Conservative Misinformation and the Public Sector Debt Problem #nlpoli

There is no limit to how selectively provincial Conservatives will read a document in order to find some microscopic filament that might possibly confirm that they have really been running the most magnificent administration in the history of the galaxy.

They still insist, for example,  that they are the tops in leadership and accountability even though the most recent poll shows that 77% of the people in the province don’t think so.

Conservatives also insist they have done financial miracles.  No less a personage than the party’s vice president took to the Twitter on Monday to tell everyone that:

According to Fraser Institute, SK and NL are the only provinces that reduced their public debt since 2007.

Well,  they said a lot more than that,  but evidently Mark Whiffen and didn’t need to read anything but that. Since the rest of us are not obliged or inclined to such delusions,  let’s see what the gang at the Fraser Institute actually said.

Budget basics: Dealing with the Debt #nlpoli

Public sector pensions in Newfoundland and Labrador are underfunded.  There’s not enough money in the fund account to cover all the likely money they’d have to pay out to people when they retire.

But make no mistake, the province’s public sector pensioners are not in any real danger of losing their pensions as a result.  That’s because the Pension Fund Act guarantees that the provincial government will make up any difference between the money owed to pensioners annually and the money available from the fund.  Unless some provincial government in the years ahead changes the law governing the pensions, people will get the money and benefits they’ve been promised.

The provincial government isn’t going to default on pensions any more than they are likely to take the completely irresponsible advice some might give them to change all the plans immediately - unilaterally if necessary - to make them defined contribution plans instead of defined benefit plans.

It’s important that people remember that because there is a concerted effort going on at the moment to mislead people about public sector spending generally, and pensions in particular.

Budget Basics: Unfunded Pension and Benefits Liabilities #nlpoli

While the provincial budget for 2014 was all about spending government money, the budget speech did raise one issue that the provincial government appears intent on cutting dramatically.

A key component of the province’s net debt relates to unfunded pension and other post-retirement liabilities. Despite an investment of more than $3.6 billion, the liabilities have continued to grow. As of March 31, 2013, they accounted for 67 per cent of net debt. By 2016-17, they will account for 85 per cent of net debt – almost $9 billion.

The provincial government has been talking about the unfunded pension and benefits liabilities for a couple of years now.  It’s a hot issue among business groups like the employers’ council or the Canadian Federation of Independent Business. 

As regular readers know, the board of trade is keen to deal with the unfunded liability, too, even if the president or whoever wrote her column in last week’s Saturday Telegram don’t appear to understand what it is all about.

For whatever reason, business groups get quite agitated about public sector workers and their pensions.  Other public debt doesn’t get them quite as worked up and, as the board of trade demonstrated quite clearly, there’s a fair bit of misinformation about the unfunded pension liability.

In this second post in the Budget Basic series, let’s take a look at public sector pensions and put them in a wider context.  Misinformation never leads to good public policy but right now, pretty well all the anti-pension commentary is based on some amount of misinformation.