Montreal pension crisis

January 16, 2012

The City of Montreal and surrounding suburbs are dealing with a pension crisis. Costs for pensions have risen in Montreal from over $130 million in 2005 to over $600 million today. The mayor has made a firm commitment to create a long term solution to the problem and bring some sanity back to the city’s finances.

There have been a series of articles in the Montreal Gazette covering the issue.

Here is our contribution to the debate

Courage is needed to tackle far-too-generous pensions

The Gazette has told its readers that one of the biggest fiscal challenges facing Quebec in the new year is the high cost of municipal employees’ pensions (“It’s time to take action on municipal pensions,” Editorial, Dec. 30). The cost of Montreal’s pension fund is eating the city alive. It is driving up taxes, increasing debt levels and causing drastic cuts in the services that are paid for by tax dollars.

This situation cannot continue, and Mayor Gérald Tremblay and other local mayors are taking bold action by putting the issue front and centre. But will they have the courage to do what is necessary to fix the problem?

The pension crisis must be controlled – by PETER F. TRENT is mayor of Westmount

The amount that Montreal Island suburbs pay as their share of regional expenses increased 12.4 per cent in 2010 and 4.8 per cent in 2011. Over three years, that’s a 22-per-cent increase – more than three times the rate of inflation.

As night follows day, tax increases follow spending increases. In 2006, Montreal spent $1.7 billion on regional operating costs. (To compare apples to apples, I’ve removed the cost of operating arterial roads, a responsibility that was thankfully repatriated to the demerged suburbs.) The 2012 budget calls for spending $2.43 billion; that’s a 43-percent increase, nearly four times the rate of inflation. So it was not just the well-advertised 40-per-cent increased contribution to public transit, but a 43-per-cent increase right across the board.

What’s behind such an extraordinary spending increase? It’s mostly caused by the increased cost of pension funds, today’s silent budget killer. One-half of Montreal’s expenses go to salaries and benefits. While salary increases have been running very comfortably over the inflation rate, they are almost modest when compared with the increased cost of Montreal pension funds, which have soared from $200 million in 2008 to $600 million in 2012 for both local and regional services.

Let’s put some faces on the pension-fund problem. Especially since 9/11, we all seem to admire firefighters. But there should be a limit to our material gratitude, at least. The average firefighter in 2012 will cost the city of Montreal $123,000 a year and retire at 52 years old, getting full pension benefits after only 25 years of service. And the city pays 75 per cent of the cost of firefighters’ pension benefits. Is this fair, when you consider most taxpayers don’t even have a company pension? When there are 2,800 retired firefighters getting pensions, and only 2,300 actually working?

And firefighters are not the sole beneficiaries of municipal generosity. Even the average Montreal blue-collar worker costs the city $92,000 a year in salary and benefits, including pension costs

Montreal municipal workers’ pension costs raise tax fears

City trying to negotiate new pact; legislature may be asked to set aside 30-year-old agreements with employees

While the city of Montreal would prefer to reach a deal on the issue with its unions, it’s ready to ask Quebec for special legislation to free it from a deal that sees city taxpayers contribute $70 for every $30 an employee pays into the municipal pension plan,

“We want to keep (next year’s) tax increase at 2.5 per cent, but our costs are increasing by five per cent, and out of that five per cent, three per cent is going directly into the pension plans of city employees,”

It’s time to take action on municipal pensions

The city of Montreal’s 2012 budget calls for a spending increase of 5.2 per cent over 2011, of which 3.2 percentage points are due to growing pension obligations alone. Thirteen cents in every spending dollar now goes to pensions.

In Montreal, the average municipal worker retires at age 55 with a $35,000 pension. The average manager retires at 59 with a $51,000 pension. And the pension gravy train isn’t limited to Montreal. In Westmount, workers can retire at age 50 after 30 years of service with a pension equal to three-quarters of their average final three years’ earnings.

Municipal pensions are high all across Quebec because they are tied to municipal pay scales, which are generally 20 to 30 per cent higher than pay scales in the private sector and the provincial-government public sector.

City unionized workers face tough contract talks in 2012

 Considered in the context of the $609-million contribution required from the city next year, that may seem (relatively speaking) like small change.

But when it’s considered that about two-thirds of the city’s pension payments in 2012 will be spent on benefits paid to retirees, perceived as untouchable, $50 million represents about 25 per cent of the remaining contribution.

That sum is seen by those at city hall who are close to the issue as an important – if not ideal – reduction in costs.

The city also is seeking either to raise the minimum retirement age offered by the plans or reduce the benefits offered to those taking early retirement.

Under the present agreements, the average age of retirement for unionized white-collar workers is 55 and their average annual pension $35,000.

A Montreal police officer leaves the force at an average age of 53 and collects $59,000 a year, while a city firefighter retires at an average age of 52 with an annual pension of $53,000.

City managers and professional employees retire at an average age of 59, the former collecting $55,000 annually, while the latter receives $51,000.

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