Unfunded Pension Liability Put To Rest

September 29, 2017 Ernie Clintberg
ATA president Frank Bruseker and Alberta Premier Ed Stelmach announce a historic pension agreement between the government and the Association on November 15, 2007.
Photo: Koni Macdonald

Historic agreement solves decades-old problem

In the fall of 2006 Alberta’s economy was in overdrive, on its way to generating annual growth of 6.8 per cent and creating employee shortages in many sectors (but not public education, which was still strapped for cash).

During these last days of Ralph Klein’s run as premier, the province experienced multi-billion dollar surpluses but struggled to keep up with growth pressures. As the hot economy drove up the earnings of many Albertans, teachers and other public servants whose salaries had remained stagnant were experiencing an erosion of their take-home pay. For teachers, this drain on net income was being exacerbated by a lingering and growing unfunded pension liability stemming from their pension plan being underfunded prior to 1992. In order to address this liability, which had come about due to a shift in government policy, teachers were paying 3.1 per cent of their salaries toward extra pension contributions to pay down the pre-1992 unfunded liability, which was projected to continue until 2060.

By the time the governing Progressive Conservative party was choosing Ralph Klein’s successor in the fall of 2006, this $2.1 billion unfunded pension liability had become a top issue for teachers, and diligent public relations work by the Alberta Teachers’ Association had vaulted the issue into the public consciousness and onto provincial political radar screens.

Two PC leadership candidates — Dave Hancock and Ed Stelmach — included resolving the issue in their election platforms. After winning the leadership race and being sworn in as premier, Stelmach publicly tasked Education Minister Ron Liepert with resolving the teachers’ portion of the liability.

This was a time of labour tension between teachers, the government and school boards. An example of this tension played out in February 2007 when an impasse over salaries and working conditions prompted teachers in the Parkland School Division to strike. They returned to work the next month after agreeing to arbitration.

Another example of increasing tension was the formation of the School Boards Employer Bargaining Association by 12 school boards across Alberta. The objective was to amalgamate all 12 of their collective agreements into one, similar to regional bargaining units that had operated between 1970 and 1995. Members of the bargaining association quickly learned that the Association and teachers in each jurisdiction had absolutely no interest in working with the group, past what the Labour Relations Code required.

Throughout the province, what was described by the Alberta School Boards Association as a “perfect storm” was brewing, as 54 teacher bargaining units had collective agreements coming due at the end of August. The Association saw it as a potential storm — hardly perfect — that could be averted through careful planning and proper government funding.

It was within this context that Liepert, in the early spring of 2007, proposed a $25 million plan whereby the government would take over teachers’ unfunded liability contributions for one year. According to a sliding scale that was central to the plan, it would provide the greatest benefit to teachers in their first year of teaching and the least benefit to those at the top of the salary scale. When the minister spoke at the ATA’s 2007 Annual Representative Assembly, teachers had a clear message: we are not interested in your scheme.

Undaunted by the setback and intent on keeping his promise to resolve the liability issue, Stelmach persevered. Through back channels, his office became involved with the Association, prompting Provincial Executive Council (PEC) at its June 2007 meeting to establish parameters for a solution to pension issues including the unfunded liability.

In order to pave the way for discussions on the issue, ATA president Frank Bruseker continued to work on the legislative contacts he had developed during his time as an MLA, with a focus on the premier. Meanwhile, throughout June and July of 2007, ATA executive secretary Gordon Thomas and deputy education minister Keray Henke exchanged documents and information as they geared up for a meeting between the two parties.

In August 2007, at an emergent meeting during Summer Conference, PEC finalized a document entitled Conceptual Elements of a Provincial Framework Agreement, which included a proposal for dealing with the unfunded liability. PEC then handed the reins to Thomas, who established an executive staff committee of four, chaired by himself, to meet with government, which was represented by the deputy minister’s office and led by Henke.

Formal discussions began on September 4, 2007 with the government opening with a statement that it was seeking a seven-year agreement that met five principles:

• Value for taxpayers
• Value for students and parents
• Respect for teachers
• Building a stronger Alberta/managing growth pressures
• Respect for stakeholder roles and responsibilities

The Association was seeking a three-year agreement that addressed a broad list of issues, including the unfunded liability, pension improvements, hours of work, salaries, class size, legislative stability, consultation and labour peace. As the discussions progressed the Association added that transferring teacher practice review to the profession would enhance the deal and gain support from ATA members.

The first meeting set the ground rules and tenor for the next five meetings. It was clear that the premier wanted a deal, but it became evident that it would be a challenge to bridge the imbalance between the deputy minister’s limited mandate and the Association’s broad interests. Time was also a factor. The government had stated that it wanted a deal completed and ratified by January 31, 2008, and Association officials felt it would be extremely difficult to complete an agreement — which would involve local ratification of 62 new collective agreements — within such a short time frame.

However, the parties exchanged written proposals at the next meeting on October 10 and followed up with four more discussion meetings that culminated in a draft memorandum of agreement on November 13. After the Association held emergent meetings for PEC, local presidents and Economic Policy Committee chairs, Bruseker and Stelmach signed the memorandum on November 15.

Fast Sprint

The previous years had been marked by numerous failed attempts to resolve this issue, so this memorandum could have been viewed as the finish line of an ultra-marathon, but was also the start of a frenzied sprint, as the completion deadline was just 77 calendar days away and there were now 62 collective agreements that needed to be updated and ratified. Many detractors said it couldn’t be done, but Bruseker and Stelmach envisioned and expected success.

Following an Emergency Representative Assembly on November 24, PEC members joined Bruseker and all Association staff in promoting the memorandum. The Association brought in retired staff to assist, and PEC approved a budget that allowed for ATA staff and officials to travel around Alberta in charter planes. The government was also committed to using every effort to complete the agreement.

As this process began, 54 collective agreements were in open bargaining and eight units needed to be opened for bargaining. By Christmas, 24 bargaining units representing 67 per cent of Alberta teachers had a memorandum of agreement.

The School Boards Employer Bargaining Association, which had resisted the ATA and government in moving to settlement, finally agreed to mediation on January 6. Later in January, all the other collective agreements were resolved by either memorandum of agreement, mediation or arbitration.

Meanwhile, teachers embraced the deal, with more than 15,000 of them voting 97.5 per cent in favour of the agreement. However, as the clock was counting down on the January 31 deadline, six school boards had not agreed to settlement terms recommended by the mediator. Five of the boards were part of the School Boards Employer Bargaining Association (SBEBA); the other was the Grande Prairie Public School District.

The five SBEBA boards settled by agreeing to arbitrate a final decision by midnight January 31. The Grande Prairie board, after initially rejecting a mediator’s recommendation to accept the terms, rescinded its motion and agreed to the mediator’s recommendation just seven hours before the deadline. After countless hours and miles traveled, teachers heaved a sigh of relief, as did the government. The unfunded liability deal was successfully completed.

As a result of this historic agreement, teachers’ take-home pay increased by 3.1 per cent due to the fact they no longer made contributions to the pre-1992 unfunded liability.

The deal also provided other significant improvements. The government and the Association gained a new era of positive and productive consultation, the Association improved its professional status by taking over practice review, and teachers benefitted from having their salaries tied to the Average Alberta Weekly Earnings index. Students, school boards and teachers also enjoyed five years of labour peace.

But the significance of resolving the longstanding debt issue cannot be overstated. This was a problem that had been developing for decades prior to 1992 and there had been numerous failed attempts to solve it. Finally it was done. Teachers no longer had a $2 billion debt hanging over them and Alberta taxpayers stood to save an estimated $40 billion over the expected life of paying down the debt.

Dr. Ernie Clintberg is a former associate executive secretary of the Alberta Teachers’ Association. As the co-ordinator of Teacher Welfare, he participated in the negotiation of the 2007 agreement and in facilitating subsequent efforts to secure collective agreements in all 62 of the province’s school jurisdictions.

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