Looks as if the federal government is turning its sights on public sector pensions. Finance Minister Jim Flaherty told reporters in Vancouver yesterday that the budgets of some government departments could be cut by more than 10%—and that issues such as pension reform and other benefits for public servants are under the microscope.
“If one is going to make any sort of intelligent assessment of government spending in Canada, one has to look at the cost of remuneration, including benefits and pensions,” commented Flaherty.
Public sector pensions have been in the crosshairs of late, with organizations such as the Canadian Federation of Independent Business and the Professional Institute of the Public Service of Canada arguing that public sector DB plans are unsustainable and create an unfair retirement income gap between public and private sector employees.
Last month, the C.D. Howe Institute released a report claiming that Ottawa’s unfunded pension liabilities are much higher than reported in public accounts. The authors stated that the fair value of a typical federal employee’s pension entitlement is growing at more than 40% of pay annually—much faster than the contributions to fund it, and faster than tax rules permit other Canadians to contribute to RRSPs or DC plans.
Flaherty said that all government departments have been asked to come up with two plans analyzing cuts of between 5% and 10% as part of a review on government spending. The feds have an eye toward being more “more fugal,” he said, noting that equalization payments and transfer payments to provinces and individuals wouldn’t be touched.