Alberta Politics & Government Thread 3.0

[Goriders]

Originally Posted by Slava

The confusion is sown by the UCP because they are pursuing this “firewall” idea. The reality is they’ve been told that they’re not getting half the money. The end result is under half of what they wanted. Trevor Tombe did these calculations and came to this conclusion a year ago, so it’s not really a new piece of information for the government.

ETA: the reason the numbers are so different is the Chief Actuary takes the position that the formula has to apply if all provinces wanted to leave the plan at the same time. Therefore, you can’t have provinces with negative values, which is what the outcome of the LifeWorks calculations would have.

The methodology for leaving the plan is in the CPP act. I haven’t read it but my guess is the calculated number is quite high and that’s why it wasn’t released. If it was lower why wouldn’t they have released it?

Not sure why people have issues around Alberta pointing out that they are getting taken advantage of under the current setup. Also don’t understand what the big uproar is around managing our own pension. Quebec does it, what’s the difference?

If the concern is derisking the investments you could literally invest in the same portfolio as the CPP currently does. I’m sure the overhead to manage it locally would be less that the CPP. That’s just money being left on the table. I’m guessing just by younger and more affluent demographic that Albertans are one of the larger contributers and not one of the larger consumers. That misbalance would also be addressed.

[calgarygeologist]

Originally Posted by Fuzz

Are we a country, or a collection of fiefdoms resentful at the fortunate resource wealth we lucked into? This whole discussion is pretty ####ing gross to me, looking to maximize whatever we can from our fortunes, to #### over other Canadians, they should have pulled up there bootstraps more. Unreal.

Maybe once we get an APP we should make sure the cities get a larger share, and neighborhoods like Mt Royal have generated the most wealth, probably deserve 50% of it. Sorry, One Four, you get pennies.

Goddamn this disappoints me as a Canadian to hear fellow Albertans looking to maximize their own gains. Some of you people disgust me. Look in the ####ing mirror. Greed. A true virtue, right?

The interesting and potentially concerning thing about Canada is that we are a federation, obviously, but a very decentralized one where the provincial/territorial governments do have to compete against one another and not necessarily cooperate first and foremost. Obviously a main driver is the relationship that Quebec exhibits with Canada but also significant are things like the regulations on trade between provinces which can made production or sales of goods very difficult. As a country, businesses and provinces shouldn't have to battle through externalities created to suppress trade but that is a reality of our federation.

[Ashartus]

Originally Posted by Goriders

Not sure why people have issues around Alberta pointing out that they are getting taken advantage of under the current setup. Also don’t understand what the big uproar is around managing our own pension. Quebec does it, what’s the difference?

Alberta isn't being "taken advantage of" - Alberta doesn't pay anything, individuals do. The belief is that because Alberta has a relative young and high earning population you could reduce payments, this is likely true in the short term. Quebec thought the same thing and that's why they didn't join the CPP, over time demographics changed and now they pay more. When it comes to CPP I'd rather take the safe, conservative approach than a gamble that might benefit in the short term but increases long-term uncertainty.

[edslunch]

My understanding is that they are still working through the exact numbers. Who contributed what, in which province, who collected what, in which province, since the beginning of the plan. But the approach they laid out makes it clear it will be nowhere near Alberta's number.

[Fuzz]

Originally Posted by Ashartus

Alberta isn't being "taken advantage of" - Alberta doesn't pay anything, individuals do. The belief is that because Alberta has a relative young and high earning population you could reduce payments, this is likely true in the short term. Quebec thought the same thing and that's why they didn't join the CPP, over time demographics changed and now they pay more. When it comes to CPP I'd rather take the safe, conservative approach than a gamble that might benefit in the short term but increases long-term uncertainty.

That's ridiculous, you need to take take take every penny you can get your hands on, #### the future.

[Wormius]

If Smith was this wrong about how much she thought Alberta would get as a portion of the CPP, I can’t say I really trust at her numbers at how much Alberta is paying into administration fees. Who’s to say we’re not going to pay more to manage this? If it’s going to be a wash and we’re going to copy the CPP, it seems like a pretty stupid and useless like all of the Wexit crap she seems to be playing towards.

[Goriders]

Originally Posted by edslunch

My understanding is that they are still working through the exact numbers. Who contributed what, in which province, who collected what, in which province, since the beginning of the plan. But the approach they laid out makes it clear it will be nowhere near Alberta's number.

Wonder if there’s a way to actually get the wording. Just because we are all guessing. I’ve watched a few discussions online where it sounded like it was pretty cut and dried and there wasn’t really room for interpretation.

[Goriders]

Originally Posted by Wormius

If Smith was this wrong about how much she thought Alberta would get as a portion of the CPP, I can’t say I really trust at her numbers at how much Alberta is paying into administration fees. Who’s to say we’re not going to pay more to manage this? If it’s going to be a wash and we’re going to copy the CPP, it seems like a pretty stupid and useless like all of the Wexit crap she seems to be playing towards.

From what I had explained to me it would be impossible for it to cost more. The benefits to running our own pension are unavoidable and we are leaving a lot of money on the table. Essentially a no brainer.

I watched the recordings towards the start of the year so don’t remember the details. But I can go back and rewatch and post them here if anyone is interested. They had an actuary explaining it so it was someone who knew what he was talking about.

[Roughneck]

Originally Posted by Goriders

Wonder if there’s a way to actually get the wording. Just because we are all guessing. I’ve watched a few discussions online where it sounded like it was pretty cut and dried and there wasn’t really room for interpretation.

If you read the link in this post it not only gives you the publicly available wording, but also explains how the wording can lead to different interpretations.

Anybody who claims it is cut and dry is trying to sell you something.

[edslunch]

Originally Posted by Goriders

The methodology for leaving the plan is in the CPP act. I haven’t read it but my guess is the calculated number is quite high and that’s why it wasn’t released. If it was lower why wouldn’t they have released it?

Not sure why people have issues around Alberta pointing out that they are getting taken advantage of under the current setup. Also don’t understand what the big uproar is around managing our own pension. Quebec does it, what’s the difference?

If the concern is derisking the investments you could literally invest in the same portfolio as the CPP currently does. I’m sure the overhead to manage it locally would be less that the CPP. That’s just money being left on the table. I’m guessing just by younger and more affluent demographic that Albertans are one of the larger contributers and not one of the larger consumers. That misbalance would also be addressed.

No one is getting taken advantage of. Albertans pay and receive exactly the same as everyone in Canada, based on a plan we signed up for (or at least didn’t it out of).

Could we have done better going our own way? In hindsight probably. The CPP generates solid returns on the fund but the payouts are not great, in part due to unwinding the early decades of underfunding. With our incomes and demographics we could have done better, but we didn’t. Every higher earner in the country could say the same thing, but that’s how it goes with a universal safety net.

Could we do better starting now? Probably, but look at Quebec as a cautionary tale in that one. Are we justified in considering the option? 100%. Just drop the ‘taken advantage of’ bit. It’s a bad look.

[GGG]

Originally Posted by bizaro86

Is it specified in the founding documents that a province can't have a negative value? That seems plausible to me if some have taken out more than they've put in but I don't know.

I would also comment that if Alberta got $334B from CPP we'd be economically rational to take it and run. Even if the plan splinters into 9 and the GoC ends up responsible for a large additional debt, our share of the tax burden of that additional debt would be way less than our share of the divided up cpp assets.

If you read through Tombes paper it’s talking about the difference between money that goes to fund the payouts of the plan vs money invested into the plan as the key difference in the interpretation of clause b)

I’m not sure we are way better off in the tax recovery scenario as Alberta has the highest incomes and youngest population so if there was increased taxation to pay for the cpp debt it will disproportionately come from Alberta as well. Essentially it would depend on if our ratio of retirees to workers difference is greater than the differences in median income.

[GGG]

Originally Posted by Goriders

The methodology for leaving the plan is in the CPP act. I haven’t read it but my guess is the calculated number is quite high and that’s why it wasn’t released. If it was lower why wouldn’t they have released it?

Not sure why people have issues around Alberta pointing out that they are getting taken advantage of under the current setup. Also don’t understand what the big uproar is around managing our own pension. Quebec does it, what’s the difference?

If the concern is derisking the investments you could literally invest in the same portfolio as the CPP currently does. I’m sure the overhead to manage it locally would be less that the CPP. That’s just money being left on the table. I’m guessing just by younger and more affluent demographic that Albertans are one of the larger contributers and not one of the larger consumers. That misbalance would also be addressed.

I linked it for you along with the mathematical discussion on the differences between interpretation options. Go read it before posting incorrect info on this topic. It is not clear.

[Goriders]

Originally Posted by Wormius

If Smith was this wrong about how much she thought Alberta would get as a portion of the CPP, I can’t say I really trust at her numbers at how much Alberta is paying into administration fees. Who’s to say we’re not going to pay more to manage this? If it’s going to be a wash and we’re going to copy the CPP, it seems like a pretty stupid and useless like all of the Wexit crap she seems to be playing towards.

If you copied the portfolio investment performance would be a wash. That wasn’t the benefit though. I believe it was the structure of the CPP and its overhead that was the carrot.

Reduced overhead or management expense fee ultimately and that older demographic regions get more benefit than younger.

Like I said above. I can’t remember the fine details. I’ll try and find the arguments and post them here.

[indes]

CPP is a federal program that gets paid into on an individual level. Alberta being "taken advantage" of is akin to saying old white dudes are being taken advantage of by paying more golf membership fees than other demographics.

[Goriders]

Originally Posted by edslunch

No one is getting taken advantage of. Albertans pay and receive exactly the same as everyone in Canada, based on a plan we signed up for (or at least didn’t it out of).

Could we have done better going our own way? In hindsight probably. The CPP generates solid returns on the fund but the payouts are not great, in part due to unwinding the early decades of underfunding. With our incomes and demographics we could have done better, but we didn’t. Every higher earner in the country could say the same thing, but that’s how it goes with a universal safety net.

Could we do better starting now? Probably, but look at Quebec as a cautionary tale in that one. Are we justified in considering the option? 100%. Just drop the ‘taken advantage of’ bit. It’s a bad look.

Fair enough. But I guess the point I’m trying to make and I think you agree based on what you said is that we’d get a better return running our own pension.

If that is the case why wouldn’t you do it? Does anyone do that with thier investments outside of the CPP?

[Goriders]

Posting this from an article from the C.D. Howe Institute. Mirrors what others have said. Sounds like the CPP act wasn’t worded very well. Probably was assumed that no one would contemplate leaving.



Many commentators, including the prime minister and leader of the opposition, have now weighed in on the downsides of Alberta withdrawing from the Canada Pension Plan (CPP) and creating its own Alberta Pension Plan (APP). The Alberta proposal puts at risk a plan that has been providing secure retirement, survivor and disability benefits for nearly 60 years.

Much of the criticism and concern revolves around the $334 billion that a report prepared by the actuarial firm LifeWorks for the government of Alberta says the province should claim in compensation for assuming responsibility for paying the future benefits Albertans earned while their province was part of the CPP. The amount is 53 per cent of CPP’s current assets and greatly exceeds Alberta’s 16 per cent share of contributions to the CPP over the years.

One aspect of the LifeWorks report is drawing less attention than it deserves. The CPP legislation includes a roadmap for a province withdrawing from it, including how much it should receive as compensation for paying benefits earned up to the date of withdrawal. LifeWorks argues that if this section of the legislation is taken literally, Alberta would be entitled to $747 billion — an unlikely 118 per cent of CPP assets.

LifeWorks concedes this is an unreasonable outcome, so it turns to a modified version of the legislated formula and comes up with the $334-billion proposal. This recalculation of Alberta’s entitlement signals the reality that any payment to Alberta is likely to be determined through negotiations that may in the end have little connection to the existing wording of the CPP legislation.

The most important problem with the relevant section of the legislation is that it ignores the contributions that have been required in order to build up the CPP reserve fund so it can generate the income needed to stabilize the contribution rate in the face of population aging. In order to achieve this objective, the provinces have since 1997 been paying more into the CPP than has been paid out in benefits.

Given the legislation’s lack of clarity, there are two alternative approaches to settling what should be paid to Alberta: either pure and open-ended negotiating under the existing legislation or amending the legislation to make it clear and workable. I prefer the latter approach.

It seems to me three closely related standards need to be met in any reasonable resolution of the issue. First, any settlement has to be fair for all provinces in the CPP, not just the one leaving. By eliminating the 118 per cent option, the LifeWorks report seems to agree. Second, the payment to any province that does leave should be no more (or less) than what would be paid to it if all nine participating provinces left simultaneously. In other words, we should simulate a break-up of the plan and give the exiting province no more (but no less) than its share of the break-up value. Finally, the break-up value in question cannot exceed the value of CPP’s current financial assets.

In principle, these standards could also be applied in negotiations that would take place under the existing language of the CPP legislation dealing with the appropriate payment to a province that leaves the plan. But trying to settle the issue based on the existing, somewhat opaque wording of the legislation is likely to involve prolonged and difficult negotiations punctuated by court cases.

My view is that we should instead make it a priority to amend the section of the CPP legislation dealing with the transfer of assets to a province that leaves. No doubt agreeing on and legislating new language will also involve difficult negotiations. But this approach would have the advantage of lending clarity to how any transfer of assets is to be determined, either in the immediate case of Alberta or off in the future if other provinces exit.

Amending the CPP act requires agreement between Ottawa and two-thirds of the provinces with two-thirds of the country’s population. Even so, it may well be more attractive an option to provinces than an open-ended negotiation over money. It also provides the perfect opportunity to clean up a section of the CPP legislation that cannot in its present state be made operational in a reasonable way.

It may seem unfair to change the rules in the middle of the game, as it were. But a negotiated settlement under the existing legislation is unlikely to bear much resemblance to the current wording of the legislation. And the ultimate rationale for whatever amount of money finally did emerge from such a process might be essentially mysterious, as many political outcomes are.

The alternative of explicitly changing the legislation before Alberta’s exit would have the clear advantage of codifying the logic behind whatever the transfer to Alberta ultimately was.

[Goriders]

When I watched the online discussions though the initial payout wasn’t the prize though. Even at the lower 20% vs 50% number it was still a win. I’ll try and post the reasoning. Sorry I can’t remember all of the details. Getting too old.

[Roughneck]

Is the reasoning worth listening to if these are the people who insisted it was black and white and cut and dry?

[Goriders]

When I listened I would say yes. Per above. They weren’t focusing on the pile of money. There focus was on the long term benefit of the alternative set up.

[ripTDR]

Dumb question...Would people who lived and worked in Alberta but no longer do be entitled to a portion of their pension?