Chicago is broke!

 

Like most governments around North America, the State of Illinois is staggering under the weight of its pension obligations.

Public servants baby boomers have made extravagant pension promises to themselves. Now that these boomers are close to retiring, the taxpayer and future workers are finding out the size of the tab. It is not pretty.

A large part of the problem is the gap between what public sector employees have offered themselves and what the private sector will get. Now in Illinois the States largest business organization, Commercial Club of Chicago, has started a campaign to control the costs of these plans.

Check out the Web Site and watch for more future news from this group. Illinois is broke.com 

Lets hope we see more of these groups help to share the news.
Canadian Taxpayers Federation  
Canadian Federation of Independent Business
New Start Nova Scotia - Pensions In Crisis
Pension Tsunami
The Free Enterprise Nation

Obscene taxpayer and pension abuse in Ottawa

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The CBC reported on an issue in Ottawa where the city auditor gave himself a very juicy pension deal courtesy of the taxpayers of Ottawa.

The auditor was leaving employment of the federal government. Unfortunately for taxpayers he had not yet qualified for his gold-plated pension with the feds. He appeared to be a few years and $100,000 short.

Some of the facts are:

• He had a verbal agreement with Kirkpatrick (city manager) that he could transfer his federal pension to Ontario’s municipal employees’ group pension plan.  
• He had the opportunity to buy back federal pension time. For an expenditure of $20,256, he was able to boost his federal transfer amount by $175,536
• Ask the corporate-services committee if it would cover the money he had paid out to enhance his pension. Because such a payment would be a taxable benefit, the city was asked to boost the amount to just under $104,000 to cover the taxes Lalonde would have to pay.
• Lalonde worked for the federal government and then the City of Gatineau before getting the Ottawa auditor's position in September 2004 
• The auditor now has full pension credits from three different employers and one taxpayer

        Auditor got $104,000 boost to city pension 
        Pension defence tarnishes auditor

The truly obscene thing about this deal is not the $ 104,000 "bonus" he took from City Hall or the $208,000 that Ottawa pays him every year; it is the fact that he transfers pension credits from one employer to the next, and keeps his full pension.

He appears to be fully qualified for his City of Ottawa pension. At his current salary of $208,000 he will receive a 70% of salary pension for life. This is worth $ 145,000 per year, paid for life and indexed to go up every year. All courtesy of the Ottawa taxpayers.

The fair-value of this pension is close to $ 2.3 Million.

This is the same deal that earlier in the year the President of the University of Calgary received.
University Faculty calls president's pension 'obscene'

Part of the tragedy of this story is that the position of auditor is one that most government organizations should better manage and implement. However, if the auditor himself has no credibility the position loses all of its potency.

Here is an example of the types of issues the auditor can address: 
Sick leave, transit strike cost Ottawa millions 
City auditor general's report

Here is what happens when he has no credibility:
Auditor has no authority to question taxpayer funded party

This is outrageous and Ottawa taxpayers should stand-up against this type of abuse. 

To whom is Canada's Debt Owed? CTF Report

A recent report from the Canadian Taxpayers Federation shows that a large portion of Canada's federal debt is owed to the civil servants. It is owed for the future promise on the pension obligations of the federal government. Canadian Taxpayers Federation

The statistics from Statscan shows that Canadians owe $137 Billion to the pensions of federal employees. This is in addition to the billions already pumped into these pension plans.At the end of 2008 the PSP already had almost $40 Billion of taxpayers money.

The amount of the deficit is actually a lot larger than the $137 Billion that Statscan reports. The CD Howe Institute shows the actual amount is closer to $200 Billion. The Startling Fair-Value Cost of Federal. Government Pensions - PDF .

The CD Howe report comes up short on the obligations for Canadians when it is considered that federal employment only accounts for 15% of total Canadian government employment. If we consider that 15% of government pensions are short almost $200 Billion. The total liability to taxpayers is in excess of $1.3 Trillion.

This is in addition to the $555 Billion that Canadians have already pumped into public sector pension plans.

In Other Notes 
The average Canadian is earning about $41,000 per year. Canada's average wage

A report from BC shows that paramedics in Ontario earn in excess of $100,000  in total compensation. Considering their base salary of $88,000 per year, pensions for these employees will be valued around
$61,600 per year. They are guaranteed for life, indexed to increase every year and go to a surviving spouse for life.
Report on Paramedic Compensation - PDF

Pension report from BC's Finance Minister

The Globe and Mail pension specialist, Janet McFarland, covered a report released from the BC government. The report shares their vision for the future of pensions in Canada.

Middle-income retirees face pinch

BC Pensions Report

This ia an excellent article on an interesting topic.

The CPP as it stands is designed to provide 25% of income up to the YMPE limit of $47,200. So any earners over the limit have topped out on CPP. This year the earnings will be $11,800.
2010 CPP contribution numbers

The BC report points out that CPP and OAS programs combined are designed to provide 40% of the YMPE income level. This is seen as a suitable income level for Canadian taxpayers to have for retirement. However, the BC Finance Minister and the rest of the MLA's in BC feel it is necessary to have a 70% replacement pension for themselves. They like to include the rest of the public sector employees at 70% as well. All with no limits or YMPE.

One rule for taxpayers and another for public servants sucking up taxpayer money.
Gold-plated Pensions for MLS'a in BC

This compares with public sector pensions that earn 70% of final salary. The income average at the federal level is $75,000. (the last salary survey was based on 2002/3 numbers, the average annual increase has been about 7% since then.) So the pensions here are at about $52,500 including CPP.
Treasury Board of Canada Treasury Board Compensation Report

Canada's average wage is at around $40,000 per year. So most Canadians are covered under the CPP plan. As the article points out there is a shortfall for the group between $30K and $100K. This group pays about 42% of disposable income into taxes. This does not leave very much to save into retirement plans.

The unions in Canada envision a program to boost CPP to 50% up to $100k. In the UK they have begun to implement this type of a program. They call it the NEST plan. All employees and employers will be required to contribute into the supplementary retirement plan.    
UK-wide pension fund to be called NEST
 
Lets move the public sector and private sector to the same plan, level the playing field so to speak and most Canadians will live comfortably in retirement

Public Sector Prepares All Out Battle with Taxpayers on Pensions

 

The public sector is preparing for battle over the issue of protecting their taxpayer funded pensions. It will not be pretty and the taxpayer does not have much chance of winning.

The war teams of the public sector unions are meeting in Ottawa to develop the battle plan. Eighteen of Canada's public sector unions are getting together as Federal civil servant unions gird for battle

It is urgent for the public sector unions to protect their pensions as Canadians begin to realize that Federal PS pensions are a $58B debt time bomb. Especially as Taxpayers are asked to cover rising pension costs for government employees as noted in this Business Week article. This article has US references but still relevant for Canada, I put this in here as Leo from Pension Pulse is quoted.

In Ottawa the current government is afraid of the fight and has been trying to avoid it at all costs. In an attempt to diffuse the issue they claimed that retirement security was not a problem for Canadians. Don't panic on pensions.

Despite federal government denials of pensions being a problem in Canada, public sector unions can see trouble brewing. CUPE Video on Issue

You can get a preview of the fighters who will be in the ring making this similar to a last man standing WWF fighting match. Heading Towards a Pension Summit. Indeed there are billions of dollars of your money at stake!!!

The unions had a get together in the fall of 2009. Here is a series of videos that offers a preview of issues that they will be bringing forth.  

Pension Video Series 

Ontario Teacher Federation  

Canadian Labour Congress  

CLC, pension crisis - Part 1

CLC, pension crisis - Part II

Public pensions part of the problem

One of the leaders in the discussion on pensions in Canada is Catherine Swift. She is president and CEO, Canadian Federation of Independent Business (CFIB).
 
Today her letter to the editor was printed in the National Post. She is right on the money when she says Public Pensions Part of the Problem

 Ontario NDP Leader Andrea Horwath’s claim that pension plans like OMERS, the Ontario Teacher’s Pension Plan and HOOPP work well once again promotes the incorrect notion that if only we could have such wonderful types of plans to offer other Canadians all our problems would be solved. She neglects to mention that there is one and only one reason these plans work — because they are endlessly supported by massive and growing amounts of private sector taxpayer dollars. 

These are dollars that those private sector taxpayers do not have to put away for their own retirement. Public sector plans like OMERS and the OTPP are part of the problem, not part of the solution. These plans are invested in exactly the same stock and bond markets as are RRSPs and other plans.

For example, the OTPP lost 23% in the recent market meltdown — pretty much the same as what everyone else lost.  Yet did benefits get affected one iota? Of course not, as generous taxpayers are expected to pick up the slack like they always have.

There are indeed serious problems facing private sector retirees that need to be addressed, and one of the first steps must be cutting back on the private sector dollars going to rich public sector plans, and increasing public sector retirement ages (currently much younger than anyone else in the economy) so that private sector taxpayers are left with a few bucks to put away for their own modest retirements. There is no financial or social justification for our two-tiered, reverse-Robin Hood pension system.

The facts that she presents here were backed up in a report produced by the CFIB called the Pension Predicament  This report was on the first to recognize that the gap between public sector pensions and taxpayers retirement plans is unfair, unjustified and unsustainable. 

Retirement crisis overblown???

An interesting article today from one of Canada's foremost pension expert was released in Advisor.ca

The article cited that

Despite dire warnings in the press that Canada's pension plans are set to implode, one of the country's most respected actuaries says the problem isn't really that bad. In fact, Canadians are in an enviable position compared to most other countries.

When we see the news today  about the earthquake in Haiti we realize how truly blessed we are to live in a country like Canada. It is true that

"We have virtually no poverty among senior citizens in Canada — virtually none; a big change from 40 years ago when we started to develop the (retirement) system that we now have."

The contention of this blog is that all Canadians need to share fairly in our countries wealth. There should not be a divide between the haves and the haves nots. Especially when the haves are funded at the expense of the have nots.

Statscan showed that in 2008 Canadians contributed a total of $ 34.1 billion into their Registered Retirement Savings Plans (RRSP). These are the plans that cover those workers who do not participate in work sponsored pension plans. There are a total of around 18.4 million workers in Canada and only 5.9 million belong to pension plans. These RRSP contributions include those of the 68% of workers not in a pension plan, or about 12.5 million workers. Nationally, the median RRSP contribution was $2,780.

These RRSP contributions contrast with those contributions made into Canada's pension funds. Statscan estimates these pension contributions to be about  $ 37.2 Billion in 2009. This is for the other 5.9 million Canadian workers who are in a pensions plan. Of these workers almost half are public sector employees. This makes for an average contribution of $ 6271.

A significant portion of contributions were funded by taxpayers for the benefit of a public sector on defined benefit pension.

In the Eye of the Pension Storm

The eye of the pension storm is focused in Southern California.

ABC News came out with this report on Pension Friction in Contra Coast County. Contra Coast is a bedroom community in the San Francisco - Oakland area. Although the report focused on an issue called "spiking"" it is really just the tip of a much larger fight that has been brewing for some time and threatens to become much larger.

Last summer we saw the Toronto strike focus on an issue of accrued sick time. The vacation time issue in this news report is based on the the same concept, a lump sum payout at retirement. Because public sector pensions are based on final salary, these terminal payments go towards the calculation of the worker's pension. The result is known as pension spiking or boosting.  

The issue of spiking is really just the current bulls eye on a fight over public sector pensions.

In the report we see Marcia Fritz interviewed. She is the President of the taxpayers advocate group called California Pension Reform. They are demanding the reform of public sector pensions in California.

One of the accomplishments of California Pension Reform has been to bring to light a serious issue that has been hidden and undisclosed to taxpayers for a long time. They have been responsible for the push in California to disclose $100,000 pensions in the public sector. Their work has been aided by the Pension Tsunami.

Pensions are an issue that will steamroll over every level of government in North America. Public pensions are the same in design and cost for workers from the City of Toronto, to California State to federal workers in Ottawa. They are surprisingly consistent across cites, states and provinces.

Unfortunately too many politicians and taxpayers are unaware of the looming disaster. Arnold Schwarzenegger calls them a locomotive.

"We are about to get run over by a locomotive and we can see the lights coming at us. We can see the lights coming"

Pension reform is an issue that is very controversial. These entitlements will be  furiously by the public sector unions regardless of the costs to taxpayers.

Conversations Between Bankers and Taxpayers

Stephen Gray wrote about the the feudal system the gap between the corporate elites and taxpayers. He captured a conversation between a banker and a taxpayer. It covers the essence of the problem very well.

The Writings of Stephen J. Gray - Blog

Earlier this year the Globe and Mail quoted me:

He calls it our "Modern Feudal System."
A system where a few have a lot and the majority have - or will have - very little indeed." -

Church and King have been replaced by Government and Big Business," says the Hamilton-based pension specialist with WB Benefit Solutions. "In the feudal age, the church and nobility always wrestled for the purse of those trapped in the caste system. But the poor serf still paid with everything he grew or could make.

 The Globe article went on to talk about the gap between public pensions and private pensions. Stephen covers the other side.

 

Average RRSP Holdings of Canadians

Statscan produced a report called the Wealth of Canadians (PDF). The report shows the level of preparedness of Canadians for retirement. It is based on the amount of retirement savings Canadians have put aside for their golden years.

This is a list of confusing facts and figures compiled on retirement savings in Canada. Feel free to analyze and create a create a comprehensive report of what all these numbers mean. The bottom line is Canadians have manged to save about $37,000 into their personal retirement accounts while contributing into and creating public sector employee plans worth and average of $163,000 per employee.

It appears that Canadian taxpayers are in deep doo-doo.  


RRSP Average Holdings for Canadians( for the 58% of Canadians who have them)
Age 35 - $22,500
Age 35-45 - $49,100
Age 45-54 - $ 90,300
Age 55-64 - $124,500
Age 65 and Older - $ 108,200

All age average of employer funded pension assets - $ 160,000


Based on the Average Wages of Canadians it appears most Canadians are woefully prepare for retirement. The average working wage in Canada is slightly over $40,000 per year.

Total value of employer pension plans $826.5 billion, loss of $128 Billion from a year previous.
Total value of public sector pension funds $ 555 Billion

Annual contributions into pension plans in Canada $ 38.8 Billion
Considering that public sector pensions hold 67% of all pension funds, if the contributions levels are the same Canadian taxpayers funded about $25Billion into public sector pension funds last year.

Public sector pensions make up over 65% all employer-sponsored pension assets. 
Public sector workers make up 20% of the workforce

Total value of Canada's infrastructure - $286.2 billion
Including highways and roads, bridges and overpasses, water supply systems, wastewater treatment facilities and sanitary and storm sewers
Taxpayers have funded a total of $ 269 Billion more into public sector employee pension plans than they have contributed into Canada's infrastructure

Average annual contribution into public sector pension plans $ 7,269 per employee. Based on estimated annual contributions of $ 25 Billion for 3.4 million public sector employees.  
Average Canadian contribution into RRSP's - $2,650

Assets in public sector pension plans in 1990 - $111 Billion
Assets in public sector pension plans in 2008 - $555.7 billion
Growth in assets in public sector plans - 500%
Percentage of workforce - 20%
Average per worker $163,000

Assets in individual registered savings plans in 1990 - $157 billion 
Assets in individual registered savings plans in 2008 - $631 billion
Growth in assets - 400%
Percentage of workforce 80%
Average per worker $ 37,000

I hope my analysis of these numbers is accurate. Please let me know if you see anything out of place.