July 15, 2020

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And the premier had an unsound plan: EI? EI... uh-oh

Opinion

Premier Brian Pallister is still trying to convince the public that there’s a pot of money sitting in an Employment Insurance fund in Ottawa that belongs to Manitobans. It's one of the more bizarre positions the premier has taken during the pandemic.

Pallister has been claiming for weeks that EI funds can be used to finance his government’s proposed reduced workweek for public servants as a way of reducing costs during the COVID-19 outbreak.

He says Manitobans have contributed to the fund for years and have set aside "savings" that can now be tapped to reduce civil-service costs. He’s even gone as far as claiming EI funds do not belong to the federal government.

"We paid $2 billion of taxpayer money into a fund to pay workers when there isn’t enough work," Pallister said last week.

The premier says instead of borrowing more than it has to, Manitoba should use EI money to soften the blow to the provincial treasury.

There are no savings set aside for Manitoba or any other province. Manitobans who pay into EI, and are eligible to collect, can do so. But Pallister is wrong to claim there is money saved up in an account for any province.

"There is a pandemic and we’re going to draw on the Employment Insurance fund for some of our workers," he said. "We saved up for exactly this type of situation and we’re going to use savings that we had set aside."

It’s unclear whether the premier doesn’t understand how the EI program works, or if he’s deliberately trying to mislead. It seems unlikely that someone with a background in insurance who spent years in Ottawa as an MP would not have a working knowledge of the EI program.

Nevertheless, he continues to describe it as some kind of savings account Manitobans can dip into under their own terms.

"It’s not the federal government’s money," Pallister insisted. "It’s our money."

Actually, it is the federal government’s money, just as PST revenue belongs to the provinces.

EI isn’t a savings account. It’s not even a real insurance plan. Premiums paid into it by employees and employers go into the federal government’s general revenues. It’s accounted for in a "notional" account. But it’s not kept in a separate fund like a pension plan or a trust fund.

Prior to 1990, Ottawa subsidized EI from time to time when the program was in a deficit. That changed in the 1990s when the federal government jacked up premiums to generate surpluses large enough to weather recessionary periods. Trouble was, the accumulated surpluses grew so big, the federal government started using them to pay down debt and balance the books. That became a sore point with labour and business groups who demanded Ottawa stop using EI as a slush fund.

It’s unclear whether the premier doesn’t understand how the EI program works, or if he’s deliberately trying to mislead. It seems unlikely that someone with a background in insurance who spent years in Ottawa as an MP would not have a working knowledge of the EI program.

Legally, though, Ottawa was within its right to do so.

That was confirmed in a landmark 2008 Supreme Court of Canada case, after labour organizations took the federal government to court demanding surpluses be returned to workers. The top court sided with Ottawa. The merits of using EI premiums to balance the books or pay down debt may have generated a lot of political debate, the court said. But under the Employment Insurance Act, the federal government is allowed to use EI premiums for purposes other than paying out benefits to unemployed workers. EI premiums are federal revenues, the court ruled.

"It is clear that the account does not constitute — as is the case of pension fund assets — a trust fund or patrimony by appropriation," the court wrote. "These monies were used like any other part of the revenues in the consolidated revenue fund, and the appropriate accounts were kept."

After years of racking up EI surpluses in the tens of billions of dollars, Ottawa eventually adopted a seven-year break-even plan. Premiums are now set each year with the goal of having a balance of zero in the EI account at the end of a seven-year period.

Premiums were reduced slightly this year to bring the accumulated EI surplus down to a projected $3.8 billion in 2020. It’s expected to reach zero by 2026.

There are no savings set aside for Manitoba or any other province. Manitobans who pay into EI, and are eligible to collect, can do so. But Pallister is wrong to claim there is money saved up in an account for any province.

Whether the premier can convince the federal government to use EI funds to subsidize Manitoba’s civil service is a separate matter. That decision is up to Ottawa. Whether Pallister likes it or not, it’s the federal government’s money.

tom.brodbeck@freepress.mb.ca

Tom Brodbeck

Tom Brodbeck
Columnist

Tom has been covering Manitoba politics since the early 1990s and joined the Winnipeg Free Press news team in 2019.

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