The government of Ontario has a knack for hiding bad news. Damning auditor general reports and embarrassing news releases are usually reserved for Friday afternoons, preferably on a long weekend, or even better, in the midst of the latest Rob Ford revelation.
Almost on cue, on the Friday of the August long-weekend, the government quietly released a new report confirming that Ontario’s hydro pension funds are wildly unsustainable.
According to the report — commissioned in December, dated March 18, but inconspicuously released in the middle of the summer — unless drastic changes are made, electricity ratepayers and perhaps even taxpayers will be on the hook for bailing out these incredibly indebted funds.
Finance Minister Charles Sousa brought on former Ontario Teachers’ Pension Plan boss Jim Leech to help manage the impending pension crisis. Leech guided the Teacher’s pension back to health, in part by hiking the amount of money taxpayers put into the pension fund.
The new Leech report focuses on the four hydro utilities that make up the former Ontario Hydro — Ontario Power Generation (OPG), Hydro One, the Independent Electricity System Operator, and the Electrical Safety Authority. It decodes the complicated funding formulas, describes how these pensions are overly generous and expensive, and offers recommendations for restructuring and bailing-out these funds.
OPG’s pension fund is currently $555 million in the hole, in part because of the contribution formula. For every $1 OPG employees put into their own pension fund, the OPG (through our electricity bills) chip in as much as $5. (It’s even worse at Hydro One, where employees pay only 12 per cent, while 81 per cent is paid by the Crown employer.)
These government utilities are not profitable enough to cover the exorbitant pension obligations, so as more baby boomers retire, these funds are driven deeper into the red.
Leech calls for drastic steps to increase worker contributions and fix this structural imbalance. But the problem is just as much with the benefit promises as the contribution shortfalls.
Most government employees, including those at public utilities, receive lucrative defined-benefit pension deals. These plans guarantee stated retirement benefits regardless of other factors. So long as employees meet the basic criteria, it doesn’t matter how much money individuals contribute to their own pension, the rate of inflation, how fund managers invest the money, how well the markets perform, or how long these individuals live. They will continue to receive their annual pension, based on a prorated amount of their pre-retirement salaries.
Despite being told to take drastic steps, the Ontario Liberals are unlikely to do anything to upset their friends in big labour. Chances are, the Leech report will be tossed in the dustbin, next to the Drummond report, and ignored.
It will be left to hydro ratepayers to pick up the slack with higher rates.
But Ontario hydro prices are already double what our neighbours pay, and are schedule to increase by another 42 per cent over the next five years. While Ontario families are struggling to cope with these drastic increases, OPG and Hydro One employees will be well protected. Top OPG executives are eligible for pension salaries ranging from $180,000 up to a whopping $760,000 per year.
But as far as the Wynne government is concerned, there is nothing wrong. That’s why they waited for a Friday afternoon in early August to deliver a report saying otherwise.
This article appeared in the Toronto Sun on Monday August 11, 2014Candice Malcolm is the Ontario Director of the CTF
