by Ralph Morris, President Elect NLPSPA
What is an Unfunded Liability? An “unfunded liability” is a projected expense that a company, business, or government could expect to incur if all its employees cashed in their benefits, such as annual leave, sick leave, overtime, and pension or the company, business, or government was shut down and had to honour these commitments to its employees at one time.
An unfunded liability is a financial myth. Referring to an unfunded liability as a reason not to settle an account past due is the latest politically correct way to mislead the general public. Simply put, an UNFUNDED LIABILITY is a DEBT, which is deposited in the form of markers into fictional trust funds that will someday have to be paid for by taxpayers. No matter how this debt was or is being incurred, the continuing reference to an unfunded liability as being the reason NOT to action pension increases is a deliberate attempt to confuse and mislead the general public to absolve Government from its obligations. Debt is debt, plain and simple. We all have to pay our bills and Government should be no different.
A growing course of complaints about pension debt is unsettling to the ordinary voter and for business owners and in some cases for pensioners themselves. Truth be known, there is no cause for anyone to be unnerved. The only possible explanation of “unfunded liability” is to contrast it to a “funded liability” which presumably is more financially secure and apparently morally superior. Funded or unfunded liabilities are nothing short of “guesstimating” what will be needed ten to thirty years into the future. More and more, we are seeing publicly available retirement funds (RRSPs, RIFs, and other pension retirement funds) and long-term savings plans with a healthy percentage of stocks quickly turn from a “funded liability” into an “unfunded” one. Yet our Government continues to place the blame on former public sector workers for the debts of the Province?
Here are some truths as to why the public sector pension fund is “unfunded” or has a debt:
- From 1967 to 1981 Government spent the pension premiums of workers and failed to pay their portion of the matched premiums resulting in a $4 billion shortfall;
- In the mid 1970’s Government dropped the retirement age from 65 to 60 to avoid layoffs caused by cutbacks, offering full pension at age 60; government did not compensate the pension fund for this shortfall;
- In the mid 1980’s Government further reduced the retirement age to 55 to avoid more layoffs because of cutbacks, offering early retirement and again added this debt to the pension plan;
- Ex-gratia pensions were granted to persons who had never paid into the plan, with no compensation to the plan from Government;
- Some persons who served on Boards of Government or special projects were granted free pensionable service years at cost to the pension plan with no offsetting deposits from Government;
- Government took over certain “private” pension plans, deposited millions of dollars placed into general revenue, placed the employees into the Public Service Pension Plan and transferred no funding to compensate for the shortfall;
- Removal of a $62 million unfunded liability from MUN pension fund and placed into the Pooled Pension fund;
- Government in 1991, 1992, and 1993 took a holiday from paying its premiums into the plan; pensioners continue to carry this decision forward into perpetuity;
- Lucrative pensions of MHA’s and Judges are paid out of the Pooled Pension Fund, with these pensions having to be subsidized by other public sector pensioners as the pay-in rates and numbers contributing are far less than the amount being paid in benefits to these groups;
- In addition to the MHA’s defined pension benefits, they are also eligible for a second benefit known as the MHA supplemental retirement allowance.
- Increasing costs in administering the Pooled Pension Fund, including full funding of the Pensions Division of Government, are subtracted annually from the pension fund.
These actions and others of respective Governments have led to the underfunding of the pension plan and yet today Government continues to blame the former workers of this province for this unfunded liability.
Well I ask Government…..
What is the unfunded liability of Health Care for this Province?
What is the unfunded liability of Workers Compensation Benefits for this Province?
What is the unfunded liability of the Educational Programs for this Province?
What is the unfunded liability of Social Security for this Province?
What is the unfunded liability of roads and infrastructure for this Province?
We never hear of Government’s unfunded obligations for all of these programs. We only hear of the unfunded liability of the pension plan. Governments, business, and the corporate community who are profit focused would have you believe that you are responsible for this pension mess and that you should not enjoy those benefits that you worked so hard for during your employment. It is time to tell these institutions that you know the real truth. Tell them you deserve better and you demand it. Without us, this province could not and would not survive. We deserve to live in dignity and peace.