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February 16, 2007

MLA Pay and Pension

The following letter was faxed to the Independent Commission to Review MLA Compensation today. If you would like to make a submission to the Commission, please use the address captioned below. Don't expect a media campaign inviting your submission. The Commission was appointed on January 30, 2007, and given 90 days to report. Their early May report will arrive in time for the Legislature to implement it before it adjourns.

February 16, 2007

Independent Commission to Review MLA Compensation
c/o Fasken Martineau DuMoulin LLP
2100 - 1075 West Georgia Street
Vancouver, BC V6E 3G2

Dear Commissioners:

The purpose of this submission is to argue that there should be no change in the salary and pension benefits currently enjoyed by BC MLAs.

Nowhere on the Legislative, Government or political party websites can one find a full listing of the salaries, benefits and expense allowances for MLAs. Whatever you recommend with respect to their pay and pensions, I urge you to also recommend that all details of the compensation and expense package be readily available on the Legislative website.

I was elected MLA for North Vancouver-Lonsdale in 1991. During my five year term, MLA salaries were frozen and we legislated the end of the very rich defined benefit pension plan. Salaries were substantially increased following the adoption of the 1997 Citizen's Panel Report on MLA Compensation. Compensation arrangements are handled by the very secretive Legislative Assembly Management Committee (LAMC), one of the rare committees whose work is not recorded by Hansard. Bill 51(1997) increased the powers of LAMC to set salaries for: the Speaker, the Deputy Speaker, the Deputy Chair, Committee of the Whole, the Leader of the Official Opposition, the Leader of a recognized political party other than the government or opposition, the Government Whip, the Deputy Government Whip, the Opposition House Leader, the House Leader of a recognized political party other than the government or opposition, the Official Opposition Whip, the Party Whip of a recognized political party other than the government or opposition, the Government Caucus Chair, the Official Opposition Caucus Chair, the Caucus Chair of a recognized political party other than the government or opposition, and the Chair of Select Standing or Special Committees. It is hard to find a member of the government caucus that doesn't receive at least $5,000 more than the base salary, and several opposition members also enjoy pay above the base. Bill 51 also allowed LAMC to establish a group registered retirement savings plan which effectively re-instated MLA pensions in the form of a defined contribution plan to which the employer pays 9.0% of base pay.

In 2004, only 453,770 British Columbians reported registered pension plan contributions, and only 776,790 reported RRSP contributions averaging $4,418. Employment income was reported by 1,840,380 people, so most have no form of pension whether it be defined benefit or defined contribution. Most British Columbians would probably consider themselves lucky to have $6,849 per year contributed to an RRSP on their behalf like our MLAs. Invested over a 40 year working career, those contributions form a good basis for retirement. We shouldn't expect MLAs to have instantly vested full defined benefit pensions after serving only one or two four year terms.

The base pay for MLAs is indexed with a complicated formula that includes both average pay for all workers and the consumer price index. Currently at $76,100 it is 36% higher than the 2004 median BC family income of $55,900, and to earn it some families must have more than one wage earner to make that income. Comparison to the incomes enjoyed by most British Columbians is particularly important since those are the people the MLAs are elected to represent, and they are the people who ultimately pay the MLAs salary. According to Revenue Canada's taxation statistics for 2004 (the most recent year available), 90% of the 3,029,720 people who filed income tax returns reported income from all sources of less than $70,000. More than 9 out of 10 British Columbians make less than the current base pay received by MLAs.

Government hires expertise; the voters elect MLAs. It is important to keep that distinction in mind because MLAs are briefed by and lobbied by many well-paid people and some begin to feel that they are part of that circle and should be paid accordingly. We wouldn't want our MLAs to be so poorly paid that they would have to moonlight or worse, but we also shouldn't want them so highly paid that they lose touch with what life is like for the vast majority of people they represent.

Unlike deputy ministers, MLAs get their jobs by getting the most votes, not by being the most qualified in any particular field. Some are relatively young and will likely work for many years after they leave politics. Other are over age 65, and notwithstanding BC eliminating mandatory retirement, it is fair to say that they are unlikely to seek further employment after leaving politics. That variety in work history and proximity to retirement is relevant to the argument that MLAs disrupt their careers and should be compensated for that sacrifice. No one forced any of our elected representatives to disrupt their careers and some, perhaps many, did not do so. MLAs take a lot of abuse; it is not the purpose of this argument to add to that abuse but merely to argue that there is not a case to compensate them for any loss. For every MLA there were several others on the ballot who wanted the job, and there were dozens more who unsuccessfully sought nominations. If supply and demand determined their compensation, there would be downward pressure on their wages.

In The Intelligent Woman's Guide to Socialism and Capitalism, George Bernard Shaw wrote: "It is no use saying that it is scandalous that Mrs. A. should have a thousand pounds a day and poor Mrs. B. only half a crown. If you want the law altered you must be prepared to say how much you think Mrs. A. should have, and how much Mrs. B. should have. And that is where the real trouble begins. We are all ready to say that Mrs. B. ought to have more, and Mrs. A. less; but when we are asked to say exactly how much more and how much less, some say one thing; others say another; and most of use have nothing to say at all except perhaps that Mrs. A. ought to be ashamed of herself or that it serves Mrs. B. right." As Commissioners you have the trouble of saying not more or less, but saying exactly how much more or less MLAs should be paid. While I argue here that they should not be paid more, in either salary or pensions, you might ask whether I would extend my argument to the point of asking for a reduction in compensation. The reason I argue for no change is that the current compensation provisions are what were in place when our MLAs were elected in 2005. Nothing has changed in less than two years that justifies either an increase or a decrease.

Sincerely,

David D. Schreck


January 31, 2007

[Addendum: In November 2005 after MLAs tried to give themselves a 15% raise and a full pension after just 12 years of service, I wrote an article on pensions that remains relevant for the Commission that was announced to revisit the issue. See StrategicThoughts.com/record2005/pensions.html.]

More Money for Politicians?

The current base pay for an MLA is $76,100 annually. Extra money is paid for being a cabinet minister (another $39,000), a caucus chair ($9,000), a government whip ($9,000), a legislative committee chair ($6,000), a parliamentary secretary ($6,000) or being the Premier ($45,000) or Leader of the Official Opposition ($39,000). It is hard to find many government members that don't receive something extra. Then there is the benefit package which includes 9% of the base pay ($6,849) as an employer paid contribution to an RRSP, dental, extended health, MSP premiums paid and a capital city and transportation allowance that allows many MLAs to pocket the difference between actual costs and the allowance.

Premier Campbell announced that a special three member panel will have 90 days to report on any changes they consider appropriate for MLA compensation so the changes can be implemented before June. The news release said: "MLA compensation has not received any significant increases since the recommendations of the 1997 Citizen's Panel Report on MLA Compensation were adopted." The new release failed to mention that MLAs' pay has been indexed since 1997, so while they haven't received "significant increases", they have received annual increases. Most British Columbians haven't had significant pay increases for the past decade, and many have had their pay frozen or cut courtesy of their politicians.

The news release quotes Campbell as saying: "It will be at the sole discretion of the Commission to determine how they collect information and receive public input for their report." The Commission won't be able to do much public consultation in just 90 days. Three distinguished British Columbians make up the Commission, two lawyers and a university professor. If changes to Health Care can be recommended by ordinary citizens engaging in the government's "Conversation on Health", and if changes to how we elect MLAs can be recommended by randomly selected voters in a Citizens' Assembly, why can't randomly selected British Columbians determine how MLAs should be paid?

The median family income in British Columbia in 2004 (the point where half of all families are below and half above) was $55,900. How much more than that should an MLA make? Currently MLA pay is more than 36% higher than median family income; should it be twice as much? What's wrong with letting a panel of people whose families get by on $55,900 per year determine what their politicians should be paid rather than hand picking a panel of people whose families probably live on good six figure incomes. It is not that the members of the panel aren't good people, it's just that they aren't representative of the kind of people you would get if you picked a jury at random.

Some BC MLAs like to point to the fat salaries earned by their federal cousins, the MPs in Ottawa, or their provincial counterparts in Ontario, which recently gave themselves big pay raises. Wouldn't it be better to compare MLA salaries to the family incomes of the people who elect them? No one forced our politicians to give up their previous jobs. They should be paid as the people's representatives, not as Deputy Ministers.

No one wants to see our MLAs underpaid, but it is also not wise to overpay them. Do you want your MLA to identify with the problems faced by most BC families, or do you want them to identify with the top 5% of income earners and lose touch with the people who pay their salaries? It has only been 14 months since the ill-advised attempt by members of the legislature to give themselves a big pay raise with Bill 17. The members of the Commission must show that they are representing the public and not simply serving as a cover for the MLAs to get what they tried to give themselves in November 2005.

 
 

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