To some in New Brunswick, he will appear as a beacon of enlightenment. To others, he will seem no more inspiring than any other pragmatist. But Ernie MacKinnon’s real distinction may be that he is the first resident of this province to openly repudiate his private interests in favour of the broader public’s.
In a long, though articulate, commentary, along the “ask-not-what-your-country- can-do-for-you” vein, published by the Telegraph-Journal this week, Mr. MacKinnon – a former Deputy Minister and first CEO of the New Brunswick Investment Management Corporation – explains why he has changed his mind about pension reform in the province. It wasn’t an easy decision, he explains. But it was a necessary one.
“When the issue of major reforms to the pension regime for public servants first burst into the public’s consciousness. . .my initial response was anger,” he writes.
Then, “At some point, the reality of what is coming forced me to look more objectively at the facts and important trends. . .After much research, listening, and thought, I now see the value and the urgency of many – but not all – of the proposed pension reforms.”
It is an astonishing admission, as rare as snow in July, in a province that has become inured to bad economic news, yet wedded to its various and costly entitlements. And it is not calculated to win him any friends over at the New Brunswick Pension Coalition, for which he has consulted, and which is planning to haul the government into court over its decision to move to a shared-risk approach to managing the retirement savings of former civil servants.
Still, as Mr. MacKinnon states, “Make no mistake, if I thought it were possible, I too would insist to have our pension contract honoured. However, I have reached the conclusion that if measures are not taken today and should potential risks become reality down the road, the implications for pensioners will be even worse.”
The former bureaucrat’s comments point to the grim truth about public pensions just about everywhere in Canada. They were crafted at a time in the nation’s history when the future looked much brighter than it does today. The pay-it-forward model – in which the existing generation of public workers essentially contributes to the retirement well being of future ones as it relies on the beneficence of past ones – is, for all practical purposes, broken.
In New Brunswick – where the annual deficit is nudging $500 million on a structural debt of nearly $12 billion – the unfunded liability in public pensions is perilously large. Indeed, the “flaws” in the plan, Mr. MacKinnon observes, are clear to see. They “arise from increases in member lifespans, a spate of costly early retirement schemes and sometimes inadequate sponsor and member contributions.”
And while returns over the past few years have been higher than anticipated, the fund “still has a substantial deficit because the liability side of things has been deteriorating faster.”
Mr. MacKinnon doesn’t let the government off the hook entirely. He wants elected officials to mitigate worries that base benefits will be cut. He also wants them to “make provisions” to soften the blow of cost of living adjustments in the initial years. Meanwhile, he insists that those who manage the fund truly know their business. “Thirdly,” he writes, politicians “must ensure, in legislation, that pension funds are managed here in the province, to the greatest degree possible, by our own people at NBIMC (New Brunswick Investment Management Corp.) to minimize costs and ensure control of risks.”
All of which is eminently reasonable. But there’s more to this.
Mr. MacKinnon’s essay addresses questions that extend far beyond the pension debate. He reminds us that New Brunswick is, in fact, a “village” and that its citizens owe one another an obligation of mutual indulgence – that “we must all contribute to the resolution of the challenging issues we face today.”
Beacon or pragmatist?
Let us hope that Mr. MacKinnon is, at least, a trend-setter.