The Cardus Daily

When Teachers are Less than Exemplary

The Baby Boomers are retiring. This aging tidal wave sweeping over Canada, along with the whole developed world, is placing massive stress on the financial solvency of governments. As Boomers retire they believe they are in line to receive an unprecedented level of entitlements, including lower taxes, unlimited access to health care and, particularly for those in the public sector, “gold-plated” pensions. But there is a serious problem. The money to fund many of these entitlements does not exist.

This lack of funding is clearly displayed within our public service sector. Over the past five decades the public service sector has, with the complicity of government and powerful unions, increased the value of their benefits (pensions and health care) to levels that are totally unsustainable.

The level of unfunded entitlement liabilities associated with the public service sector across the developed world will bankrupt virtually every government unless benefit levels are slashed and retirement ages are materially increased.

In Ontario one of the most abusive pension programs is the Ontario Teachers Pension Plan (OTPP). While managed by one of the most competent money management teams in the world, the actuarial assumptions and the lack of funding by the teachers themselves is disgraceful. This is particularly infuriating when you consider that our teachers are supposed to be principled leaders and examples for the next generation. But exemplars do not conceive, exploit, and maintain benefit systems that are structures of theft against the very people they are supposed to be helping.

Here are a few facts pertaining to the OTPP. In 1970 there were 10 teachers working for every retiree and the average time that a teacher worked was 27 years. The average teacher at that time enjoyed 20 years of retirement. Over the ensuing four decades these numbers have shifted dramatically. This shift has been obvious and yet little has been done to mitigate a growing liability that is falling more and more on Ontario taxpayers. In 2011 there were only 1.5 teachers working for every retiree, and while the average career that a teacher worked was still 27 years the average retirement period had expanded to 32 years or a 60% increase over 1970. In 2025 the number of workers to retirees is projected to be 1:1. The official unfunded liability in the OTTP as of the end of 2011 was approximately $10 billion, or 2% of Ontario’s GDP. Yet if the plan was converted from a Defined Benefit Plan to a Defined Contribution Plan today, the shortfall would increase to $45 billion or 7% of Ontario’s GDP. This is a more accurate picture of the underfunding of the pension plan, which does not rely on historic rates of return that are highly doubtful within the context of the zero interest rate environment we are facing.

Further, according to Bill Tufts in the Financial Post:

  • Ontario teacher pensions at the highest income levels are worth about 50% more than average teacher salaries around the developed world—not their pensions, their salaries!
  • Last year Ontario taxpayers contributed $1.4 billion to the Teachers’ Fund in regular contributions, plus an additional $525 million in top-up payments to be allocated towards the massive multi-billion shortfall.

Despite all this, the teachers still threaten work stoppage if their benefits are altered.

Ontario is in a dire financial position, but try telling that to teachers or the public service in general. Ontario now has an accumulated debt of over $250 billion (40% of our provincial GDP, and larger than our share of the federal debt) and a current annual deficit of $15 billion. These numbers make us comparable to many of the insolvent European countries, and it is only a matter of time before our borrowing costs increase substantially and place the Ontario economy in great risk.

Where, you ask, are the leaders who will guide us out of this mess? One place you will not find them is amongst our teachers. The members of the OTPP are too preoccupied with lining their own pockets and fighting to maintain their unsustainable “entitlements”. After all, if you can spend 20% more time retired than working and be paid at the top of the pay grid compared with the rest of the world, why give that up? It’s time the teachers were taught a few courses in ethics and honesty: not picking the pockets of others, but working together for common good.



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