The growing threat of hidden costs of public sector pensions

Posted March 20, 2014

There is widespread concern among taxpayers across the country that public employee pensions are growing faster than those in the private sector.

The Ontario Public Sector Disclosure Act (PSDA) requires all 444 municipalities in Ontario to report the salaries and benefits of those public employees earning more than $100,000 a year. It’s called the Sunshine List and the city-originated report must be filed before March 31. This year the City of Guelph stated in a news release that 144 of city staffers made the list. That did not include police services employees and there are 55 of them making the grade.

In 2013, 199 Guelph employees earned more than $100,000.  That is compared to 178 in 2012 or an 11.79 per cent increase in one year. The city says it controls staff compensation by not filling vacant positions. If true, then the city staff establishment needs a drastic review to reflect the actual staffing needs of the corporation.

Bill Tufts of the Fair Pensions for All organization says the Sunshine list fails to list 25 per cent or more of additional benefits including pension contributions, sick time, vacation payouts, pensions and free retirement healthcare.

All of these unreported benefits plus salaries, wages and reported benefits are paid by the taxpayers.

The alarming growth of staff in Guelph, now 2,069 full time employees, up from 1,450 in 2006, is 42.68 per cent in seven years. When coupled with the annual increases awarded in labour contracts by the administration, it is easy to understand that the taxpayers have already been placed in a precarious position when it comes to supporting the rapid growth of staff and compensation.

And Guelph’s civic staff is 80 per cent unionized.

How the system is gamed

Here’s what the Brookings Institute think tank says about galloping public sector pension costs.

“There are three basic problems with (the public sector) pension system. With a combination of high unionization, lots of money, and low voter turnouts, public sector unions now control the political process and election results in Canada.

“Public sector unions are often highly involved in raising funds and donating to the campaigns of political candidates, often with the goal of preserving the pension status quo.”

Bill Tufts says “One of the things I think the unions and politicians have gotten onto is they can put more into those packages and it’s not going to show up because it’s not reported on the Sunshine List and also doesn’t come up in compensation agreements.”

When Guelph’s city employee compensation costs take up 80 per cent of the city’s property tax revenue, it’s no wonder that taxpayers have faced an average of 3.6 per cent increase in property taxes in the past seven years.

In 2014, that jumps to 4.36 per cent due to the increase in property assessments. As your assessment goes up, so do your taxes.

The one candidate for Mayor, Karen Farbridge, has received support from the municipal unions in her last two elections.  This is an example of how employee numbers and costs have soared under her stewardship.

The Brookings Institute put it this way: “There is no daylight between them (management, legislature) and labour. They are on both on the same side of the table, and this creates a serious principal agent problem. There is a real void between the legislatures and every other actor on pensions and so it’s not surprising we have a mess.”

Those comments have great value and resonance with a growing number of informed citizens. The combination of overstaffing, the growing percentage of unreported staff benefits, and too generous increases and benefits are slowly strangling our city.

So far, large annual tax increases and user fees have barely been able to keep up.

But here’s the direction our city is headed. House prices will go up along with higher taxes. Because of high costs, this will discourage people from moving here and more important, will make it increasingly harder to attract business and industry to the city.

We are already one of the highest taxed municipalities in the province.

It’s something to think about next October 27 when you cast your vote.

Stay up to date with events that affect your city and your financial security. Join GrassRootsGuelph.com. It’s a non-partisan, non-profit citizen’s group with members, just like you, determined to bring fiscal responsibility and common sense to the council table next October.

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3 Comments

Filed under Between the Lines

3 responses to “The growing threat of hidden costs of public sector pensions

  1. geo

    My vote and dare I say millions of other fed up Ontarian’s votes will go to people and or Parties that have the intestinal fortitude to stand up to the public sector (please note I did not say public service because those days are long over) and say the province of Ontario does NOT exist just to keep you living in the style to which you have become accustomed.
    I believe this is the mindset of the majority of voters in Ontario both municipally and provincially.

    • Geo: Well, the public sector class has become accustomed to their lot at the expense of you and me. Getting a public service job in Ontario today is like winning the lottery with indexed monthly payments until they die. Only citizens can change that by throwing out those politicians who lack the will to protect those who voted for them. We’ll get a chance when the Grits go to the mattresses soon seeking re-election. I know how I am voting and Liz Sandals is not on my dance card.

  2. Mary Heyens

    Please read the Letter to the Editor that appeared in the March 20th Guelph Tribune newspaper: http://www.guelphtribune.ca/opinion/guelph-should-be-alarmed-by-short-term-loan-stores/ City of Guelph staff are Oh So Privileged!

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