Pensions and the investment funds that keep them afloat are not immune to economic pandemic pains. However, the federal government is banking on substituting creative math for basic arithmetic to provide civil service pensions with COVID-19 immunity to obscure pension liability realities.
A recent fiscal update from the Parliamentary Budget Officer pointed out that the Canada Pension Plan’s current structure is not sustainable. Sustainability will require either increased contributions or reduced benefits. That is basic arithmetic. But the federal government is not big on basic arithmetic. Politics requires leaving it to the private sector. The public sector needs more leeway to keep taxpayers in the dark and government workers happy. In a global pandemic world in which economies are locked down or operating at half speed and with a Canadian government set to saddle the country with an onerous $1 trillion debt, basic arithmetic can be bleak for taxpayers and painful for politicians. So creative number work is needed. There is no shortage of that creativity in Ottawa, as the C.D. Howe Institute points out in a late November brief. Its authors note that the federal government is proposing a new presentation of its operating budget statements that, in effect, would mask the true costs of its generous defined-benefits pension plan for government employees. The details of that shell game outrun the space allocated here, but, in simple terms, Ottawa’s proposed operating budget document would understate today’s value of the pension benefits federal government employees will receive tomorrow. So accrued pension benefit obligations reported as $149 billion as of March 19 in reality would be closer to $315 billion, according to C.D. Howe estimates. That is an admirable piece of math creativity. But it is not helpful for anyone who needs an accurate reckoning of where the country and its finances are now and where they will be years down the road.