Reboot Alberta

Thursday, June 28, 2007

Stelmach Steps In on Teacher Pension Issues.

Congratulations to Premier Stelmach for taking the conditions off the additional $25M "goodwill" contribution of the Alberta government to the unfunded pension liability for teachers. Putting conditions as to how the funds were to be allocated distributed is not the government’s business.

Now he must continue his leadership and ensure that the resolution of the pension issue is not part of the labour negotiations. This separation of the two issues became a clear message coming our of the PC Leadership forum. It is my understanding that is consistent with the Premiers position then too. For the record, I have worked for the ATA in the past on finding ways to resolve this pension issue and I also working to try and fix the mess left by a former Minister who's bullying tactics was the real cause of the recent teacher strike

The Task Force on the unfunded pension liability the Minister of Learning has set up is also been redirected by the Premier. It merely needs to find the most expeditious way to resolve this issue. It does not need more public hearings on this issue. We have too many of those going on right now. We also have all the actuarial expertise it needs within the fund management and the government finance people so that part of the original mandate is unnecessary…in fact it is obfuscation at its worst.

This unfunded pension liability is one of the most unfair holdovers of mismanagements of past governments all the way back to Social Credit. The 1992 resolution that was reached was not effective for the long term because it assumed the education system would be in constant growth and there would always be more new young teachers coming into the system than older ones retiring. We know how wrong that has proven to be. Even the cuts to education that resulted in significant numbers of teacher lay offs in the debt and deficit days undermined the logic and effectiveness of the 1992 “resolution” of the issue.

Premier Stelmach, Alberta is not out of debt until this matter is resolved once and for all. Continue to take the responsibility to resolve this matter personally and dedicate some of the Sustainability Fund or Heritage Fund interest proceeds towards this problem. It will never be less expensive to do than now and it will never be more important for the long term benefit of our youth and the province as a whole. Do it now. Get it done.

7 comments:

  1. Anonymous7:57 am

    Ken,
    I agree that solving the teacher's pension liability is an important issue. And as the Premier said, it is a separate point from contract negotiations (which are the responsibility of the school boards).

    What I don't agree with is the actions of the ATA over the initial offer of $25 million to offset draws from teacher's cheques to pay down their obligation. It is patently unfair that new teachers should have to pay off the pension debt of old teachers. Having a sliding scale was an equitable means of at least beginning to address years where old teachers under-funded their own pension. Frank Bruseker going on about this being a "divisive" tactic was pure B.S. Period. Full stop.

    Call me cynical, but if the province had offered some sort of "seniority bonus", where teachers with 10 years of service or more would have got a special payment, the leadership of the ATA would have been all for it. But I guess it is just a coincidence that in this case it would be a benefit to the oldtimers at the (notional) expense of the up and coming teachers, and that the ATA is backed by teachers with many years of service.

    What the ATA needs to do is come to the realization that in this day and age, a defined benefit pension plan is a rare jewell, and they should be very grateful to have it. Very very few public companies have one; most have new employees start with a defined contribution plan (where the sponsor contributes a set amount that you invest yourself) as defined benefit plans (where the sponsor guarantees your pension) are extremely expensive to maintain (as we taxpayers are finding out). Even though the two items are negotiated separately, in my view the teachers should consider this in their contract negotiations. You can't have the best of both worlds.

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  2. I agree with the re-jigging the "free" $25 million to distribute it equally, although I would disagree with giving the $25 million in the first place.

    But, I'm not sure I would agree with you that the 1992 deal needs to be re-done.

    If no new deal is signed, the 1992 deal stands. What would the ATA offer that would end up giving the government (ie. taxpayers) a better deal?

    The ATA already turned down a 10-year no-strike deal that would have seen their wages tied to the Average Weekly Earnings Index. That was a sweet deal for the ATA and a bad deal for taxpayers.

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  3. Hi Scott - glad to see you read this Blog. The $25M, as a goodwill gesture, makes sense tio get the discussions started - but it is only a start.

    The teachers did not exactly turn down a 10 year no-strike deal according to my information. I was part of the strategy discussions from the ATA side now and then during those negotiations.

    Tying a no strike deal to the same compensation MLAs get - the average weekly earnings you speak about was seen as a good thing then and I expect it would still be acceptable today.

    However what if market conditions change and that formula ends up not being enough to attract teachers into the profession in the future? We need some flexibility to give us certainty and sustainability. The world is a very volatile place these days.

    We all need some means to be sure any formula can be reassessed - in both directions, in case circumstances change.

    In any event this needs problem fixing and independent of labour negotiations. If we let it go on the way it is, the overall taxpayer costs under this current formula is going to be nothing but more expensive to taxpayers in the long run.

    Get it funded now from surpluses today not tax increases tomorrow. Be fair to teachers and taxpayers at the same time. The past pasturing and bad faith, espeically from the government side has to change. Stelmach knows this and he took steps yesterday to signal such a change in attitude byuhis goverment - that is the motivation behind the the $25M good faith gesture towards resolving the teacher's pension unfunded liability.

    Imagine what the long term benefits will be for our children from solutions on the unfunded pension liability. That will bring stability and sustain quality in the teaching profession. Pretty important stuff particularly as our children will be facing a very different and much more competitive world.

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  4. Ken,

    For starters, let's be clear it's two debts, one worth around $4.3B that taxpayers are stuck with, and another one that is $2.1B that teachers are on the hook for.

    Nothing wrong with the government paying off their ($4.3B debt) earlier and saving money.

    It's the $2.1B that worries me.

    As for the ATA not turning down the 10-year deal, I'd be interested in hearing more about how that went down, because it was my (and most peoples) understanding that it was rejected by the ATA during the negotiations following the order back to work.

    Regardless, I'm not convinced that was a good deal for taxpayers anyway, so I'm glad it wasn't signed.

    I was talking to a teacher the other day about the "changing market conditions" that make the 1992 deal "unfair" now. And I asked the question as to whether they would be willing to renegotiate if the tables were turned and the 1992 deal was now seen as a bad deal for taxpayers.

    Guess what answer I got...

    The fact is the 1992 deal is no different than you signing a fixed mortgage. If interest rates go down you would love to renegotiate with your bank, but if they go up you're not interested if your bank wants to renegotiate.

    Just like your bank would have to offer you something substantial in return to get you to the table, teachers are going to have to do the same.

    Perhaps a complete reformation of the pension plan??? Perhaps long-term labour peace??? I don't know. But I don't think it is the government's responsibility to figure that out, it's the ATA's.

    As for losing teachers thanks to the 3% they pay towards the unfunded liability... I’m not buying it.

    Other than in some remote rural and northern school boards, there's hardly a teaching job that's advertised that doesn’t get dozens of applicants. One teacher I recently spoke to, told me that in his jurisdiction (central Alberta) they get 50 applicants per job.

    That’s more applicants than most private industry jobs would get right now in Alberta.

    And the northern boards have always had a tough time recruiting teachers, so it’s hard to blame the unfunded liability burden on that.

    If this continues to be a problem, should the government create incentives for teachers to work up north? Maybe. They recently gave every gov't worker in Fort Mac an extra $12K/yr.

    But if Edmonton and Calgary teaching positions are still hot commodities, why would we incentiveize them by paying them more or paying off their debt?

    If there's a problem with teacher recruitment and retention (which the ATA hasn't shown any numbers to prove that) there's got to be a more efficient way to deal with it than asking taxpayers to cut a $2.1B cheque.

    Anon,

    The way the money was distributed was unfair. The whole argument of “I wasn’t there when the debt was created, so I shouldn’t have to pay it” is BS. If that argument carried any weight then all of the taxpayers who weren’t around in 1939 when the pension plan was started (and when the unfunded liability started) shouldn’t have to pay the taxpayers’ portion either. And since I wasn’t a taxpayer when Trudeau built up our national debt in the 60’s and 70’s, then I shouldn’t have to pay off our national debt.

    It’s a convenient argument for new teachers, just as it would be for new taxpayers.

    But then again, I disagree with handing over $25 m with taxpayers getting nothing in return in the first place…

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  5. Anon,

    Oh, and I also whole-heartedly agree about the defined-benefit pension plan.

    There's a reason why private industry is moving away from them... it's call insolvency.

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  6. Anonymous4:00 pm

    Hi Ken,

    Without getting into great detail, I'd like to react to some of the comments posted in response to your blog entry.

    1. In 1992, teachers did not assume 1/3 of the liability of the pension plan. The MOU between the teachers and government and the subsequent amendments to the pension legislation speak only to the teachers increasing their contribution rate to cover 1/3 of the ongoing cost of funding the liability. Why would teachers agree to do this? At the time the provincial treasurer was threatening to wind up the plan as part of the government's response to the financial crisis of the day. Times have changed and so should this agreement.

    2. Scott might want to ask himself a simple question, if the 2004 proposal was such a sweet deal, why did teachers turn it down?
    The major problem with the 2004 proposal was its duration and, more importantly, the fact that school boards were proposing that collective agreements be frozen in place for a decade. Alberta teachers' collective agreements are very thin documents when compared to those of nurses or teachers in other provinces because they contain very little content governing working conditions. (In fact, locals often print off copies designed to fit into a shirt pocket.) This is not a problem as long as school boards are constrained by the realization that any egregious behaviour would engender a response at the bargaining table. So boards have considerable flexibility to exercise "management rights" but are held in check by the ATA's ability to engage in collective bargaining. If the ATA had agreed to freeze collective agreements in place, this check would have been removed and school boards would have been given an absolutely free hand to unilaterally change teachers' working conditions. The ATA could not allow its members to be hung out to dry for a decade.

    3. Every teacher who is working today or who has worked since 1992 has paid money toward a UFL that was accumulated mainly as a result of government policy going back decades. Therefore, every teacher deserves some relief. The reason we have a UFL is that the plan for years was run, at government's insistence, on a pay as you go basis on the false assumption that the provincial economy and the size of the teaching force would continue to grow indefinitely. The goal of teachers is to have a fully funded plan so that teacher and government contributions are sufficient to meet future obligations as those obligations are incurred. Such a plan, properly funded, would not impose an additional burden on taxpayers. Teachers are willing to pay their freight and look forward to negotiating a fair and lasting agreement with the provincial government to eliminate the UFL on an expedited basis. If we fail to address this problem now, the UFL and government’s exposure will continue to grow, doubling by 2045 and the total cost to taxpayers and teachers of carrying this debt will exceed $45 billion.

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  7. Anonymous9:09 pm

    Wow. Talk about spin. So, in effect, the bulk of what Dennis has said is that - in his opinion - the teachers should not really share in any part of the unfunded liability because it is only there due to bad government policy. That is how I read it. With all of that, his statement: "Teachers are willing to pay their freight and look forward to negotiating a fair and lasting agreement with the provincial government to eliminate the UFL on an expedited basis", really means nothing in terms of commitment by teachers to funding anything.

    I say again, many of those in the public sector have absolutely no idea of the value these days of a defined benefit pension plan. One only need look at why most private sector companies have dispensed with theirs - too expensive to maintain. I would give my big toe to have such a plan, but alas, like most people I must save for my own retirement.

    I agree the unfunded liability and contract salary negotiations are two separate items, inasmuch as they involve negotiations by separate entities (AB Gov't and School Boards, respectively) but so far all I have heard from the ATA side in the media is "give us what we want, we deserve all we get and more". Hardly a sunny prelude to effective negotiations for either item.

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