Council’s pension plan also ‘unsustainable’

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OVER the past decade, for every dollar a member of Winnipeg’s city council put into their pension plan, taxpayers put in $4.80.

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Opinion

OVER the past decade, for every dollar a member of Winnipeg’s city council put into their pension plan, taxpayers put in $4.80.

This fact seems to have been missed over the past few years, particularly when the city’s outgoing council attempted to reform the pension benefits provided to members of the Winnipeg Police Service — a pension plan Mayor Bowman called “unsustainable.”

While the cost for the police pension plan has received plenty of attention from city council, reforming their own pension plan didn’t seem to make it onto councillors’ agenda. This is surprising, as it’s Politics 101 for elected officials to lead by example if they’re going to expect those below them to follow suit.

Simply put, asking police to reform their pension while council’s own pension was also quite costly was a bit rich.

Buried at the back of the city’s Annual Financial Statements are details regarding how much council members contribute to their pension each year, as well as how much the city (taxpayers) contributes. From 2011 to 2021, council members paid a total of $1.2 million, while taxpayers put in $5.8 million.

One could certainly call this pension “unsustainable,” too.

If you graph the cost of council’s pension plan, the portion council members contribute has grown relatively slowly over the past decade. It’s a fairly smooth line. Conversely, the bill picked up by taxpayers looks more like a roller-coaster — one year it’s three times the amount council members paid, the next year it’s 10 times higher. This is because of the costly structure of the pension plan.

Council members contribute about 7.5 per cent of their income to their plan each year, while the city contributes whatever is needed as a top-up to cover the cost of the guaranteed payments offered by the plan. Needless to say, this is more than 7.5 per cent.

City council may have all kinds of reasons to justify the large bill for its pension — from recessions and “unforeseen circumstances” to inflation. What the public should note, however, is that it doesn’t have to be this way.

Edmonton also provides retirement benefits to its council members, but their benefits are far less costly. For starters, the structure of the pension plan is quite different; it’s known as a defined contribution plan, and it’s similar to an employer matching an employee’s RRSP contributions.

If an Edmonton council member puts in a dollar, the city puts in a dollar. As a result, there’s no risk for Edmonton taxpayers if there’s a recession, higher than expected inflation or other complications. This approach helps ensure Edmonton can use more of its budget for fixing potholes and policing rather than on retirement benefits for its elected officials.

Had the City of Winnipeg taken this approach in 2000, when council set up its pension plan, Winnipeg taxpayers could have saved millions — at least $5 million over the past decade alone.

Most importantly, council would be in a moral position to ask the city’s thousands of employees to curtail aspects of their pensions that have proven to be costly and out of line with what everyday Winnipeg taxpayers receive.

Reforming Winnipeg’s city council pension plan is fairly straightforward: a new council could vote to honour benefits earned to date, but begin offering less costly pension benefits to all council members going forward.

If someone has spent the past four years on council, those benefits would remain in place. However, if they’re re-elected, their new benefits would accrue on a dollar-for-dollar contribution approach.

All of this, of course, is great in theory, But if reform is going to happen, council will first need to recognize its own pension is one of the “unsustainable” costs at the City of Winnipeg.

Colin Craig is the president of SecondStreet.org, a Canadian think tank.

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