Pensions take $2-billion hit

Rob Antle
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Downturn contributes to 2009 budget deficit

The provincial government's pension plans have taken a $2-billion hit over the past year, Finance Minister Jerome Kennedy says, helping drive up the coming year's budget deficit.

Kennedy says the government has not changed its approach to managing the pension plans, despite the $2-billion loss.

The provincial government's pension plans have taken a $2-billion hit over the past year, Finance Minister Jerome Kennedy says, helping drive up the coming year's budget deficit.

Kennedy says the government has not changed its approach to managing the pension plans, despite the $2-billion loss.

"What we're told by the economists and by officials is that, because of the diversification of these funds, and the number of different companies that run the funds, that we can expect to see them rise," Kennedy told reporters prior to tabling Thursday's budget.

If and when stock markets recover, the province will begin to regain the lost pension value.

Meeting advisers soon

The minister said he and his senior officials will be meeting with government pension advisers soon "to ensure that we're getting the best value for our money and that we're taking the right course. We have made no changes at this point."

Kennedy's steady-as-it-goes comments Thursday echoed previous ones by his predecessor, Tom Marshall.

Marshall told The Telegram in late October that the province's pensions were down $1.4 billion, but there was nothing to worry about. "The province is well diversified ... and we're confident the values will return once the markets stabilize," Marshall said at the time.

Kennedy replaced Marshall in a cabinet shuffle soon after. In January, the new minister told the CBC action may need to be taken to address the pension plunge, which had then grown to $1.6 billion.

"There can be no denying the seriousness of that hit," Kennedy told the CBC at the time. "(The) $1.6 billion, that either has to grow, growth has to be obtained in the fund over the next number of years, or we have to come up with it as a government."

Thursday's comments signalled a shift in tone for Kennedy more in line with his predecessor.

The Department of Finance is projecting an overall $750-million budget deficit for the 2009-10 fiscal year.

Officials say increased pension costs will contribute $383 million of that total.

But the $383 million is not cash that must be funneled into the fund immediately by the government.

Instead, it represents potential future payments and interest charges.

As stock values recover from the global economic meltdown, "the costs associated with pension amortization and the interest will go down," Kennedy noted.

Kennedy said that the only "significant injection" of actual cash into pensions this year is $100 million that will flow into the uniformed services plan.

That contribution is part of a deal reached between the government and workers.

rantle@thetelegram.com

Organizations: CBC, The Telegram, Department of Finance

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