My friend over at the Pension Pulse Leo Kolivakis has run a very successful and insightful pension blog since 2008. He always has very informative insights and discussions into the pension world. 

I sent him an email yesterday that he had analyzed by the former Chief Actuary of the Canada Pension Plan (CPP), Bernard Dussault. Leo posted his response to my email. It makes for very informative and interesting dialogue.

Put Leo on your blog list as he does an excellent job and for the past 3 years had made a post on pensions every day, even the weekends!

Day of Reckoning on California Pensions?

I hope you enjoy this discussion 

Bill Tufts 

Fair Pensions For All

The Pension Monster comes to Canada


Like the great Ogopogo monster in the Okanagan Valley in BC there is a monster that everyone knows is out there but it is rarely ever seen. Today the Pension monster surfaced in Montreal in an article from the Montreal Gazette. The article is Island mayors to ask Quebec for pension relief Montreal Island's two most senior political leaders are planning to ask the provincial government for a special law to help curtail the growing local tax burden associated with municipal pensions.This is an unusual move because most politicians in Canada get a ride on the monster as well. It is a personal conflict of interest for politicians to castigate the monster because he is their friend as well, most city politicians have a pension funded by taxpayers. According to their plan, people who are currently receiving a municipal pension would not be affected. Only current and future municipal employees would see lower benefits - but not retroactively.Current employees would keep whatever entitlements they have built up over time, based on years of service already accumulated. But changes would be made over time to reduce benefits going forward.The problem with pensions they way they are designed today is that they are unsustainable and unfair to taxpayers.  In Westmount, employees with 30 years of service can retire at age 50 with 75 per cent of the average of their last three years of earnings. This has encouraged a lot of early retirements in Westmount, which is why the westend suburb now has almost as many retired workers on its books (236) as full-time equivalent employees (295). Soon, Westmount will be like General Motors, with more retired than active workers.Part of the problem is that pensions are based not on what the city or employees contributes but on what the employees earn when they retire. Employee compensation in Montreal has been skyrocketing like all governments at all levels across Canada.  Another article in the Gazette shows how this happened. So much for economies of scale The spending of the island's municipalities rose from $2.7 billion in 2002 to $4.1 billion in 2011. That's a jump of 50.1 per cent -21/2 times the inflation rate.Salaries have gone up by 29 per cent, well above that 20-per-cent inflation rate. How, you ask, can this be? Hasn't the Tremblay administration been holding increases to no more than two per cent a year? Yes, but that does not tell the full story. Ways exist to get around it. One is "grade inflation:" People get new titles, qualifying them for raises. Another is overtime. A third is arbitrators' rulings. Last year, for example, an arbitrator gave police a 1.5-per-cent "metropolitan premium" because their work was more difficult than that of other Quebec police.But benefits -mainly pensions -are growing far faster. As the table indicates, they've grown by 126 per cent since the merger. A major reason is the 2008 recession, which inflicted great losses on pension funds. Provincial law requires municipalities to compensate for these losses. Prodded by Trent, the Tremblay administration plans to appeal to Quebec to reduce municipalities' need to compensate so generously.But another reason for this 126-per-cent rise is that municipal pensions are far more generous than those in the private sector. Firefighters, for example, earn $65,585 after 41/2 years' service; they can retire after 30 years with 73 per cent of salary and after 41 years with -incredibly - 100 per cent. There are solutions but is there political will?  The current practice of paying out generous defined benefit pe[...]

Weekend funnies


Today's headlines are so funny you have to laugh. London Ontario -Police swell sunshine list by 68%Paramedics in Ottawa ecstatic over a salary increase of 13 % despite wage freeze in OntarioDisillusioned over 4.4% wage hike in Edmonton St Albert - Councilors and employees approve themselves big wage increase In Regina out-of-scope healthcare employees get 18.8% or $70,000 raise.It is ironic I had just finished writing a letter to the Leader Post. The letter pointed out the game of leapfrog being played by the executives that had just given themselves handsome raises. I wrote that Despite all of the wordsmithing about out-of-scope employees, salaries significantly "under market" and comparing it to pirates in Alberta salary increases of 20% or $70,000 per year are a taxpayer rip-off. How much did they pay consultants to get a report that justified these types of increases? Don't expect it to end anytime soon. Consultants will soon be reporting to healthcare executives in Alberta that Saskatchewan just got raises valued at 20% and they should be getting the same. The it will be Saskatchewan's turn again. It's just a game of leapfrog that keeps putting taxpayers further and further behind.  The Leader Post article stated that  The health regions, the Saskatchewan Cancer Agency and SAHO worked with The Hay Group, a management consulting firm, to do the market review, which indicated that some pay ranges (bands) were no longer competitive. A broad range of out-of-scope health-care jobs include administrative positions, nursing supervisors, program directors, vice-presidents and CEOs.Then the next report I saw that was the cause for uncontrollable laughter. It was the report  from St Albert. This is where the councilors and employee both went to the taxpayer trough. And how did they justify it? Council approved a compensation review implementation plan and a compensation philosopy policy, both in reaction to a compensation report delivered by the Hay Group in November.Be watching for the next report.... I wonder how much taxpayers have to pay for these consultant reports. For some they are priceless.Here is another update on a report done by the same group in Vancouver. City staff survey produces $92,000 billRob Ford commissioned the same group to make a compensation report. Here is what the report by the same group said to the mayor of Toronto Councillors should reject raise, budget chief saysNothing New  This game is going on for a long time.  My only thought is what are these guys thinking? Across North America government are suffering financially. Taxpayers have suffered job losses, reduced wages and a significant portion of wealth was lost in the stock markets. Yet the cities listed in the above headlines continue on like we are still living in boom times.  When will they bump up against the ceiling of reality? Or maybe they believe the following article and think they can turn the ship around with more spending?   Government budget cuts pose threat to recoveryDeep spending cuts by state and local governments pose a growing threat to an economy that is already grappling with high unemployment, depressed home prices and the surging cost of oil. Lawmakers at state capitols and city halls are slashing jobs and programs, arguing that some pain now is better than a lot more later. But the cuts are coming at a price — weaker growth at the national level.Across the country, governors and lawmakers are proposing broad cutbacks — lowering fees paid to nursin[...]

Ontario Hydro - Abusing Taxpayers


It looks like electric rates are rising again in Ontairo. The OPG wants an increase of over 6%. They made the 6% look like a bargain as they originally were asking for a 9.6 per cent rate increase. Don't be deceived about it being over green energy or a $18 Million fine they had to pay.It is about the machine feeding itself. The rate increases are due to outrageous compensation packages paid by OPG. My recent blog on Hydro Ontario showed how most of the cost of running the organization was associated with the huge labour costs.  Well there is a sister to Ontario Hydro called OPG. It employs about 12,000 across Ontario. Over half of these employees or about 7,900 showed up on the Sunshine List for 2009. This is the list of earners on the government dole making in excess of $100,000 per year. The Sunshine List only shows the salaries of these employees. It does not include the total compensation they receive in pensions and benefits. For most of these employees the taxpayers of Ontario will kick in another 35% towards these fringe items.  So that a employee that shows up with $100,000 on the Sunshine List is costing the taxpayer around $135,000,Assuming that the employees on the Sunshine List earned just $100,000. their total compensation cost you as a taxpayer over $1 Billion. Of course there are all those employees not on the list probably earning close to $100,000 and many on the list far exceed the $100,000 threshold.Obscene Compensation The number of employees on the Sunshine List from OPG is an insult and affront to Ontario taxpayers. But they are just small fish compared to the big Kahunas. (Joe M keep me posted on this),A 2009 compensation report from OPG shows the real damage to taxpayers of the irresponsible use of taxpayer money to fund the personal pension plans of those running the organization. Although the numbers seem to be fraudulent and put out as some sort of a joke, I think they are real. That makes them even more horrifying. We can see why Clitheroe wanted to sue taxpayers over her paltry $350,000 a year pension.Statement of Executive Compensation - OPG The first portion of the report on page 7 shows the pension and compensation values of the senior executives. A new President and CEO was awarded a 3 year agreement beginning in 2009. That is all the time he will need to become faboulously wealthy and get onto the next government appointed job.His total compensation was $1.591 Million in 2009. It only shows as $1.011 Million on the Sunshine List  for the same year. This compensation appears to be only for half the year as the outgoing CEO and President made $1.717 Million the same year as well and $3.451 Million the previous year. Of course the outgoing President only shows earnings of $2.475 Million on the Sunshine List the same year he made the $3.451 million.Thats not all  There is lots more pain to come for taxpayers. The employees working for OPG have a long list of special benefits they are paid. None of these benefits are paid to the private sector but are part of the public sector collective agreements. They include a laundry list of goodies such as retiree health care plans (for those who retire before 60, they still get benefits), sick time payouts, vacation leave payouts and termination severances.The total liability on these benefits is close to $2 Billion. See page 125 of the OPG Annual Report   In 2009 the company contributed $ 271 million into the company pension plan. Since the wages are so low at OPG employees only contributed $ 86 Million into the plan.Most companies in the[...]

"Boot Camp" Examines Pension Cloud over Government Budgets


Over the past week I was in California. It was  chance to get away and do some work writing for the upcoming book I am writing with Lee Fairbanks called Pension Plunder.I was invited to the Bootcamp by Jack Dean the publisher of Pension Tsunami.Jack works with California Pension Reform CFR and they were the hosts for the event. California provided a nice break from winter and the Bootcamp provided me with a good reason for a get-awayI had a chance to share lunch with Marcia Fritz the founder of California Foundation for Fiscal Responsibility  and Scott Baugh Former Republican Leader, California Assembly. It was a very interesting day and provided lots of insight into issues that elected officials and city managers have in dealing with the aging time bomb. The seminar was a sell out and there were an additional 350 people listening to the program live over the internet. There were a wide range of people in attendance from self proclaimed unions thugs to elected city councilors, mayors and taxpayer groups.  At lunch we were joined by the City Manager and an elected official from Loma Hills California. The event was presented to better help key decision makers better understand the pension tsunami and hear about timebombs set to go off for municipalities around California.  The biggest surprise were the costs of OPEB's (Other Post Employment Benefits). Although the focus of the event was California all governments at all levels have identical problems when it comes to the issue of employee entitlement packages. A lot of discussion was had around the changes that have to be implemented in order for the system to survive. Marcia told me the biggest challenge of the issue is understanding exactly what the problem is and making people aware.  There is a lot of myth and misinformation out there about the problems that exist and the Bootcamp was a great way to start to begin the discussion on what needs to be done. The feature speaker was Girard Miller and he had some very interesting perspectives. His presentation was called The Power of No. He has written many articles and papers about pensions and the key issues surrounding reform. Poor Pension Math I hope that in future blogs I will be able to share some of the details of the information that we heard. There was a wide range of experts and they focused on those issues that can make a big impact for taxpayers and their employees. "Boot Camp" Examines Pension Cloud over Government Budgets Lawmakers Head to Pension Boot CampBill Tufts Fair Pensions For All [...]

Ontario Hydro a big shock for taxpayers


Ontario Hydro releases 2010 results. year taxpayers in Ontario are made aware of how Ontario Hydro is being used by its employees as their personal piggy bank. Politicians and management refuse to stand up to the Hydro employee unions and in fact have promised to guarantee their gold-plated benefits and well into the future. The government makes the promises and you will be paying for them The top earners from the Sunshine List every year are usually from Hydro. Last year the head of Ontario Hydro was third on the list at $977,000 and the head of Ontario Power Generation came in first making more than $2.2 million. In addition to the top dogs Hydro over 2,000 employees make it to the list that reports on employees earning over $100,000 per year. This number is only the base salary paid. Salaries are only part of the story. Employees at Hydro also earn gold-plated pensions and platinum benefits. Benefits and pensions contributions are worth about an extra 35%. Ontario Hydro just reported their 2010 results and the trend to skyrocketing pension and benefits costs continues. This year Hydro paid almost half a billion dollars for these benefits. This year the company paid combined pension and benefits expenses of $ 453 million. Costs were $191 million  for pensions and $262 for benefits. Pensions costs have skyrocketed from $86 million in 2006 to $191 million this year. This is a 122% increase. In most companies the employees are responsible for a portion of their retirement costs. In the private sector a 50/50 contributions is standard practice. At Hydro however, the employees contribute only 15% of the cost of the gold-plated pensions. Over the past 5 years the company has contributed $585 million into the pension plan and employees made a paltry $99 million contribution. Employees are entitled to pensions unheard of in private sector. They are entitled to 70% of their average terminating salary. Employees hired before 2005 get a pension based on their top 3 years of salary. Newer employees are entitled to a 5 year average plan. A recent piece of taxpayer paid propaganda was mailed to Ontario households with a warning from McGuinty that hydro rates will rise for many years to come in Ontario. Now we know why. The story only gets better. Ontario Hydro does not have to pay all of its costs incurred in a single year. There is a category called Future Employee benefits or OPEB's, Other Post Employee Benefits. These are benefits accrued this year but to be paid in future years. It is a loan to employees for future goodies. The liability of OPEB's at Hydro is now just short of one billion dollars. The actual total this year is $980 million up from $716 million in 2005. An increase in liability of 36% since 2005. OPEB's mean that Ontario taxpayers in addition to paying gold-plated pensions pay for more benefits at the time of retirement or after they retire. Some of the OPEB's include the employee termination packages such as vacation time payout and vacation time payouts. A bonus to be received for terminating employment. Also most will retire around age 55 they are entitled to full health benefits until age 65. The total of goodies paid to employees plus the loans you have made to them have added up to $2.9 Billion over the past 5 years. Hydro has returned to taxpayers a profit of $ 2.4 Billion. Please don't be fooled by election bribes in the form of energy tax credit[...]

Great Canadian Pension Reform Debate and PRPPs


In a recent edition of the Daily Reckoning the author Bill Bonner had this to say about fairness. And here's another important point. Since more wealth is only interesting from a RELATIVE point of view...that is, it is only useful when it gives you higher status...a normal, healthy human being cares more about "fairness" than he does about absolute wealth. Of course, fairness can mean practically anything you want it to mean. It can mean fairness of opportunity - as in, we all play by the same rules. Or it can mean fairness of outcome - as in, we all end up in the same place. In an up and coming economy, with limited government and low taxes - like the US in the early part of the last century - people care more about fairness of opportunity. People are making money. They're creating status for themselves. Things change fast. You are responsible for creating your own wealth, power and status.Later, as the economy matures, fairness of outcome becomes more important. New wealth is harder to get. It's harder to move "up" in society. People get a hold of the government and turn it into a zombie- protector. They use it to make sure the rich get richer and the poor stay poor. The banking and investment community is currently in the process of positioning themselves for the PPRP. Terence Corcoran commented on pensions in his article entitled The Great Pension Myth.If you missed the news and don't have a clue about what these new PRPPs might be, don't worry. I'm not sure the ministers even know what they are. There's certainly no possibility of PRPPs coming into existence any time soon. The politicians issued a brief description of what pooled pensions might look like, then they "tasked federal, provincial and territorial officials to work collaboratively to examine, among other things, changes that would be required to permit defined contribution Pooled Registered Pension Plans across Canada."While experts have been on the pension-reform case since the stock-market crashes of the last decade undid their pension models, the issues -- technical, ideological, economic, tax, political, jurisdictional and regulatory -- are numerous and complicated. They don't lend themselves to easy solutions, unless you're a union leader and can parade mythologies as reasonable options. All we need, they say, is a massive expansion of the Canada Pension Plan to give all Canadians generous pensions.The core mythology of pensions is the all-too widely accepted idea that it is possible and even easy for individuals to get more out of their savings and investments beyond a reasonable but modest rate of return. That's the great pension fantasy, an extravagant promise that somehow there is free money to be had.There are, essentially, only three sources for this free money. 1) New funds can be voluntarily contributed by corporations and employers offering pensions as an employment perk, adding to the total savings returned to the individual. 2) New money can be taxed from others and transferred between generations or income groups to provide higher returns to one set of individuals at the expense of others -- a form of wealth redistribution. 3) Expert investment advisors and managers can achieve dramatically superior investment returns that will reward each individual with larger retirement savings and payments than they could achieve on their own.There are no other possible sources of bonus pension benefits beyond what the individual contributes. One [...]

The future of pensions in Canada


  Recently Arnold Schwarzenegger spoke at the Montreal Board of Trade. An article about his event was posted in the Montreal Gazette I am a little bit unique. In his first comments he spoke about the pension issue. In California, public pension underfunding was pegged at about $50 billion, but analysis by university researchers revealed it was $500 billion, he said. "Now the federal government is for the first time looking into what is the liability (for) each state. This will be a disaster in the future when it all comes out," he told a Board of Trade of Metropolitan Montreal luncheon. "Right now they know about it and they should do something about it and they haven't done anything about it."By now everyone recognizes that there is a pension tsunami coming. We are still not aware of the true extent of the damage it will cause and a lot more investigative work needs to be done to disclose the real numbers. In anticipation of the seriousness of the tsunami some policy makers are attempting to bring about changes that will deal with the crisis. One of these is a recent proposal to allow American state to go bankrupt. The proposal was outlined in an article from the Los Angeles Times and was written by Jeb Bush, past Governor of Florida and Newt Gingrich, a Presidential hopeful. In Better off bankrupt they highlight their proposal. During the 2008 financial crisis, the federal government reacted in a frantic, ad hoc fashion, tapping taxpayers for bailouts galore, running roughshod over the rights of bondholders and catching the American people unaware and unprepared. In contrast, we still have time to prepare for the looming crisis threatening to engulf California, Illinois, New York and other state governments.The new Congress has the opportunity to prepare a fair, orderly, predictable and lawful approach to help struggling state governments address their financial challenges without resorting to wasteful bailouts. This approach begins with a new chapter in the federal Bankruptcy Code that provides for voluntary bankruptcy by states, a proven option already available to all cities and towns across America.The figures for next year's budgets are staggering. California, which faces a $25.4-billion budget shortfall, will pay $100,000+ pensions to more than 12,000 state and municipal retirees this year. A Stanford study puts the state's unfunded pension obligations at more than half a trillion dollars. Illinois has a $15-billion budget deficit, prompting its governor and lame-duck Legislature to hike its personal income tax rate by 66%. New York, where 73% of the government workforce is unionized, is staring at a $10-billion deficit.One of the key issues they try to address is: Second, as with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc. The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers. The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal he[...]

The Alabama State Pension System on Way to Collapse


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Are Union Pensions Bankrupting America?


Read the transcript here. Show transcript

Bill Tufts 
Fair Pensions For All

Unions are Pissed!!!


NUPGE and OPSEU are mounting a campaign in opposition to the Ontario corporate tax cut program. Is there any disclosure on these unions? How much are they spending every year? Where are they getting their money? How much are the senior executives in the unions being paid? Unions are a huge lobby group in Canada. They siphon money paid by taxpayers into the civil service. Why is there no disclosure required for public sector unions? Check out their parody site here. People For Tax Cuts Unions are worried about any money that may not be available to pay their outrageous wages, benefits and pension demands. Of course they are saying that it will come out of the pockets of Ontario taxpayers. what they are really worried about is that it will come out of future wages increases and gold-plated pension contributions. I have to admit that they have a point if the big-cats in the corporate sector are getting a big tax cut. But they miss the point that it is the business sector generating economic activity that feeds us all. OPSEU out to kill corporate tax cuts with humor    Be sure to check out all the You Tube page with all of the video, all 15 of them!  Bill Tufts Fair Pensions For All  [...]