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The Public-Sector Pension Bubble: Time to Confront the Unmeasured Cost of Ottawa's Pensions

Author

Listed:
  • Alexandre Laurin

    (C.D. Howe Institute)

  • William Robson

    (C.D. Howe Institute)

Abstract

Fair-value accounting reveals Ottawa’s employee pension obligations to be larger and more volatile than official figures, a problem shared by European and US state governments. This exposes taxpayers to an unmeasured $65 billion funding shortfall. To keep pace with benefit accruals and stop the gap from growing, contributions in the latest fiscal year would have had to be almost double what was actually paid in. Taxpayers risk finding that the responsibility to back-fill the funding hole falls to them – and potentially finding that fears of sovereign defaults by governments with opaque balance sheets and big exposure to public employee pensions will drive up the cost of borrowing.

Suggested Citation

  • Alexandre Laurin & William Robson, 2010. "The Public-Sector Pension Bubble: Time to Confront the Unmeasured Cost of Ottawa's Pensions," e-briefs 108, C.D. Howe Institute.
  • Handle: RePEc:cdh:ebrief:108
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    File URL: https://www.cdhowe.org/public-policy-research/public-sector-pension-bubble-time-confront-unmeasured-cost-ottawas-pensions
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    Cited by:

    1. Colin Busby & William B.P. Robson, 2011. "Impulse Spending: Canada's 2011 Fiscal Accountability Rankings," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 142, September.
    2. Angelo Melino, 2011. "Moving Monetary Policy Forward: Why Small Steps - and a Lower Inflation Target - Make Sense for the Bank of Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 319, January.
    3. William B.P. Robson & Alexandre Laurin, 2012. "Federal Employee Pension Reforms: First Steps - on a Much Longer Journey," e-briefs 140, C.D. Howe Institute.
    4. James P. Bruce, 2011. "Protecting Groundwater: The Invisible and Vital Resource," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 136, February.
    5. Alexandre Laurin & William B.P. Robson, 2011. "A Faster Track to Fiscal Balance: The 2011 Shadow Budget," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 320, February.

    More about this item

    Keywords

    Pension Papers; fair-value accounting; Canadian public-sector pensions; defined-benefit (DB) plans;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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