Quick Pension History
Some of our conservative bloggers have been raised to new levels of excitement over the Auditor General and his commentary on debt.
Now I understand where Noseworthy is coming from - he will always recommend reduction of debt as did all AG's before him - but he is the AG and he is not responsible for social policy of a province or her people.
Then there is the misconception of what happened to our pension plans and the history surrounding it. We should review that also.
First of all let me acknowledge the sites that have commented on the debt issue.
NL-Outsidethebox
Responsible Government League
Let me deal with Liam of the RGL first.
Many of us have been calling for the refunding of the provincial pension plans since Brian Peckford.
You see Liam here is how it is:
Joey made pensions a responsibility of the provincial government and workers did not have to contribute - it just came out of general revenue - this in turn meant there were no contributions - nor were they invested - so we just kept retiring people and paying them - with no plan to set up a proper pension system. This built up significant unfunded liability for our parents or grandparents.
Then Liam came Frankie Moores:
Frank set up a pension plan with contributions from employees - which he promptly placed in general revenue and spent to build bridges - schools - arenas - hospitals - roads etc. So Frank spent all their money. This accumulated another massive unfunded liability for us and our children.
Next came Brian Peckford who changed the system to stop any further usage of pension funds for general revenue - however he did not begin to deal with the past liability - his was a go-forward basis - which slowed down the growth of unfunded liability - however because of interest and the fact that the contributions from both the employer (govt.) and employee were deficient the liability continued to grow again increasing the burden of our children and us. He provided no funds to refund the liability to that date.
Then came Clyde Wells - Clyde started his journey down the unfunded liability by having the actuarial reports done - telling us exactly what mess we were in as it related to pension liability to that date. The reports were completed and demonstrated the financial mess of the plans and the likelihood that they would be bankrupt within 20-25 years. He did not however put any money into the unfunded liability.
Then came Brian Tobin:
He in fact was the first Premier that started to refund the plans. His was more of ad-hoc let's get some money in to respond to the AG - which was Elizabeth Marshall at the time - she was adamant about this unfunded liability and people like me - who read the AG report since Peckford had been encouraging both Clyde and Brian to deal with it. The media did not really mention it much back then - it became media fashionable when Danny started beating the Liberals up with the reports both Beth's and John Noseworthy's. It is funny though that the person who fought for these changes - Beth Marshall - the same woman who identified the problems with the IEC - did not last long in Danny's Cabinet.
In either case - then came Roger Grimes:
He did put in place a plan to deal with the unfunded liability and dealt with the unions on that - as a Premier he put more into this than any Premier before him. The plan was designed to deal with the liability without crucifying social programs. That was proceeding up to the election.
Then came Danny Williams:
Loyola Sullivan was fortunate enough to receive the benefits of the newly negotiated (now in question) deal for additional payments relative to equalization and oil revenues. He plunked down 2 billion on the teachers plan and has now set his sights on the public service plan. There are other opinions as to whether or not all this money had to be placed in the teachers pension fund and whether or not it might have been better to take the refunding of all the plans at a steady pace over 10-15 years and place some of the 2 billion and other oil revenues into investments that would make the province money - these investments could be in education - infrastructure - and energy. That's when we start talking about good debt and bad debt. Remember the pension plans had money in them and we did not have to start borrowing to pay pensions just yet.
The next post will deal with debt and the choices we have including the schemes mentioned in the Conservative blogs such as private correctional facilities. And just as a sub-note how are your American Conservatives to the South doing on their debt issues?
Now I understand where Noseworthy is coming from - he will always recommend reduction of debt as did all AG's before him - but he is the AG and he is not responsible for social policy of a province or her people.
Then there is the misconception of what happened to our pension plans and the history surrounding it. We should review that also.
First of all let me acknowledge the sites that have commented on the debt issue.
NL-Outsidethebox
Responsible Government League
Let me deal with Liam of the RGL first.
Many of us have been calling for the refunding of the provincial pension plans since Brian Peckford.
You see Liam here is how it is:
Joey made pensions a responsibility of the provincial government and workers did not have to contribute - it just came out of general revenue - this in turn meant there were no contributions - nor were they invested - so we just kept retiring people and paying them - with no plan to set up a proper pension system. This built up significant unfunded liability for our parents or grandparents.
Then Liam came Frankie Moores:
Frank set up a pension plan with contributions from employees - which he promptly placed in general revenue and spent to build bridges - schools - arenas - hospitals - roads etc. So Frank spent all their money. This accumulated another massive unfunded liability for us and our children.
Next came Brian Peckford who changed the system to stop any further usage of pension funds for general revenue - however he did not begin to deal with the past liability - his was a go-forward basis - which slowed down the growth of unfunded liability - however because of interest and the fact that the contributions from both the employer (govt.) and employee were deficient the liability continued to grow again increasing the burden of our children and us. He provided no funds to refund the liability to that date.
Then came Clyde Wells - Clyde started his journey down the unfunded liability by having the actuarial reports done - telling us exactly what mess we were in as it related to pension liability to that date. The reports were completed and demonstrated the financial mess of the plans and the likelihood that they would be bankrupt within 20-25 years. He did not however put any money into the unfunded liability.
Then came Brian Tobin:
He in fact was the first Premier that started to refund the plans. His was more of ad-hoc let's get some money in to respond to the AG - which was Elizabeth Marshall at the time - she was adamant about this unfunded liability and people like me - who read the AG report since Peckford had been encouraging both Clyde and Brian to deal with it. The media did not really mention it much back then - it became media fashionable when Danny started beating the Liberals up with the reports both Beth's and John Noseworthy's. It is funny though that the person who fought for these changes - Beth Marshall - the same woman who identified the problems with the IEC - did not last long in Danny's Cabinet.
In either case - then came Roger Grimes:
He did put in place a plan to deal with the unfunded liability and dealt with the unions on that - as a Premier he put more into this than any Premier before him. The plan was designed to deal with the liability without crucifying social programs. That was proceeding up to the election.
Then came Danny Williams:
Loyola Sullivan was fortunate enough to receive the benefits of the newly negotiated (now in question) deal for additional payments relative to equalization and oil revenues. He plunked down 2 billion on the teachers plan and has now set his sights on the public service plan. There are other opinions as to whether or not all this money had to be placed in the teachers pension fund and whether or not it might have been better to take the refunding of all the plans at a steady pace over 10-15 years and place some of the 2 billion and other oil revenues into investments that would make the province money - these investments could be in education - infrastructure - and energy. That's when we start talking about good debt and bad debt. Remember the pension plans had money in them and we did not have to start borrowing to pay pensions just yet.
The next post will deal with debt and the choices we have including the schemes mentioned in the Conservative blogs such as private correctional facilities. And just as a sub-note how are your American Conservatives to the South doing on their debt issues?
4 comments:
Sue
You, my friend, are doing a wonderful job in your research and you are keeping us abreast of the political manoeuvres that are happening.
Please keep up the great work of churning out information. Without knowledge we are a lost people. That is what we were for 57 years.
Hey Sue
Excellent history lesson. As a 30ish accountant I didn't realize what crazy decisions our early leaders made. Truly amazing.
I don't think debt is a bad thing. Debt to fund things that generate revenue like a hydro project is good. But I don't believe that we should be incurring debt to generally run the province and its programs.
I do agree with Loyola's comment a few budgets ago that we shouldn't be borrowing money to pay the grocery bill. I do think that our collective sack of programs & interest payments should only be as big as the bag of money. And I am a believer in government using the accrual based method of accounting for determining the cost of the programs rather then the cash basis.
I think that the cash basis is probably what caused the bad decisions of the past. When you don't have to pay something out in the next 12 months it's pretty tempting to spend it on something else.
I do think we should concentrate on the unfunded pension liability and getting that 'squared away'. I wonder what the collective severance and annual leave liability is across govt? Not as much as the pension for sure but for some depts and agencies it will become troublesome to pay as the boomers retire in larger numbers. That will make for higher operating deficits in the years to come.
I don't agree with massive cuts to do find the liability but I think the reporting process for the accountability act should point whatever govt is in power to areas that duplicate mandates or are not doing what they should be and possibly scaled down or eliminated. So getting that one into law would be a good thing.
Just some thoughts - like to see your post on your take on social programs.
Thanks
Thank you both for your input...
On the issue of accrual accounting - I do agree it should be presented that way - and in the past couple of months the Minister has referred back to mentioning cash-basis on a couple of occasions...
I did however in the days of cash accounting pick up my copy of the budget and estimates and could determine our debts and deficits as could the politicians that were there at the time.
There is also nothing wrong with getting departmental reports yearly - which has not been met apparently - as there are programs that are not efficient and outdated. We need all the info though and as yet we have not received it.
We need a truly balanced approach to achieve balanced budgets - orderly reduction of "bad" debt - consider where possible making good investments that will being us in some money - and investments in infrastructure to ensure attraction of industry and business. That is that infrastructure we are responsible for not that which the private sector can do. Most of all the feds have to be taken to task on the fishery destruction because there is nothing we can do to make up for that loss - and it is killing rural Newfoundland and Labrador.
thank you for that tidbit of history. it was the best explanation i have seen to date and easy to understand.
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