Doing the math on city staff costs
I appreciate CUPE Local 417 president Brian Stevens response to my recent letter to the editor outlining my public pension concerns. Hopefully, I can briefly flesh out the figures disputed by Stevens.
By the numbers (rounded down): There are 145,000 employees covered under the LAP plan. The current unfunded liability is $5 billion, or $34,500 per plan member. With 1,400 City of Red Deer employees, that’s $48.3 million. As the pension shortfall has grown since 2012, it’s a safe bet that the city’s share is thus close enough to $50 million to call it that. Like it or not, that is debt and it does not appear on the city’s financial statements.
With 40 per cent of the city’s $305-million operating budget being payroll, that gives us a figure of $87,142 in payroll costs per employee. Without a median figure, and in the absence of how much of that $87,142 is in the form of pension allowances and other benefits, I gave the benefit of the doubt and assumed that the real figure is likely somewhat lower.
When one considers that this figure is substantially higher than the average earnings of those employed in the private, for-profit sector of the economy, that gives cause for concern.
If the average is high because we have a large number of managers, then we have a problem. If the average is high because pay and benefits are considerably higher across the board than what the private sector pays, then we have another problem.
Mr. Stevens makes two points that need to be addressed. He points out, correctly as per the LAPP website, that the average CUPE member retiring on an LAPP pension will receive approximately $15,000 per year.
Again, by the numbers: A 10-year city employee, retiring at 65, would receive $15,000 per year if they earned $75,000 per year, which is below the average payroll cost. A 25-year employee earning $45,000 per year, well below the average, would receive $22,500 per year from their city pension alone, guaranteed for life, and irrespective of any other personal savings.
Again, the concern is that these payouts are backstopped by the personal earnings and savings of those who do not have such protections from market realities, and that the pension amounts are wholly unrealistic compared to real world earnings and savings of those who have been obligated to pay for all of this largesse.
Mr. Stevens also professes the belief that having a well-paid civic workforce helps to drive up the pay and benefits of those who work in the private sector. Unfortunately, he can’t be more wrong. The necessary high taxes that are levied to support the extraordinary wages and benefits paid to public sector workers reduce private sector profits, re-investment, industry growth, and job and income growth. Without all of these things, there are no taxes.
Our pension tax bomb can be defused without raiding the pockets of the taxpaying public, and it can be accomplished without asking those who have yet to retire from the public sector to sacrifice a dime of what they have invested.
The question is, does our city government have the political will to do so?