Finance Minister Doug Horner is enjoying a brief moment of fiscal responsibility. After two years of throwing caution to the wind with the province’s finances, the minister is finally making a few decisions with an eye to long-term financial sustainability.

Horner has decided that the province can no longer wait to tackle its insufficiently funded employee pension plans. Beset by people living longer, a lower ratio of contributors to recipients, and returns on investments that have not met expectations, the government’s employee pension plans are now bleeding money with a $10.8 billion unfunded liability. In short, there is not enough money in these plans to meet their obligations.

In January, a coalition of union bosses unveiled a report claiming that everything was, in fact, just fine. The $10.8 billion unfunded liability will just go away. No need to fix what isn’t broken.

Alberta taxpayers are ill-served by this ‘head-in-the-sand’ strategy.

Union bosses claim that the financial hole in these pension plans will disappear within nine years without any changes at all to contribution rates or payouts. This is difficult to fathom, with government projections showing the unfunded liabilities continuing to increase in the next two years to $11.3 billion.

That’s a 4 per cent, $451 million increase in the province’s pension shortfall over the next two years. This is following a 39 per cent, $4.2 billion growth in the size of these unfunded liabilities since 2007-08. How the union bosses figure this explosion in pension shortfall is a license to do absolutely nothing, we may never know.

The only way the union bosses’ claim could come true is if there is an extraordinary planetary alignment of: above-market investment performance, pensioners not living as long as predicted, and the number of active government employees increasing by 37.5 per cent over the next 25 years.

Union bosses would have a concrete and self-interested reason to push for an ever-expanding bureaucracy in order to ensure that they have enough contributors to their pension plans.

If any of these three fantasies – high investment yields, shorter life expectancy, and an exploding bureaucracy – fail to come true, their own projections will leave a multi-billion dollar hole for someone else to fill.

When that happens, Mr. and Mrs. Taxpayer will have to continue to bail them out.

Whichever happens in 10 to 15 years, today’s government union bosses will not be the ones to live with the consequences. They will be lauded for preserving the pension plans as they are today, but they won’t be there to suffer the consequences when the pension plans no longer have enough money to meet their obligations.

That’s why reforms that put these plans on a solid financial footing are in the interests of taxpayers.

Taxpayers are already bailing out some of Alberta’s government pension plans. In 2007, taxpayers were saddled with an additional $3 billion debt, thanks to a massive government bailout of the teachers’ pension plan. And just this past autumn, Horner quietly announced that taxpayer contributions to the pensions of senior bureaucrats would increase from 19 per cent of salary, to 22 per cent. This, when taxpayers were already contributing 63 cents of every dollar in the plan, with senior bureaucrats contributing just 34 cents.

For a bureaucrat making $150,000 a year, this change is costing taxpayers an extra $4,065 annually. For this one bureaucrat, taxpayers will be contributing a total of $32,755 a year towards their pension each year. This while the average Canadian only manages to save $3,544 in RRSPs every year. 

Most government employees contribute to their pensions on a 50-50 shared basis with taxpayers, but it has not been sufficient to keep the plans from running up a $10.8 billion unfunded liability. 

While the pension plan for senior bureaucrats had a hole of $199 million to plug, the province’s overall unfunded pension liabilities are a staggering 54 times larger than that.

There just isn’t enough money to do nothing as the union bosses would like you to believe.