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Alberta Minister of Finance Doug Horner. REUTERS/Dan Riedlhuber (CANADA - Tags: BUSINESS POLITICS)

DAN RIEDLHUBER/Reuters

Alberta's Finance Minister, Doug Horner, deserves congratulations for the sensible way he is tackling the issue of his province's underfunded public-sector pension liabilities. Contrary to claims from union officials that he is "manufacturing" a crisis, Mr. Horner is wisely addressing a cascading problem before it becomes irreversible.

The Minister stated clearly on Monday that "there's no crisis today," and he is right. But, he added, "it's the long-term sustainability that we need to address." And this is true. It is, in fact, widely acknowledged that aging populations and their increasing longevity are placing enormous pressures on existing defined-benefit pension funds, both public and private.

According to Mr. Horner, the Alberta government's quartet of public-sector pension plans had four working, contributing members for every two pensioners in 1993. Today, there are only three, and the two pensioners they fund can be expected to cash their monthly cheques into their 90s. As Mr. Horner says, "The demographic of our work force has changed tremendously since these plans were designed and the benefits put in place."

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Alberta's pension funds are currently unfunded to the tune of $7.4-billion. Mr. Horner, like many others who are responsible for large pension funds, is hoping the economic recovery will narrow the gap. But no increase in market returns can paper over the demographic changes occurring in the work force; at some point, the taxpayer will be on the hook. Thus, the Minister's proposals – which include putting a cap on government contributions, decreasing cost-of-living adjustments by 10 percentage points and only paying them out if finances permit it, and ending early retirement with full benefits – make perfect sense. His vow to legislate the changes, rather than negotiate them with the unions, is controversial, but it will sharpen the focus of the unions and bring them to the table during the consultation period he says will take place between now and the end of the year.

Mr. Horner has done what too few politicians do; he has taken the long view. The pension problem is real, and the bottom line is that Alberta's finances, and the long-term welfare of its employees, will be better off for the Minister's initiative.

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