Pension tension affects us all

Sharon Horan
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Finally, it seems like this long, drawn-out winter may be over and spring is in the air.
With or without spring weather, we do have something to celebrate this month.

In May, we observe Board of Trade Week, and I want to take this opportunity to give a shout out to all the business owners in the province who take a chance, invest their own money into setting up their business, employ people, pay taxes and support their communities. I don’t think we recognize enough what the business community does, and all too often business owners don’t talk about it, either. Business people typically avoid the spotlight because we feel that talking about success may jinx us or bring bad karma, often because owning a business with the goal of making a profit is perceived by some as being villainous. We need to emerge from the shadows and be proud of what we bring to this province.

Fifty-nine per cent of Newfoundlanders and Labradorians work in the private sector, and the vast majority work in small businesses with fewer than 10 employees. This sector created 11,800 new jobs between 2009 and 2012. Daffodil House, Ronald McDonald House, the YMCA and the Gathering Place are here and thriving because businesses have voluntarily contributed to campaigns that made these projects successful.

Small businesses are the heart and soul of our community; they are the job producers. A strong vibrant private sector is critical to our province’s future.

And speaking of strong and vibrant, we should be energized about the enormous business opportunity in our own backyard. Labrador is exploding with opportunity. Vale is starting construction of its underground mine. The Lower Churchill project is in full swing. Alderon is developing a mine in Labrador West and IOC plans to double its capacity.

Labrador is going to need everything from beds to bolts. The St. John’s Board of Trade is organizing a number of initiatives to familiarize the local business community with opportunities in Labrador, help build partnerships with aboriginal companies and assist with the logistics of getting your products to and from Labrador.

We want to help local business grow and expand, and May is the month to let us show you how.

I have been receiving a lot of feedback in the past month over the St. John’s Board of Trade shining light on our unfunded pension liability. Many have called to say thank you for starting a much-needed discussion while others have responded negatively.

Pension envy

People have suggested that we have pension envy, that what we have reported is not factual, that the problem is only on paper and not real. They have said I and the Board of Trade have no place in this discussion.

The fact is that all citizens have a right to participate in this discussion. It is citizens who are the taxpayers, who vote in elections. As Newfoundland and Labrador taxpayers, we should all be concerned about how our tax dollars are spent.

It is tax dollars, both from citizens and the business community, that are paying the government’s portion of the pensions and part of the unfunded liability. The nature of defined benefits plans is that the government has to cover shortfalls if investment returns fail to meet expectations. The government uses tax revenues to cover these shortfalls. Perhaps the argument is correct that the pension plans will never technically go bankrupt, but that is only because more and more government dollars will be diverted from health care, education and other critical government services to go into the pension fund(s).

Real problem

The problem is real and doesn’t just exist on paper, as each year more and more of government revenues are being expended on paying post-retirement benefits and pensions. You only have to go to the Department of Finance website to see that in black and white.

The interest we pay on our debt for 2014-15 is projected to increase to $807 million — that’s just the interest, not the debt itself, and 67 per cent of this debt is the unfunded pension and other post-retirement liabilities.

Let’s put this in perspective. The replacement of Western Memorial Regional Hospital is estimated to cost $500 million. The replacement of 401 bridges in the province which are older than 40 years and reaching their life expectancy is a little more than $800 million. We could have these things paid for if we didn’t have an $800-million interest payment.

According to the auditor general, bridge replacement is a required investment by the province, in the near to medium term, but to do so would require the government to allocate eight times more than it has planned in the next five years. Who wouldn’t agree that this is alarming and affects every Newfoundlander and Labradorian?

Those who criticize the concern we have expressed have failed to acknowledge that we have indicated that the pensioners are victims here. They did nothing to create this problem. Rather, the government made a promise to pensioners that it can’t fiscally deliver and, as a result, more tax dollars than were anticipated are now required to fulfil the promise.

Pensioners were promised something that is now in jeopardy, and we want the government to find a solution that doesn’t see any Newfoundlander or Labradorian worse off, whether that is a pensioner or a taxpayer who doesn’t have a pension. The solution is likely going to result in both parties not liking the outcome; the pension arrangement may change, to the dismay of the pensioner and, at least in the short term, more tax dollars are going to be spent servicing debt rather than  on other necessary services, to the dismay of the general taxpayer.

There is one more thing I know for certain: the problem has to be solved, and the longer we wait to address the unfunded pension liability, the more painful the solution will be. We will be burdening the next generation with a debt they had no part in creating.

So, we can deflect and delay, but the sooner we accept that this is a very real challenge and the sooner we start moving to a solution, the better everyone will be — pensioners, private employees and the elected officials who represent them.

Let’s stop the finger-pointing, name-calling and blaming. Let’s be courageous leaders and find progressive solutions.

 

Sharon Horan is chair of the St. John’s Board of Trade. She lives in St. John’s and the Humber Valley.

Organizations: Board of Trade Week, Daffodil House, Ronald McDonald House YMCA IOC Department of Finance Western Memorial Regional Hospital

Geographic location: Newfoundland and Labrador, Humber Valley

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Recent comments

  • Business Man
    May 11, 2014 - 08:28

    Ah yes, the great contributions of the business sector, keep in mind that the business sector claims those contributions in their tax returns. Lets not mention how many millions the business sector receives from government in the form of grants and interest free loans every year. Strangely, they never want to tell people the root cause of this liability - that is, because government agreed to a pension system but decided to underfund their share. Instead they spent that money. Lets also keep in mind that the business sector is the same group that opposes minimum wage and other benefits to labor. Those things are important to keep in mind to understand who they are representing - and it's not the public.

  • Corporate Psycho
    May 10, 2014 - 18:45

    Didn't a mine just close in Labrador? Horan is just another Danny plant sent to look after special interests. Horan doesn't mind spending taxpayers money on Danny's mine.

  • Joe
    May 10, 2014 - 08:58

    Having done such an exemplary job on the Temporary Foreign Workers Program, I am interested to see the Board of Trades solutions to this "problem".

  • Robert
    May 10, 2014 - 08:09

    The members of the board of trade spend more tax payers dollars, through grants, cost sharing and non-repayable loans, then the pensioners. If Ms. Horan was concerned about the pensions she should say, "No thanks you government official, the members of the board of trade don't want any handouts this year, put the money into the pension plan where it was supposed to go." The pensions plans are "unfunded" because the government has not be paying their portion. Let's not confuse the facts.