Group urges action after pension deficit doubles
By Jeff Davis, The StarPhoenix
The City of Saskatoon’s municipal pension funds ran a deficit of $113 million last year, which the Canadian Taxpayers Federation says threatens to swamp the city’s books with red ink.
“The public needs to know that the city of Saskatoon has a big pension problem that nobody is talking about,” CTF Prairie director Colin Craig said Thursday.
Audit reports on the city’s pension plans, conducted by accountants Deloitte and Touche, have been released on the city’s website. They show deficits for the city’s three defined benefit pension plans – for police, firefighters and municipal bureaucrats – nearly doubled in a single year, increasing to $113 million at the end of 2011 from $61 million at the end of 2010.
Mayor Don Atchison said he’s aware of the growing pension deficit and the subject has been discussed by the police and fire department’s pension plan boards of trustees.
No decisions will be made, Atchison said, without guidance from provincial authorities.
“With the provincial government, we’re waiting for the final report to come down to see exactly how the province will deal with that particular situation,” he said. “There is going to be some soul-searching that has to go on.”
Atchison said the pension fund hasn’t been getting a very good return on investment.
“Right now what’s hurt us is not the stock market or our bonds,” he said. “Quite frankly, it’s been the interest rates that are so low right now.”
Mayoral candidate Tom Wolf said he is as surprised as everyone else that the pension deficit is so “astronomically high.”
“I can’t understand how this could have slipped past the administration and could have been concealed from the public,” he said.
While warning such a large deficit could hamper the city’s ability to provide services, Wolf did not provide any suggestions about how to fix the city’s pension regime.
“I don’t think it’s wise to just jump to a knee-jerk reaction about this,” he said. “We have to study it and make sure we do the right thing.”
To stay solvent in the long term, Craig said the city must move away from defined benefit pension plans to less expensive defined contribution plans.
“Unless the public votes for politicians that will put new hires in a less costly pension plan, this could have a big impact on their property taxes,” he said. “If the city has to spend more and more on employee pensions, the less money it has to fix roads and clean up city parks.”
Marlys Bilanski, Saskatoon city hall’s general manager for corporate services, said the pensions deficits are a concern. But, she added, the situation could be much worse.
“The good news – if you can say it’s goods news – is that’s it’s not as bad as some of the pension plans in the country,” she said.
Former pension consultant Bill Tufts said many cities across the United States, as well as Canadian cities such as Montreal and Saint John, N.B., have already learned the hard way what happens when municipal pensions get out of control.
Most raise taxes to cover pension payouts, he said, while at the same time cutting services and taking on a greater debt load.
Tufts is author of the book Pension Ponzi and founder of Fair Pensions for All, which advocates for public-sector pension reform.
Tufts said Saskatoon should cap annual pension payouts, increase the retirement age to 65 and take a hard look at police pensions in particular.