By Ed Downey
Premier Kathy Dunderdale has support from more than just the Conservative caucus. When she announced that a tentative deal was reached with a number of the sections of NAPE which imposes a two-year wage freeze, the businesses represented by the St. John’s Board of Trade, the Employers’ Council and the Newfoundland and the Labrador branch of the Canadian Federation of Independent Businesses cheered loudly.
The government had scored a touchdown. As they hoped for, the stage is now set for the wage expectations of the employees of those business groups as well.
When Dunderdale recently warned that the government was about to bring the axe to the public service pension plan, albeit “collaboratively,” these groups jumped onto the field like cheerleaders during half-time at a high school football game. They chose to ignore the fact that pensions do not come from general revenue but from a separate pension fund paid for by the employees’ dues, matched by the government’s dues and any interest which may accrue on that investment.
They choose, instead, to focus on the lump sum investments required by the government to partially compensate for the years when the employees’ dues were used to build roads, schools and hospitals.
Why did these business groups fail to complain then that such expenditures would ultimately increase the pension fund liability? Could it have something to do with the fact that they were the ones who profited from those government contracts?
They also chose to ignore the sacrifices made by public service workers for their pensions.
There was one contract in which the government offered to raise its contribution to nine per cent provided that the unions accept wage freezes and also agree to raise their contribution rate to nine per cent. Then, in a second contract, the government decided to claw back the CPP benefit when these retirees reach age 65. In effect, after paying CPP premiums for 30 or more years, these retirees see no benefit from the CPP.
Moreover, during the Wells administration, the government decided not to pay its share to the pension plan for two years, the result of which was to increase the liability. Correct me if I’m wrong, but I don’t recall the above groups sounding a warning about that decision either.
The argument used by these business groups basically is that: “Every dollar spent by government to meet its pension obligations is one less dollar for such things as education and health care.”
Since 2007, the federal corporate tax rate has gone from 22.5 per cent to 15 per cent. The small-business rate has dropped from 13 per cent to 11 per cent. The small-business deduction limit federally has risen from $300,000 to $500,000. The provincial small-business deduction limit also rose from $300,000 to $500,000 in the same time period. Strange though it may be, I didn’t hear the business groups complain that for every one of these tax dollars not collected amounted to one less dollar for such things as education and health care.
Another strange argument used is that the people of the province pay $900 million each year to pensions which have an unfunded liability of $5 billion. If that were true, this debt would be paid down in about six years.
The truth is that the government made lump-sum payments of $2 billion to the teachers’ pension plan and $1 billion to the public service plan in order to partially make up for the years in which governments not only didn’t contribute but spent the employees’ contributions rather than investing them. The government pays no interest on this debt, and other than its obligation to see that retirees receive their pensions from this fund, they are only required to pay their agreed to contribution rate.
I find that it is also peculiar that these groups are so concerned about a debt which requires no interest charges and yet at the same time are supporting the Muskrat Falls project, which has already taken some $600 million from the provincial treasury over the last several budgets and which will require a bank loan of several billion dollars — and that will see principal and interest charges of hundreds of millions of dollars from the provincial budgets for decades into the future.
By the way, please don’t insult readers by claiming that this debt will be repaid by Nalcor from electricity rates. Nalcor is a Crown corporation and its profits and debts are incurred by the provincial government. Every dollar Nalcor will be paying to the banks is a dollar Nalcor will not be paying to the province in revenue.
Angling for work
The real motivation behind these self-serving lobby groups is contracts that the government will call for as it proceeds with its plan for Muskrat Falls. Could it be that if government slashed the public pension plans all hope held by the employees of these business groups of obtaining a decent pension will be dashed as well?
Who knows, perhaps even another reduction in business taxes would then be possible.
I understand and admire entrepreneurs who wish to grow their business and increase profits. However, to do so by trampling others underfoot and suggesting taking away benefits that others have fought hard to obtain and maintain speaks of unmitigated greed.
To feign that this is driven by concern for the ordinary citizens, when these groups have done nothing to ensure that government shares the wealth from this booming economy is unpalatable.
In fact, these same groups have opposed increasing wages and are on record as doing everything in their power to stop a rise in the minimum wage or an increase in benefits to retirees.
The Newfoundland and Lab-rador branch of the Canadian Federation of Independent Business (CFIB) has even gone so far as to post a petition online for its members demanding that the premier make major changes to the pension plans.
This Conservative government has catered to these business lobby groups and in return has garnered their support. Nevertheless, one has to wonder what will happen, as we get closer to 2015, if the polls remain as they are.
Keep in mind that these lobby groups are self-serving, so just how dependable is their allegiance?
A hint may be gleaned from the CFIB website, from which I quote: “Our government is squandering our oil wealth in the short term, which is irresponsible in the long term.”
Ed Downey writes from Marystown.