Stealth Pension Bailouts Costing Taxpayers a Fortune

TORONTO, ON: With Labour Day just around the corner, the Canadian Taxpayers Federation (CTF) released new numbers today on “stealth bailouts” for government employee pension plans.

Virtually every government employee pension plan in Canada hit troubled waters over the past decade, but rather than reform the plans or bailout these plans with large cheque presentations, governments have been quietly increasing taxpayer contributions, creating a “stealth bailout.” According to Statistics Canada data, governments in Canada put $6.7 billion into government employee pension plans back in 2002. By 2012, that expense had skyrocketed to $18.1 billion; a 169 per cent increase. The CTF calculated the cost per employee at $2,676 in 2002 and $5,741 by 2012; an increase of 115 per cent. These calculations do not include special back payments made by governments. “It’s not fair for everyday Canadians to have to keep bailing out government employee pension plans,” said CTF Federal Director Gregory Thomas. “Politicians should have reformed these expensive and unstable government employee pension plans years ago. It’s time to act.”

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Sources: Cansim Tables 280-0026 and 280-0008. Government contributions do not include back payments, only annual contributions that are based on rising rates.   In Ontario, taxpayers have paid for similar stealth pension bailouts. In 2003, taxpayers put $713 million into the teachers’ pension plan, but by 2013 that figure has jumped to $1.53 billion. That is a 114 per cent increase in a decade. Similarly, taxpayers make annual “special contributions” of $127 million to bail out the Public Service Pension Plan (PSPP). These “special contributions” do not appear in the annual budget, and are only referenced in the Annual Report and Consolidated Financial Statements (Public Accounts).    “Most taxpayers don’t have a workplace pension, and yet they are required to bail out government pension plans through these sneaky bailouts,” said Candice Malcolm, CTF’s Ontario Director. “It isn’t right.”   “The Wynne government is borrowing money and running the province deep into debt – debt that will be repaid with higher taxes on future taxpayers – so it can continue to lavish government employees with defined-benefit pensions,” continued Malcolm. “They need a reality check – Ontario cannot afford super pensions for some at the expense of everyone else.”   The CTF has called on the Wynne government to do three things:   1) Tackle hydro pensions:  In 2012, total pension contributions to Ontario’s four hydro pension plans was$585 million, but only $100 million came from employees. Ontario must restructure these lucrative plans so that employee contributions match what the employer pays, rather than forcing the public to bail out these indebted funds through higher hydro rates.   2) Stop the bleeding: Just as Saskatchewan's NDP government did in the late 1970s, begin putting new employees into less risky defined-contribution plans; this type of plan protects taxpayers from bailouts.   3) Make do like everyone else: follow New Brunswick’s lead for “targeted-benefit” clauses for existing plans. This requires the plans to pay out what they can afford rather than the sky is the limit approach.   The CTF has released two YouTube clips to explain these bailouts to the public – click here and here to view them. Ontario Director Candice Malcolm