AG raises concerns about pensions, oil revenue

James
James McLeod
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Auditor General Terry Paddon released his analysis of the province’s finances Friday morning, and raised concerns about the government’s pension situation and overall fiscal position.

 

The financial analysis discusses the volatility of oil production and prices, and how in the past decade, the government has become more and more reliant on offshore royalties as a major source of revenue.

Paddon said the government should give serious thought to the risks associated with this strategy.

“Oil royalties are significant to the provincial treasury and they are inherently difficult to forecast,” he wrote. “Therefore, government should consider this risk in its short and long-term expenditure planning.”

At the same time, Paddon pointed out that the amount of money the government is spending has grown massively in the past decade.

“Since 2004, expenses have grown from $5.1 billion to $7.7 billion, an increase of $2.6 billion, or 51 per cent,” he wrote.

In the Department of Health, the government is spending a billion dollars more per year than it did in 2004.

The report also raises the alarm about the province’s aging population, which will end up costing the government much, much more in health-care spending in the coming decades.

By 2026, Paddon wrote, fully one third of the population is forecast to be over 60 years old.

“Health-care spending is highly correlated to the age of the population,” he wrote. “As the population ages, there will be an increase in the prevalence of chronic diseases such as heart disease, cancer, diabetes and arthritis, which will result in higher demands on health care in the future.”

Friday’s report also looked at the pension and post-retirement benefits situation for the province, and things don’t look good.

Despite plowing $3.5 billion in special payments into the pension funds in the past decade, the unfunded pension liability is higher today than ever before.

Paddon said the gap is widening between the pension fund in the bank and the future benefits owed to retirees because the investments in the market haven’t been getting a good return. But also, because people are living longer and there are more retirees out there, the amount of money they’re owed is going up.

Finance Minister Tom Marshall issued a news release within a couple hours of Paddon’s report coming out.

Marshall focused on some of the more upbeat findings — that net debt has gone down — and he pointed out that the government has cut taxes.

But Marshall also acknowledged that pensions are a concern.

“It is clear that the unfunded liability associated with pension and post-employment benefits must be addressed in order to reduce our province’s net debt and to ensure long-term sustainability for the province and its people,” he said.

jmcleod@thetelegram.com

Twitter: TelegramJames

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  • Gern
    January 17, 2014 - 12:40

    All this talk of the old people draining resources from the economy. I find it quite scary how politicians can use the impoverishment of the elderly to balance the books. I wonder if they've considered the "Soylent Green" option? So tasty, and so much raw material that in our "culture" seems to be of little value.