Severance packages and tax-free salaries scrapped by Alberta government

Local MLA Shayne Saskiw says the steps made by the PC government in implementing 13 of the 15 recommendations laid out by retired Supreme Court Justice Jack Major are a step in the right direction, but insists the Wildrose party will fight “tooth and nail” to ensure the proposed defined pension plan for MLAs does not become legislation.

Last week, in conjunction with the first session of Alberta’s 28th legislature, house leader Dave Hancock announced Premier Alison Redford’s government approval of most of the recommendations laid down by Major in his written report on salaries paid to Alberta politicians. Redford had originally pledged to accept every one of Major’s recommendations around MLA pay. However, immediately following the 327-page report’s publication, the premier announced she would not accept the recommendation for an increase in her salary to $335,000 (a raise of $124,000).

 

The topic of MLA salaries and the severance packages handed out to those retired or defeated serving members was prevalent leading up to last month’s election. Following the election, the Canadian Taxpayers’ Foundation (CTF) estimated the severance package would cost taxpayers just under $15 million in payouts to retiring or defeated MLAs.

The Redford government will comply with Major’s recommendation and scrap MLA severance packages. Other items on the chopping block include RRSP funding and any additional money MLAs received for sitting on committees. MLAs will instead be paid a base salary of $134,000, plus up to $67,000 if they take on additional responsibilities.

The tax-free portion of the MLA salary, which was originally implemented to compensate politicians for their out-of-pocket expenses, has also been cut, contrary to Major’s recommendation to keep part of the salary tax-free.

“They’ve been basically double dipping,” Saskiw said, as expense accounts were already in place for existing MLAs to compensate them for purchases on the job. Though he is pleased with the proposed actions by the PCs, the Lac La Biche-St. Paul-Two Hills MLA said his party has issues with Major’s recommendation for a defined benefit pension plan.

“The one concern we do have is they haven’t made a final decision on the defined pension plan,” he said. “What they said is that they’ll put that issue to a committee and the Wildrose will definitely fight tooth and nail to ensure there is no defined pension plan in legislation.”

Saskiw cited the pension plan scrapped by former Premier Ralph Klein in the early ’90s, saying these types of plans create “unfunded liabilities that leave taxpayers on the hook.

“Before Premier Klein eliminated it, there was still, I believe, around $40 million of unfunded liabilities,” he added. “They’re archaic and they’re not used. I don’t think there’s been a defined pension plan in the private sector for over 20 years.”

Instead of the defined pension plan, Saskiw said the Wildrose believe a defined contribution plan, where MLAs get what they put in, would be more suitable.

In his report, Major cites research that a defined benefit pension plan can deliver the same retirement income at 46 per cent lower cost than an individual-defined contribution account.

Other critics of the defined benefit pension plan, including the CTF, recommended the government create an optional group RRSP for MLAs where the government will match dollar-for-dollar contributions from MLAs to a maximum of the RRSP contribution limit.

Aside from the pension debate, Saskiw said the PC government’s decision to accept the majority of Major’s other recommendations “is a step in the right direction and quite consistent with what the Wildrose had proposed with our paying perks policy.”

After MLAs accept the recommendations, the report will be handed over to the Member Services Committee where it will begin implementing changes over the coming months.

Published in the St. Paul Journal on May 29, 2012