Capital beat column
The province’s largest public sector union is now preparing to take on the Robert Ghiz government over planned changes to the pension plan of civil servants.
Debbie Bovyer, the president of the Union of Public Sector Employees, is vowing the battle will bring back memories of the 7.5 per cent rollback solution implemented by the Catherine Callbeck government. When public sector salaries were unilaterally cut 7.5 per cent as a cost-cutting measure, thousands of civil servants descended on the legislature for almost daily marches and protests.
They are currently holding a series of meetings across the province to mobilize their members.
The Canadian Union of Public Employees is also vowing to fight the changes. The other two unions, the International Union of Operating Engineers and the P.E.I. Teacher’s Federation, have so far said little on the issue and the Finance minister claims they are onside with the changes.
Like many pension plans across the country, the retirement plan for the public service is suffering from unfunded liabilities. There are several reasons why that is happening – the world economic downturn hit pension investments hard.
However, the main problem is demographics – people are retiring earlier and drawing pensions longer. As more and more baby boomers hit retirement age, that problem will only escalate.
Finance Minister Wes Sheridan said the unfunded liability would be $400 million next year alone if nothing was done – a cost that is picked up by taxpayers. Premier Ghiz is arguing, and rightly so, that taxpayers should have to assume that cost on a regular basis.
One of the biggest changes is set to occur in 2017, when the plan will no longer be fully indexed. Currently, payments are increased annually to reflect the increase in the cost of living. After 2017, such increases will only occur if they can be sustained financially by the plan.
Starting next year, the way pension earnings are calculated will also change.
Currently, employees are allowed to use their best three or best five earning years. Starting in January, pensions will be calculated by averaging all of an employee’s total earnings, and then indexing them to account for inflation. As well, the minimum age for drawing a full pension will move from 60 to 62 in 2019.
While the unions mobilize, the premier seemed to be playing some wedge politics, saying he has heard from taxpayers who don’t have a fully indexed pension that are upset at having to foot the bill for losses in the provincial plan.
There is no question that sentiment exists, although it is hard to tell just how widespread it is. If the unions do mobilize, there is unlikely to be any protests at the legislature backing the government action.
That being said, those Islanders who are facing their golden years without a work pension will probably shed no tears for civil servants facing a pension cut.