Chris Schnurr
Carol Kosowan LL.B., B.A. (Law), B.A. (Policy)
We have heard the arguments as they relate to Post-Retirement Benefits and the “unsustainability” of them. And yes, under the current arrangement they are unsustainable.
To understand this we have to play this forward.
The proposal to eliminate post-retirement benefits for new hires does absolutely nothing to eliminate the growing unfunded liability – up over $100-million since 2005, according to past comments by Mayor Eddie Francis:
But the bond raters warned the city will have to deal with a growing burden posed by rising post-retirement benefits that have left it with a future liability of $170 million.
“Windsor’s large post-retirement liabilities … are among the highest compared with its peers,” the report said.
Mayor Eddie Francis said the city will have to find a way to deal with the burden. One way is to stop providing those retirement benefits for new employees, while grandfathering them for current employees.
Now that ‘unfunded’ liability is approaching $300-million – nearly double in 4 short years under Mayor Francis’ “fiscally” responsible watch.
It is also important to note, this increase has occurred while the city hires “temporary” workers for sometimes years and who are not eligible for benefits, as I understand.
And I didn’t say it – the Mayor did. Using his numbers, he has demonstrated complete and utter fiscal irresponsibility by not dealing with this issue sooner.
But in fact, the “unfunded” liability, for a direct comparison between now and 2005, the same reporting method should be used.
When this is done – we find the unfunded liability in 2005 was $214-million as opposed to the Mayor’s claim of $170-million.
But it is much more dramatic to use the lower number against a $290-million figure, isn’t it?
Makes you wonder what exactly Standard and Poors was told.
However, this slight of numbers is much like attempting to compare the Greenlink costs using 2006 dollars against the DRIC costs in 2011 dollars. In doing so, the increased costs of Greenlink can be hidden or mitigated.
But back to my point.
Eliminating post-retirement benefits will do nothing to reduce the unfunded liability today.
While eliminating post-retirement benefits for new hires will eventually end the growing liability - which will continue to grow between 5 – 10% per annum for the foreseeable future, it will not pay for the current liability of $290-million.
This is what has been bothering me about these claims of financial Armageddon – the current proposal does nothing at all to avoid this.
That unfunded liability, and to be clear, an unfunded liability could be described as “promises made by politicians and expectations of…citizens shaped by these promises” can only be reduced within the current time frame in one of four ways:
Complete elimination of all benefits for all employees.
This could be simply done by repealing the city’s bylaw authorizing these benefits.
If Mayor Francis had not messed up his motion at council, it is quite clear this is what the intention of the motion was.
Terminating all employees
Probably not realistic – but an option using a variety of methods.
Massive property tax increases
Current benefits must still be paid and if no action is taken, hundreds of millions of dollars will have to be found – and soon – within the next 10 years as hundreds of employees are set to retire. Revenues to city coffers would have to increase (or equal spending cuts or a combination of both) around $10-20 million dollars a year for the next 10 years.
Any councillor that claims eliminating post-retirement benefits will solve the problem is being dishonest.
Because of this, I can only conclude the stage is being set to eliminate all benefits not only for future employees, but current ones as well.
For if the current level of unfunded liabilities is “unsustainable” all council members need to come clean and state publicly how they will be made “sustainable” today.
Sure, one can argue that by eliminating PRB’s for new hires is the fiscally responsible thing to do.
But what is fiscally irresponsible is failing to inform both employees and taxpayers as to how they are going to fund the $290-million unfunded liability or if at all.
Filed under: Uncategorized
No, not “everybody” – I like strikes. I love a good protest march, been to them all, Quebec city in ‘01, Ottawa, etc, I like pretty much anything that dumps on ruling class ‘establishment’ parasites (that’s what we called them in the 60’s). Blogs are good too!
Strikes and protests are very good things indeed, lest there would be no social progress whatsoever if left to our moneyed aristocrats.
And garbage strikes are especially good because all you environmental slackers and slobs finally get some idea how much trash you actually produce in pursuit of your big pig consumerist lifestyles.
‘Back to work’ legislation is just the heavy hand of the jackbooted thugs coming down on our heads, and police are little more than the enforcement arm of the ruling classes.
As you can see, my 60’s hippy ethic has not changed much. If anything, it has become reinforced by life in Canuckistan.
Many people do not feel this way today. They think: ‘there, but for the good grace of the rich and powerful, go I.’
They seem to think ‘rights’ are something granted to the peasants by our lords and ladies.
They have things backwards.
We call these people ‘conservatives’ and also, morons.
“When this is done – we find the unfunded liability in 2005 was $214-million as opposed to the Mayor’s claim of $170-million.”
Not so quick. It depends what people are referring to. The $170-million represented the PRB unfunded liability in 2005. The $214-million represents the total unfunded liability which includes PRB, WSIB and vested sick leave, vacation and overtime.
Since when does a one time property tax increase of 2.5 to 5 percent represent a “massive property tax” increase?
Thanks Vincent. This is the response I was hoping for.
So then what does the $290-million include?
Lets see apples to apples.
Otherwise please explain how the unfunded liabilities for PRBs increased from $170-million to $290-million, when past trends were an increase of about $10-million per year. $290-million is quite the substantial jump.
Particularly when in 2007 the liability stood at $198-million.
Nearly $100-million in one year?
Because according to my rough calculations – PRB liability should be in the range of of about $220-million. Still significant – but what are we comparing then when the $290-million figure is thrown about. Drama? Or real numbers?
Furthermore, if health care costs are increasing “11.5% grading to 5% per annum” after 2018, among other benefits, where do you suppose the revenue is going to come from to pay for it?
Incidentally, when the total liability for the corporation in 2007 of $253-million is costed out with an increase of 10% – the amount is $280-million.
From a one time property tax increase? Not likely unless tax revenues start increasing at a similar rate per annum.
Sorry Vincent. I didn’t raise the issue of PRBs and the financial hardship the city is facing. The mayor and certain councillors did.
So where’s the plan to effectively deal with it?
Or shall we react again in 2011 during the next contract negotiations, or in a couple of years?
It appears that the City has the unfunded liabilities revalued ever two years. I need a source for that $290-million number.
“Furthermore, if health care costs are increasing “11.5% grading to 5% per annum” after 2018, among other benefits, where do you suppose the revenue is going to come from to pay for it?”
That 11.5% is used to calculate dollar value of the unfunded liability. It is not in addition to the unfunded liability.
“From a one time property tax increase? Not likely unless tax revenues start increasing at a similar rate per annum.”
You misunderstood me. I did not mean ‘increase the tax for one year’. You only need to raise the property tax rate once to generate additional revenue in perpetuity.