At the end of March 2020, Newfoundland and Labrador had $4.89 billion in unfunded pension liabilities, including unfunded liability and promissory notes, according to a report released last week by the premier’s economic recovery team.
Added to the province’s $3.29 billion in unfunded liability related to employee benefits, this results in financial exposure of $8.18 billion — about 18 per cent of Newfoundland and Labrador’s total financial exposure of $44.5 billion.
The report points out some of the challenges the province faces in addressing those unfunded liabilities — alongside Canada’s highest provincial deficit and net debt — including that Newfoundland and Labrador has Canada’s oldest population, highest unemployment and highest per capita health-care spending. The report warns: “If debt levels get too high, Newfoundland and Labrador is at risk of not being able to meet its financial commitments such as paying salaries, operating hospitals, offering other public services or making legally required pension contributions.”
In response to the report, Chuck Bruce, chief executive officer of Provident10, which oversees Newfoundland and Labrador’s public service pension plan’s investment management and administration, noted in an email to Benefits Canada that the plan itself is highly diversified and, for the first time in its history, fully funded.
“While we can’t predict whether government will consider changes to the plan, under the current agreement any change would be the decision of the government of Newfoundland and Labrador and the five unions representing plan members,” he said.
“The suggested actions outlined in the report are simply recommendations and will require significant consultation with stakeholders. I look forward to engaging in those consultations over the coming weeks and months.”
The report’s roadmap toward a more sustainable financial footing by 2026–27 includes reimagining government and governance, transitioning to a green economy, refocusing the social compact and realizing a financial improvement plan.
Regarding pensions, the report recommended adopting a mandatory reporting framework that discloses the cost of individual public service pension plans to provincial government employees, making public provincial government employee wages, salaries and pensions — if they total more than $80,000 annually — and introducing legislation to prevent double-dipping by members of the house of assembly into public service and MHA pensions.
“We have proposed a detailed, multi-year financial improvement plan,” said Moya Greene, PERT’s chairperson, in a statement accompanying the release of the report. “It’s a balanced and measured approach, a combination of expenditure reduction, revenue increase and better use of our assets such that over the next five years, we will be out of this perilous situation.”