09) PITTING TAXPAYERS AGAINST PENSIONERS
By Jean Kenyon
In cities across Ontario an alarm is being raised in the weekly local papers. The cost of municipal employee pensions is growing out of control, we are told. The demographic time bomb is ticking, as more and more retirees live to a ripe old age. Taxpayers can't afford a defined‑benefit pension plan any more! Cities will be bankrupted! The sky is falling!
In December a Waterloo city councillor decided to put these ideas to a balanced discussion. She organized a public forum with speakers from CUPE, the right‑wing group Fair Pensions for All, and OMERS ‑ the Ontario Municipal Employees Retirement System.
The right‑wingers had their say first. A local man known for heading up a taxpayers' committee said defined‑benefit plans are "flawed" and are leading to problems "everywhere in the world".
Then Bill Tufts of Fair Pensions for All really started working the crowd. The OMERS plan has a $10 billion deficit and it's being dumped on the municipalities! People are getting 70% of their salary, when they only paid in 15%! And some of them even live to be 100! At this, a retired teacher shouted from the back of the room, "What are you going to do, shoot them?"
Finally Mike Robinson from OMERS had a chance to explain how the plan is managed. OMERS has assets of $55 billion, and current pension obligations are paid 70% from return on investments and 30% from current contributions by employees and employers. Two boards keep an eye on actuarial trends, and adjust contributions and benefits to keep the system stable. Taxpayers aren't on the hook for anything except making the day‑to‑day contributions to the plan, the same as any employer should do.
Fred Hahn, president of CUPE Ontario, which represents most municipal employees, explained that good pensions are a boon to the whole community. Far greater than the risk of paying taxes to contribute to city staff pension plans, would be the risk of letting our seniors retire into poverty. Who would pay for affordable housing for them, and home care and long‑term care?
CUPE calls for the Canada Pension Plan to be strengthened for all workers, so that separate pension plans like OMERS would no longer be necessary. Even Canada's finance minister Jim Flaherty ‑ no friend of public pensions ‑ said that the CPP is actuarially sound. So why doesn't he simply double it, as the Canadian Labour Congress calls for?
The problem is that employers don't want to pay payroll taxes, including CPP contributions. So they set up private pension plans ‑ if they set up any at all ‑ and then under‑fund them. We all witnessed the heartbreak of Nortel retirees, including those with disabilities, being shoved to the back of the line when the bankrupt company's assets were divided by the courts.
But when public pension plans build up surpluses, the funds get siphoned off by governments. In December the Supreme Court of Canada ruled that surplus funds, which the Mulroney and Chretien governments took from public service pension funds to pay down the national debt, do not have to be returned to the public service unions.
In Ontario, Hahn explained, the Harris Tories in 1998 downloaded a lot of costs to municipalities, then "compensated" the cities by declaring a 5‑year contribution holiday to the OMERS plan. It was simply robbery from OMERS to make the provincial books look good, he said.
So if the plans make too much money, the government Is allowed to dip into them. And if their earnings fall, as in 2008‑9, the ideologues howl that they're unsustainable and a burden to taxpayers.
The rhetoric against public service pensions is only going to be stepped up, as PC leader Tim Hudak continues rolling out his months‑long campaign for an Ontario election he hopes to trigger in the spring. We must not be fooled by the right wing's attempt to dismantle one of the biggest assets that workers in Canada have ‑ namely stable pension plans like OMERS.
It's important for now to defend public service pension plans, even as we dream of the day when workers' pensions will no longer have to be sustained through investments in the stock market.
(The above article is from the January 1-31, 2013, issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $30/year, or $15 low income rate; for U.S. readers - $45 US per year; other overseas readers - $45 US or $50 CDN per year. Send to People's Voice, c/o PV Business Manager, 706 Clark Drive, Vancouver, BC, V5L 3J1.)