On May 1 Ontario Finance Minister Charles Sousa will stand in the provincial legislature to deliver this year's budget speech. Imagine if Sousa were to surprise us all and take a different track -- one that sets out a new agenda to return Ontario to its historical position as the economic engine of the country.
Most government sector employees do a fine job and are a critical part of a civilized society. But pension liabilities are ultimately paid for by taxpayers, either through special payments or increased contribution rates. The sheer size of the government sector means it is in everyone's interest to ensure compensation is fair and affordable for all.
By again kicking the existing unfunded pension liabilities down the road, the province has exposed taxpayers to future risks and more bailouts, obvious or hidden. The government has also demonstrated that the theory about political behaviour -- politicians mostly act in their own short-term electoral interest and not in the long-term interest of the public -- is regrettably true more often than not.
The government/private sector pension disparity is a problem. Defined benefit pensions promise enrollees guaranteed benefits at a certain retirement age. But when existing contributions and the returns hoped for do not materialize, taxpayers without such guarantees must bail out government plans because of the promised benefits.
Whether one-time bailouts or multiple hikes in pension contribution rates, tax dollars are still used to top up public sector plans, and this is because plan members are guaranteed a certain level of benefits in retirement. And that's the real problem: taxpayers, most of whom do not have a registered defined benefit plan, end up paying for pension promises to government employees' unions.
Canadians routinely hear about alleged growing divides in Canadian society. But here is one rift that often goes unmentioned: the divide between the pension benefits of public sector employees and everyone else. Such inequality incurs real costs, where ordinary taxpayers pay ever more for above-market, guaranteed pension benefits that ever fewer in the private sector possess.