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Pensions and prisons need attention now: auditor general

|Written By Jennifer Brown

There was lots of legal fodder in the spring report from the federal auditor general as it raised questions about the country’s overcrowded prisons and the state of pensions for public servants.

The report notes that a year ago, the Correctional Service Canada had more offenders in custody than single cells available, a situation that resulted in problematic “double-bunking” in some prisons.

Although the federal government is building more prison cells in 2014, the new report says the prison system will be dealing with overcrowding again in a few years because of a lack of understanding of long-term trends.

Double-bunking will need to continue even after current prison expansion plans with the overcrowding being especially significant in Ontario and the Prairie provinces.

The Correctional Service Canada has identified “serious implications” from double-bunking, including increased levels of violence.

The report also recommends the federal government assess the long-term sustainability of pension plans for public servants, the Royal Canadian Mounted Police, and the Canadian Forces.

Auditor general Michael Ferguson warned the current state of public sector pensions could pose a “significant risk” with liabilities rising to $152 billion in 2012-13. Over the last three years, pension funds experienced funding deficits totalling $6.5 billion. Special payments were necessary to cover the gap. For 2013, special payments totalled $741 million. Over the last two years, these payments equaled about $1 billion.

In 2012-13, pensions added $9.2 billion to the federal government’s public debt charges.

The auditor’s report on public sector pension plans suggests there has been some activity by the Treasury Board Secretariat going on behind the scenes to look at other pension design options such as defined-contribution schemes, hybrid plans, and a boost to the age of retirement to 65.

“It’s clear there has been some investigation going on around options but it’s not clear from the report exactly what that is,” says Jana Steele, partner with Osler Hoskin & Harcourt LLP’s pension and benefits group.

“They’re probably looking at conversion to [defined-contribution] or other more sustainable plan design options such as shared risk as implemented in New Brunswick. I’m assuming those are the types of things they would have been looking at on the plan design front.”

Longevity, demographics, and interest rates are all factors affecting the sustainability of the plan, says Steele. With pension plans, the strategy should always be about identifying and managing the risks.

“When you look at New Brunswick and the new federal proposal for private sector plans, one of the things they talk about is risk management procedures — so having things in the plan to address risks proactively,” she says.

The report notes the importance of looking at intergenerational equity when it comes to design changes. “We also believe that preserving intergenerational fairness is an important consideration when managing pension plans and assessing their sustainability. This would prevent the situation where one generation is subsidizing the other.”

  • Annoyed

    Rudy Haugeneder
    Greece showed the huge fiscal danger of paying civil servants too much pension for the often generally useless work they performed -- something politicians and federal mandarins unthinkingly set up, and the overwhelmingly large similarly unfunded pension debt the provinces, even many cities, owe their civil servants.
    These pensions must be rolled back and the full benefit packages retired civil servants severely slashed rather than having ordinary taxpayers who haven't worked for governments are and will pay the shot through higher taxes which mean people employed in the private sector -- the vast majority of Canadians -- and their children will never be able to enjoy the honest fruits of their labor.
    As for building more prisons that do little more than serve as crime training institutions, there has to be a better way to help people who have fallen afoul of the law, especially those who are not drug addicts and have not committed violent infractions.
  • CSC always fails

    Chris Vogel
    CSC seems incapable of doing anything right. The worst part, however, is their failure to implement the very strong requirements in their Act, policies and procedures, and Commissioner's Directives to rehabilitate prisoners. They pretend, in their Annual Reports, to be doing this but the Reports of the Office of the Correctional Investigator show these claims to be ridiculous fabrications. Part of the problem is because CSC management really can't be bothered, and partly because CSC staff are neither competent nor willing to implement the prescribed programs. Consequently, recidivism rates are high and more beds are needed every year. The silly and ineffective "tough-on-crime" legislation recently enacted doesn't help, of course.

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