Tories’ civil-service bargaining blunder blowing up province’s balance sheet

Opinion

Hey there, time traveller!
This article was published 06/12/2023 (645 days ago), so information in it may no longer be current.

In a rush to pull victory from the jaws of electoral defeat, it appears the former Progressive Conservative government has left a 10-figure retroactive-pay time bomb for the NDP.

First evidence of the pending explosion came Tuesday, when Premier Wab Kinew revealed a second-quarter fiscal report forecasting a $1.6-billion deficit for the 2023-24 year. That deficit is more than four times what was forecast by the Tories before Manitobans cast their ballots in the Oct. 3 provincial election.

Kinew and Finance Minister Adrien Sala said the deficit was caused by a slowing provincial economy, drought conditions that have devastated profits at Manitoba Hydro and a broad array of unfunded spending pledges made by the Tories — some made in the heat of the campaign — that were not reflected in the 2023-24 budget, tabled in the spring.

Among those unfunded liabilities, Sala highlighted the impact of settling contracts with unionized workers, which includes both wage increases going forward and, more significantly, the costs of years of retroactive pay for all of the expired contracts the Tories refused to renegotiate.

How much has retroactive pay added to current budget liabilities? The numbers are quite astounding.

A spokesman for the Manitoba Government and General Employees’ Union confirmed the province paid more than $117 million in retroactive pay this year to employees at Manitoba Public Insurance, Manitoba Liquor and Lotteries, the Prairie Mountain and Interlake-Eastern regional health authorities and provincial colleges.

The Manitoba Association of Health Care Professionals similarly reported that government was on the hook for $120 million in retroactive pay for deals signed in July with 6,500 employees of Shared Health, the Northern and Winnipeg regional health authorities. The previous agreements expired in 2018.

How did the Tories set the stage for this retroactive-pay bomb? We need to go back to 2017, when former premier Brian Pallister introduced the Public Services Sustainability Act in a bid to freeze government employees’ pay to help get the budget deficit under control.

The act was passed by the legislature, but never proclaimed into law. Nevertheless, starting in 2018, the PSSA hung like the sword of Damocles over all contract talks between government and external entities including school divisions, post-secondary institutions and Crown corporations.

No matter what office of government was doing the negotiating, bargaining groups were offered two years of wage freezes and two years at 0.75 per cent and 1.0 per cent, respectively. The Tories hoped the threat of a PSSA proclamation would bully unions into accepting its terms voluntarily.

In the end, the strategy backfired in spectacular fashion.

Only 24 collective agreements, involving about 8,800 employees, were settled under the threat. That left more than 100,000 provincial civil servants without contracts.

The act was struck down as unconstitutional by the Court of King’s Bench in 2020, although that decision was overturned on appeal. Even so, emboldened unions began seeking settlements that were well above its terms.

In the year following the first court decision, nine collective agreements were signed by the government with wage increases that were two or three times the numbers set out in the act. And many of them created certainty only until 2022.

The result was tens of thousands of government employees working on expired contracts, represented by unions that were fuelled by inflation and high-interest rates to seek significantly higher settlements.

Why would a government that so often trumpeted its fiscal acumen have made such a grievous error in judgment when it came to negotiating with its employees?

No union has negotiated more settlements in the last year than the MGEU, which represents workers at MPI and Liquor and Lotteries — both of which went on strike this year to get settlements — and the 11,160 members of the government civil service bargaining groups, whose contract expired in March.

Why would a government that so often trumpeted its fiscal acumen have made such a grievous error in judgment when it came to negotiating with its employees? And why would the same government, at the same time as it was kicking hundreds of millions of dollars in retroactive pay down the road, undertake a concerted campaign of tax cuts that would ultimately drain billions of dollars from the provincial treasury?

The Tories have offered little in the way of a response.

Opposition Leader Heather Stefanson followed Pallister to the premier’s office after he resigned in 2021 and is as guilty as anyone for the retroactive-pay liability. She called the NDP’s fiscal report — and it’s astounding $1.6-billion deficit — a “fictional forecast.”

She noted the 2022-23 end-of-year public accounts released in September, just before election day, actually posted a budget surplus of $270 million.

Yes, the new government is probably making the situation look a bit worse than it really is for political reasons. But you cannot ignore the reality that the province has already had to book $240 million in retroactive pay for contracts that expired years ago, a sum so large it very nearly erases the surplus Stefanson was crowing about.

That is not a fiction. It’s all hard fact.

For reasons that appear to be more ideological than practical, the Progressive Conservative government decided to ignore its obligations to bargain with its employees in good faith. In doing so, it created a huge and explosive fiscal liability.

One that will be felt for years to come.

dan.lett@winnipegfreepress.com