Pension changes pose fairness problem for teachers' union
Province to contribute extra $21 million to NSTU pension plan
The biggest unaddressed issue in our province's politics is fairness between generations, and Thursday’s announcement about changes to the teachers’ pension plan is a fine example.
Thursday’s announcement directly impacts tens of thousands of Nova Scotia families — the plan currently has more than 31,000 members — and involves hundreds of millions of dollars.
But it will almost certainly get less attention than the Bluenose II rebuild, which is now $4-million over budget, a pittance by pension standards. It will get less ink than Bev Oda’s $16 glass of orange juice in a London hotel or David Dingwall’s $1.29 pack of chewing gum.
That’s because pension issues are big, and complicated, and long-term. It’s hard to get your head around billions of dollars.
You might think that the big, long-term issues would get the most attention, but in politics the opposite is true.
The most complex bills got the least debate in the legislature.
The political culture is based on simplicity to the point of simple-mindedness, and debates over long-term issues like pensions, public debt, and the environment don’t fit that culture. That’s also why long-term follow-through on the Ivany Commission report will be such a challenge.
Government news releases often wax poetic, and at length, about the smallest of government actions. Thursday’s news release announcing the pension changes was comparatively terse.
No background documents were offered to explain what options were considered. There was a link to the plan administrator’s website, which contained no new information.
New generation pays for older generation
The essence of Thursday’s announcement is that working teachers will pay more into the pension plan, and taxpayers will match their increased contributions.
What is not said, anywhere, is that this means one generation will make all the payments, and another generation will get all the benefits. It is a straight transfer of wealth from today’s teachers (and taxpayers) to yesterday’s teachers.
Maybe that’s the right thing to do.
We all had favourite teachers, and some of us were lucky enough to have life-changing teachers. They’re retired now, and they deserve the security of a decent income in their retirement.
No argument there.
But what about today’s teachers? Some of them are life-changers too. They’re already paying enough to fund their own pension.
Now they’re being asked to fund the last generation’s pensions, too.
Today’s teachers get nothing new in exchange for their increased contributions. They benefit from a more secure pension plan, but so are retirees who are making no additional contribution.
To make things even more complicated, not all retirees will benefit equally from the changes.
A previous pension fix in 2005 created two classes of retirees. Those who retired before Aug. 1, 2006, are guaranteed close to full inflation indexing. Those who retired on or after that date get no inflation indexing at all, unless the plan is 90 per cent funded. They have no prospect of an increase for another decade at least.
The government and the teachers’ union are now holding their breath, hoping that Thursday’s changes attract no attention or controversy.
Teachers' union in tough spot
The government, led by finance minister Diana Whalen, hopes that there’s no political backlash from taxpayers or working teachers. She’ll be worried, too, about post-2006 retirees, who were hoping for more immediate relief from the deterioration in their incomes.
It’s the teachers’ union that is in the toughest spot.
Along with the provincial government, they are the pension plan’s co-sponsors, and they appoint half the trustees.
The union’s dilemma is that they represent, at least in some sense, all three groups — working teachers, pre-2006 retirees, post-2006 retirees — and those groups do not have the same interests.
As we saw in 2005, the competing interests of different groups of teachers can create significant internal strife. There was bitter debate. Working teachers first voted to reject the changes, and the union had to rework the proposal and bring it back for another vote.
It was a painful episode in the union’s history.
The union would love to avoid a repeat of that painful history.
The union certainly won’t hold a vote this time if it doesn’t have to. But a vote would only bring to the surface, and make explicit, a struggle that’s already going on beneath the surface — the struggle for fairness between generations.