06 June 2016

Entitlements and examples #nlpoli

Canadian income tax law requires that all people over the age of 71 must take payments from their registered pension plan.

Lorraine Michael is over the age of 71 and so she is collecting her pension from the House of Assembly.  She's earned it.  She's got every right to receive it.

Michael is also collecting her full salary as a member of the House of Assembly. The Telegram's James McLeod broke the story last winter.  Michael said two things about it.  First, she felt she was entitled to even more money because she was doing extra work in the House of Assembly as the de facto leader of the third party.  Second, Michael told CBC she had to double dip because that's what the law said she had to do.

Well, no, it doesn't really.
The law says Michael has to collect her pension from the House of Assembly.

The law doesn't say Lorraine has to take her House of Assembly salary on top of her pension as well as all her other entitlements. She could have found a way to reduce her total income from the same source of funds to the amount set by the House of Assembly for her job.  In light of the government's financial problems,  she likely would have earned praise for taking a principled stand against double-dipping.

Lorraine didn't do that.  Instead, she took precisely the same line that members of the House of Assembly took in 2006 to justify the scam they had going that allowed them to spend as much public money as they wanted on whatever they wanted without any proper accounting.  They said the rules allowed it.  Lorraine said the rules require it.  Same difference.

Lorraine Michael is in the rare and privileged position to be one of the people in our society who gets to set the standard for the rest of us.  She gets to make the rules.  When Lorraine says she had no choice but double-dip on the taxpayers, Lorraine isn't telling the truth.  She had a choice.  In making the choice to take her pension and her salary for doing the same job, she also implicitly said it was okay for others to do the same thing.

Of course, Lorraine isn't responsible for creating the financial mess the provincial government is in. Her attitude certainly would give heart to lots of folks doing the same thing, though.  Double dipping is a sizable problem in the provincial public service.  The most recent review we have of it appeared in the Auditor General's report for 2009. Double dipping remains an issue in the provincial public service despite a clear policy that discourages departments and agencies from hiring annuitants when a qualified alternative exists.

Teachers are especially notorious, at least according to the 2009 AG report.  In that year,  school boards hired 443 teachers who were receiving pensions.  They cost more than five years worth of rural libraries,  that is more than $5 million.  "During the year, 25 of these teachers received salaries of $50,000 or more (highest was $106,576), while in the 2008 calendar year, 17 teachers received salaries of $50,000 or more (highest was $90,748)."

Contrary to the Teachers’ Pensions Act, 60 teachers were rehired for in excess of 65 days without having their pension benefits suspended. For the period September 2007 to December 2009, these 60 teachers received salaries totalling $4.3 million (ranging from $5,956 to $200,269), while receiving pension benefits totalling $2.2 million (ranging from $3,434 to $93,408). One teacher received a total of $281,838 comprised of a salary of $188,430 and pension benefits of $93,408 for the 28-month period.  
Six retired teachers were employed for 3 years through the use of multiple applications to the Minister by school districts (5 teachers at the Nova Central School District and 1 at conseil soclaire francophone). Over the three-year period these 6 teachers received salaries totalling $1.2 million (ranging from $160,950 to $232,520), while receiving pension benefits totalling $474,581 (ranging from $58,826 to $95,396). One teacher received a total of $308,889 comprised of a salary of $222,835 and pension benefits of $86,054. Filling positions through the rehiring of the same retired teacher may indicate issues regarding the school districts’ succession planning for these positions.  Retired teachers were hired for 4 positions (3 at the Nova Central School District and 1 at the Eastern School District) even though there were non retired teachers who had applied. 
There were at least 73 applications from non-retired teachers (24 applications for a special education position, 18 applications for a French teacher position, 17 applications for a principal position, and 14 applications for an educational psychologist position). The inability to fill positions with this much interest may indicate issues with the school districts’ hiring policies and procedures. 
Throughout the rest of government, "60 pensioners (2008 - 47) were also in receipt of a salary. Pension benefits totalled $2.1 million (2008 - $1.5 million) and salaries totalled $1.3 million (2008 - $0.8 million). During 2009, 16 pensioners received salaries of $25,000 or more (highest was $162,708), while in the 2008 calendar year, 14 pensioners received salaries of $25,000 or more (highest was $115,692)."

Overloaded with Administration

Rehiring pensioners isn't the only issue in the education department. As it seems, the series of consolidations of the school boards across the province hasn't produced a reduction in administrative staff in the department and the board level that matches the decline in student enrolment.

The always annoying fellow who runs the labradore blog tackled this one back in 2013.  Way back then the provincial government was having a time making ends meet so the education minister said he'd be looking for ways to save a few pennies here and there.  Maybe put all the boards together into one big empire for some bureaucrats to run.

Well, so far that hasn't worked out too well in the old savings department.  A lot fewer students. About the same number of employees of all sorts at the school boards.   labradore event made a pretty chart showing the numbers.

Through all the reduction in enrolment (the blue line),  the number of folks in administration (red line) has stayed constant.  Between 2008 and 2009 - roughly the time of the AG report - the number of people in administration actual jumped dramatically.  There's no reason to believe this situation has changed for the better in the meantime.  If anything, the extent to which the English School District and the teachers' union are collaborating to try and hide earnings information from the public,  one could be tempted to think the situation remains very much the same. If that were the case, then it's a good indication of where cuts could come next.

Hiring annuitants will remain a problem unless there is a concerted effort to get it under control.  There are annecdtonal reports that the practice is rampant in some places like Nalcor.  The result would inevitably be that costs are far higher than they need to be.

There are situations where pensioners have specific skills that would be of benefit.  That's why there are specific policies to allow for it, with proper approval.  What the Auditor General found was that the education department was hiring annuitants without following that policy.

Lorraine Michael didn't cause the problem of annuitants but she does typify the difficulty with encouraging people to be mindful of how the spend public money when the folks setting an example feel they should be able to collect a pension, get a salary on top, and probably deserve more besides. We all think we are underpaid and deserve more, even that we are entitled to more.  It's probably true that we all deserve more in most cases. The thing is, though, that we can only draw out of the public purse what we can collectively afford. We got into the current situation because everyone forgot that in their belief they were entitled.

They aren't.

None of us are.