Trim city and police pensions, cut costs
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Hey there, time traveller!
This article was published 21/12/2015 (2602 days ago), so information in it may no longer be current.
Coun. Russ Wyatt heard some sympathetic noises out of Mayor Brian Bowman about police pensions at city council’s last meeting of the year. Mr. Wyatt believes it’s time to rein in pension costs, and starting a second, less expensive plan for new hires might be the way to do this.
Mr. Wyatt is right. Two-tier pension plans are popping up in public and private workplaces as employers wrestle with workforce demographics — plans are supporting many more retirees — and low interest rates that knock the stuffing out of “solvency” tests for the plans, triggering huge payments by employers.
In the case of the Winnipeg Police Pension Plan, the city is on the hook for tens of millions of dollars in liabilities because of a solvency test that measures a plan’s ability to pay its obligations, in the event it is wound up immediately. There will always be a taxpayer to fill in the gap, but the police plan’s members refused to exempt the city from such deficiency payments. That could have cost the taxpayer a 5.65 per cent property tax hike, but the city opted for a letter of credit to cover the obligation.
There are other worrisome financial pressures. The city has substantially increased its own payments in recent years — almost doubling its contribution rate — to meet its obligations to retirees. Despite the escalating costs to the taxpayer, employees’ contributions have not risen, remaining at eight per cent. Police can retire at age 55, with 25 years of service, to a pension based on the five best years of earnings, including overtime, and protected against inflation. People retire early as a result. In 2013, more than 40 per cent of the plan’s members were retirees.
Such benefits are by no means unique to the Winnipeg police. They mirror a variety of pension plans, including those for Winnipeg’s civic employees, although the rates for civic employees have risen annually in the last few years.
Some governments have taken steps to contain costs, either hiking employee/employer contributions or moving, as Saskatchewan did, from a pension of defined benefits to one that offers benefits determined by the investment market.
A new police pension plan, one that is more affordable with less risk to taxpayers, makes sense, and Mr. Wyatt should push on. Both the mayor and finance committee chairman Marty Morantz found merit in the idea, as did the police association president, Maurice Sabourin. That attests to the dire position the plan is in.
A new plan can help contain future costs, but it does nothing to staunch the flow of city cash into the current plan. The expense of benefits is one reason the city’s budget is hard pressed to keep up with the costs of emergency services — police, fire and paramedics.
The mayor knows this problem, because he made renegotiating pensions an election promise. Yet it was not on the table when the city entered contract talks with CUPE 500 and Winnipeg Transit workers this year. That was an opportunity lost, a lesson learned.
Mr. Bowman repeatedly used the word “unsustainable” when talking about public-sector benefits before, and immediately after, his election to office, but has been very quiet on the topic since. What happened, Mr. Bowman?
No union will willingly move to clip the benefits of its members, and will only be pressed to do so when it, too, sees a risk to the value or the viability of pension plans. Mr. Wyatt suggests a new police pension plan could be done in tandem with severances to retire veteran, expensive officers. This may serve as a model for broader reforms to benefits. Mr. Bowman should get to work on an old promise that still has merit.
Updated on Monday, December 21, 2015 7:36 AM CST: Replaces photo