Much has been made over the past couple of weeks about $5.9-million the provincial government has spent on severance packages for fired CEOs of the former regional health authorities. If these generous packages aren't enough to get the blood boiling, left-over deficits, bonuses and unfunded liabilities in the executives' supplementary pension plans should be.
In fact, the severance payments may be the smallest cost taxpayers will have to bear.
For starters, taxpayers are on the hook this year for an additional $97-million to cover deficits accumulated by the health regions.
Calgary Health Region was the largest offender, contributing the lion's share of the "surprise" deficit this year. But at this point, nobody should be surprised that Calgary's health region is running a deficit, as they have run deficits in three of the past four fiscal years. While that alone should have been enough to send CEO Jack Davis packing - sans a severance - it apparently wasn't even enough to keep Mr. Davis from receiving a bonus.
In fact, Mr. Davis received $192,000 in bonuses and extras last year. One can only imagine how large of a bonus he might have received if he had balanced the region's budget and significantly reduced waitlists. The same goes for Sheila Weatherill, CEO of Capital Health who received $136,000 in bonuses and extras last year despite running an $18.5-million deficit.
However, setting aside the bonuses, deficits and severance payments for which taxpayers are already on the hook, the expenses that have yet to garner widespread outrage are unfunded liabilities in some of the health authorities' supplemental employee retirement plans (SERPs).
SERPs are a fairly new phenomenon in government, and are generally established only for senior executives. Essentially they are a second, more generous defined-benefit pension plan, on-top of their regular defined-benefit pension plan.
All defined-benefit pension plans are prone to run unfunded liabilities due to the fact that it's rather difficult to accurately predict life expectancy, rates of return, and rates of inflation some 30 years down the road. This is precisely why the province should be converting all of their defined-benefit pension plans to RRSP-style, defined-contribution pension plans.
However, when it comes to health authority SERPs, their unfunded liabilities were not caused by missed targets, they were caused by health authority executives deciding not to fully fund the pensions.
As pointed-out recently by Alberta's auditor general, of the $30-million owed to senior health authority executives in SERPs, $22-million is missing.
Senior executives at the Mental Health Board as well as Calgary, Capital, Chinook, and Peace Health Regions, made the decision not to put money aside to fund their own SERPs, going against standard government practice.
To be clear, unlike unfunded liabilities in other pension plans, where often the decision to not fully-fund was made decades ago by governments, the decision not to fund Jack Davis and Sheila Weatherill's SERPs was made by... Jack Davis and Sheila Weatherill!
This was not a decision handed down to them by the Minster of Health, the Premier or any other representative of Albertans. These health region executives either knowingly decided to leave taxpayers with a debt for their SERPs or they were ignorant of standard government practice.
Either way, taxpayers should not be on the hook to foot this bill. Health Minister Ron Liepert, should have a look in the empty SERP accounts and tell those former senior executives at the offending health regions: "There's nothing in your SERP account, so I guess that's what you get!"
These executives only have themselves to blame, so taxpayers should take no pity. Just like few should feel sorry for them if they were suddenly homeless as a result of setting their own house on fire.
There are some unfortunate and expensive costs taxpayers are going to have to bear with the transition from nine health authorities down to one, but bailing-out millionaire ex-executives for their own mistakes should not be one of them.
- Scott Hennig, Alberta Director
shennig@taxpayer.com
