Federal budget takes aim at public servants’ benefits to save billions

Finance Minister Jim Flaherty set the stage in Tuesday’s budget for a watershed round of collective bargaining in 2014 with plans to save at least $7.4 billion over six years by reducing the benefits of former and current public servants.
 

In a one-two punch, the Conservative government is taking aim at sick leave benefits of public servants and the $1.4 billion in salary costs from estimated future banked sick leave.

At the same time, it intends to double the premiums that retired bureaucrats pay for the Public Service Health Care Plan while limiting their eligibility for the plan. That move will save $1.5 billion in 2014-15 and up to $7.4 billion by 2018-19.

The compensation cuts are the biggest savings the government booked in its drive to a balanced budget.

They come on top of the two-year operating freeze for departments the government announced last fall to save $1.7 billion. The freeze will ratchet up the pressure at the negotiating table if departments have to absorb any wage increases, which in turn will squeeze more jobs, programs and services.

The budget also signalled new legislation to get rid of “redundant” organizations and consolidate support and administrative services. Unions have long been braced for services like finance and human resources to be consolidated like the government did with IT when it created Shared Services Canada.

Public servants also took another hit with the government’s decision to give veterans released on medical leave top priority for jobs in Canada’s public service, ahead of laid off and surplus bureaucrats. This means the 1,000 veterans a year can go on the priority list for five years.

The government spends about $46 billion a year on personnel and compensation, its biggest single operating costs. Treasury Board President Tony Clement has vowed to bring this in line with the private sector to make it more “affordable and reasonable.”

The budget comes as the government heads into a much-anticipated round of collective bargaining with 17 federal unions that parallels the run-up to the 2015 election. As expected, the top priority is to replace existing sick leave benefits with a new short-term disability plan.

Unions have signed a “solidarity” agreement to refuse concessions on sick leave but their bargaining clout has been significantly weakened by new legislation that strengthens the government’s hand at the table.

Ian Lee of Carleton University’s Sprott School of Business said the government’s unusual step of booking some of its expected compensation savings as collective bargaining is poised to begin shows the Conservatives won’t be dickering at negotiations.

“They are sending the message to the unions that this is going to happen whether they agree or not,” he said. “Tony Clement isn’t going to back down and they would be grinning from ear to ear if the unions even contemplate a strike because the government feels it has the court of public opinion on its side when it comes to reducing public service pensions and benefits.”

Robyn Benson, president of the Public Service Alliance of Canada, said the government is balancing its books on the “backs of public servants” and gutting services Canadians rely upon.

Debi Daviau, president of the Professional Institute of the Public Service of Canada, called the cuts an “irresponsible abuse of the public purse to build the Conservatives’ election kitty” while compromising programs and services.

NDP MP Paul Dewar said the government could pay for the public service cuts at the ballot box in the seven area Conservative ridings.

“If the Conservatives think they can take public service for granted, I think there is a surprise for them coming up and they better take it seriously,” said Dewar. “It will be interesting to see how they sell this to their constituents.”

But Foreign Affairs Minister John Baird, the Conservative MP for Ottawa West-Nepean, said the cuts came as no surprise and are “mild” compared to the Liberals’ downsizing of the 1990s. He said no one is keen on paying more but the benefits enjoyed by public servants will still be among the best in the country after the changes.
“You know the best assurance for stability and security for the National Capital Region’s economy and the public service is a balanced budget, and the good news we are incredibly close and we will be in surplus next year and that will be the ultimate stability and security.”

The budget’s announced changes to the health-care plan have been rumoured since last summer.

The National Association of Federal Retirees quickly launched a national campaign to drum up the support of the 500,000 retired public servants, military and RCMP who belong to the plan. 

The government intends to make retired public servants pick up 50 per cent of the cost of contributions for the plan rather than the 25 per cent they pay now.

The government is also changing the eligibility for the plan. Under the existing rules, retirees who worked for two years in the public service can join the plan. The government argues two years is too short a time to access the plan and is lengthening that to six years.

The health plan is optional and popular with retirees, with about three-quarters signing up for the plan when they retire. With the new cost-sharing, the government estimates a retiree’s contribution cost would double from $261 to $550 a year.

Although the government is committed to the two major changes, it is willing to negotiate to ensure “current low-income pensioners are not affected” by the increase in contributions. The government picks up the contribution costs for all existing public servants and that will remain unchanged.

By Kathryn May, Postmedia News February 12, 2014