City council deserves a pension — just one that's not so lucrative
This past September, the Canadian Taxpayers Federation began taking a closer look into city council’s golden pension entitlements and called for reform.
Given some of the public commentary out there, and comments by some council members, it’s important for the public to know the facts.
First, let’s be clear. We believe council members should be provided with a reasonable compensation package, or the city won’t attract very good candidates. The problem is that council’s pension is costing taxpayers a small fortune.
Fraser Institute research (using Statistics Canada data) shows that 76 per cent of Albertans working outside government don’t have a workplace pension. Nothing.
We’re talking about your dental hygienist, the owner of a local shoe repair shop, the mechanic at your garage, the owner of your local florist – everyday Albertans from all walks of life.
Most Albertans save up whatever we can each year and hope our investments don’t experience large losses in the markets – and if they do, we either have to make due with less or work longer to rebuild our savings.
Council’s pension situation is completely different.
For starters, there are two council pension plans. All council members are eligible to join the first pension plan, while only the mayor qualifies for the additional plan (it tops up pension benefits above what the Canada Revenue Agency allows the main council pension plan to provide).
The two plans are set up to provide council members with a guaranteed pension for the rest of their lives, no matter how long they live.
If a newly elected councillor served for 12 years, we estimate that he or she would earn an annual pension that starts off at about $34,000 per year (rising annually at two-thirds the inflation rate). This benefit is on top of what council members earn through the Canada Pension Plan.
From 2007 to 2016 (the past 10 years for which data is available), taxpayers had to pay $6.1 million for council’s pension, while council members themselves only paid $1.2 million. That means every time a council member puts in a dollar, the city put in over five tax dollars.
Some councillors have suggested council’s pension formula only requires the city to put in about two dollars for every one dollar put in by council.
That’s true, but we can’t ignore the fact that council’s pension has run into trouble a couple of times within the past decade and required additional taxpayer bailouts. In 2010 alone, the city spent a total of $1.5 million on council’s main pension plan, while council put in just $92,000. Unless the public convinces council to change the structure of their pension plan, you can bet there will be even more large deposits in the future.
Interesting enough, a 2013 City of Edmonton committee looked at the type of plan Calgary’s city council has (a defined benefit plan) and balked, noting they didn’t feel it was “appropriate” for elected officials.
On an encouraging note, newly elected Calgary city councillor Jeromy Farkas refused to accept council’s costly pension, noting he felt it is too generous. Further, councillors Sean Chu, George Chahal, Jeff Davison and Shane Keating all agreed during the election to reform council’s pension.
However, it was disappointing to hear veteran Coun. Evan Woolley suggest council’s pension was modest and that Farkas wasn’t “interested in planning for his future.”
To be clear, our concern in raising this issue is not to point fingers at the current council – most of them never voted on implementing these pension benefits decades ago.
We will, however, point fingers at those on council who are briefed on the facts, but still refuse to downsize their entitlements to a more reasonable level. Try asking your councillor where he or she stands on the issue.
Colin Craig is the Interim Alberta Director for the Canadian Taxpayers Federation
This column was published by the Calgary Herald on November 22, 2017