City staff too costly, pension payout too rich
Regarding the current budget deliberations, some of the details and commentary made by council members are illustrative of the ongoing and increasing disconnect between those of us who live out here in the land of paying taxes and those who live and work in the world of spending taxes.
Doing the quick math, with a staff of 1,400 and a payroll of $120 million, this means we’re paying an average of $85,000 per year per city employee.
This is a fairly interesting figure, as it puts the average city employee at more than $30,000 per year above the average Alberta individual income. The figure of $85,000 is likely inflated due to the fact that it includes payroll taxes and benefits not calculated into average reported earnings. We can safely put that number in the region of $10,000 a year, but it still leaves us with average pay per employee at about $2,000 per month more than the average person who is paying the tab.
Because we don’t know if that figure of $85,000 includes pension costs, we have to set that aside for now.
We’re told that city management is proposing an overall payroll increase of $3.7 million, or an average of $2,600 per employee, assuming staffing levels stay current or close to current. As quoted in the Jan. 10 Advocate, Coun. Dianne Wyntjes is quoted as defending both the pay levels and the pay increase in the name of “high standards.” There are a few problems with Wyntjes’s statements that need to be addressed.
Even when we consider that a good number of city employees are credentialed professionals, we must balance that against the fact that there are a substantial number of city employees who aren’t. I find it very difficult indeed to believe that the city staff is so heavily weighted towards professionals that it would skew the pay levels to almost 50 per cent more than the provincial average.
This ties into my second point regarding the payroll increase. If we assume the bulk of that comes in the form of pay and benefit increases, and we safely can, we again run into the disconnect.
I continually find that only public sector workers expect increases in pay on an annual basis. In the private sector that I have worked in for 35 years, there is an expectation that beyond a certain level, in order for anyone to increase his or her income, that individual has to increase their economic contribution to the entity that employs them. Seniority and cost-of-living-adjustments simply don’t exist beyond earnings and responsibility levels considerably lower than $75,000 to $85,000 per year.
At this point, we have to re-address pension costs. The City of Red Deer has a current pension shortfall of about $50 million. According to the Local Authorities Pension Plan website, this number is increasing. When considering that, bear in mind that Detroit, as well as San Bernardino and Stockton, Calif., were all bankrupted by unfunded pension liabilities.
Given the numbers we are privy to, the average city employee — provided they have 35 years of service in — can expect a retirement income of over $50,000 per year, starting well before the average retirement age enjoyed by those who employ them.
Using rounded numbers, here is the hard reality of that: Assuming a retirement age of 58 (not uncommon in the public sector) and a life expectancy of 85, there has to be a cash pool of more than $1.2 million for every employee expecting $54,000 in retirement income. To get to there requires average contributions of $12,000 to $15,000 for the entire 35 years leading up to retirement.
Even counting those who have above-average incomes and defined contribution pension plans, you will have to look far and wide to find many Albertans earning $75,000 to $85,000 per year who are managing to get $13,000 set aside every year for retirement, let alone for a 30-year stretch.
It’s important to note that, unlike the commercial world, the City of Red Deer raises most of its funds via non-consensual transactions. Given that, it’s vital that council provide far more detailed numbers concerning pay and pension obligations that it currently has contracted. We do have a right to know.