Thursday, June 3, 2010

An Epic Pension Struggle

St John N.B has been having problems with its pension plan for several years. You would think that a problem like this would be easy to solve but it has proven very stubborn and expensive for taxpayers.

This case shows the fundamental problems with a system where politicians negotiate with public sector employees using taxpayers money. It is always the taxpayers who are getting the shaft.  

Mayor, city manager say changes necessary for long-term sustainability of plan
No matter how good the fund's investment returns are doing this year, city officials seem determined to reform the municipal employees' pension plan that's already sucked an extra $20 million from taxpayers.
 "Everybody knows this is important, from present employees to past employees, for people who are on pensions and will seek them in the future," said Mayor Ivan Court, who is also chairman of the city's pension board of trustees. "It's a national and international problem. But it's something that has to be addressed and we're all working to reach that goal."

With the news earlier this week that the pension fund of the province's 49,000 civil servants has posted a healthy rate of return of 19.94 per cent - much higher than the four per cent target - there is speculation the city's plan has had a similar rebound. The markets are still jittery, but they are doing much better than they were a year ago, when pension funds around the world were hammered.

Without enough growth in Saint John's pension fund, provincial legislation forces city taxpayers to pick up the shortfall. City manager Patrick Woods warned earlier this year that without significant reform, $10 million extra could be charged in 2011, a huge burden for a small city. Over the last several years, about $20 million extra has already been charged.
This is pretty straight forward. The plan has a problem now lets fix it. But here is where it gets nasty for taxpayers. You would think that since they are the ones funding the plan they would have a say but no...

Court, (the mayor) however, wouldn't reveal the municipal fund's latest figures, saying there was still a media blackout on such information until all the parties involved agree to a series of reforms. A special committee, which includes representatives from common council, civic unions, the city's managerial and professional staff, and retirees, has been meeting regularly for the past few months to come up with a reform package.
You can see how bad the shafting is going to be. The city sets up a committee to examine the issue and only include employees and ex-employees who will be benefiting from the plan. Of course they will inform the taxpayers when they have received a satisfactory agreement.

Let me see. The taxpayer is funding the pension plan. City managers who benefit from the plan sit down with city union members who are on the plan to make a deal?

This is the Spanish word for careful!!!

This whole affair started a couple of years ago when a city councilor, Ferguson uncovered the huge problems with the city pension plan. He spoke out against the situation. Then same team decided that they did not like what the councilor said and decided to sue him. Ferguson wins latest skirmish with pension board.Ferguson ended up mortgaging his house to pay for the lawsuit. As far as I know three years later the case is still before the court. Of course if Ferguson wins the city (taxpayers) will have to ante up for damages.

This situation has provided me with lots of amusement and has been very typical of public sector plans. The only difference here is we have a newspaper not afraid to cover the issues. There is a list of interesting article pertaining to the case. All demonstrating the inherent conflicts of interest that benefit a small group of public employees at a huge expense to taxpayers.
Is the city solicitor in conflict of interest?  
Mayor could land in courtPension 
Two councillors qualifying for public pensions say they're not hypocrites

Pension Bid to draw newspaper into lawsuit turned down

City Manager writes himself juicy deal for retirement perks 

 You can see the twists and turns this case has taken and is still no closer to resolution. But the end is very predictable. Public sector employees aided by their union will hold taxpayers in St John hostage for millions of dollars. 

Bill Tufts -

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