Defeated local MLA Ray Danyluk could be walking away from his years in the public eye with an estimated half a million dollars in severance pay, but future retiring or defeated MLAs may not be getting as hefty transitional allowances if new recommendations on MLA compensation are passed.
Last week, an independent report conducted by retired Supreme Court Justice Jack Major was released, outlining several recommendations regarding MLA salaries. In his 327-page report, Major made three substantial recommendations regarding MLAs’ transition allowance, the tax-free portion of their salaries and implementing a new pension plan similar to the one cut by former premier Ralph Klein in 1993.
Major also suggested the premier’s salary should increase to $335,000 over three years, something Alison Redford immediately turned down after the report was made public. Redford told reporters after her decision that she felt it was something Albertans didn’t want.
Major recommended that the severance package, which is a transition of three months’ pay for every year served in office and based on the member’s best three years, should be scrapped.
According to the Canadian Taxpayers Federation (CTF), to pay the 35 retired or defeated MLAs after the April 23rd vote will cost taxpayers just under $15 million. This figure does not include the $2.68 million taxpayers have provided to MLAs via RRSP contributions, stated the CTF, which dubbed the severance pay “golden handshakes.”
Former MLA for the area, Ray Danyluk, is estimated to receive a $526,000 severance package and $97,975 in RRSP contributions, according to CTF. Danyluk could not be reached for comment on the report or on the transition allowance.
Major recommended the MLA transition allowance to be two months’ salary for every year served to a maximum of 12 months, and should be based on the MLA salary alone and not on additional compensation provided for other roles.
“MLAs have, after all, served the public in a role without job security, and, as we’ve seen, their return to their former occupations or lifestyles is often fraught with difficulties,” Major wrote.
In addition to changing the severance package, Major recommended stopping the RRSP money – around $11,000 – that is given to MLAs each year.
The retired Supreme Court Justice said the government should implement a defined-benefit pension plan instead, which opponents to the recommendation say is similar to the one scrapped by Klein in the early ‘90s.
“These types of pension plans are the ones that create unfunded liabilities,” said Shayne Saskiw, the Wildrose MLA for St. Paul-Two Hills- Lac La Biche. “Right now, even after Klein eliminated the pension plan, there’s still $42 million of an unfunded liability in that previous pension plan with over 100 MLAs receiving funds from it.
“We believe if there is to be a pension plan, it be a defined contribution plan, which is basically the MLAs get what they put in,” he added.
Major referenced the Cockburn Report, a study from the United States’ National Institute on Retirement, stating a defined benefit pension plan can deliver the same retirement income at 46 per cent lower cost than an individual defined contribution account.
While he disagreed on the idea of a pension plan, Saskiw said he was pleased to see some of the recommendations in the report such as MLAs having a set salary of $134,000 and eliminating the RRSP top-up.
However, Major’s suggestion for MLAs to continue to have a portion of their salaries tax-free is something with which the Wildrose disagrees, stating all Albertans pay taxes on their incomes so MLAs should as well.
In the report, Major said the tax-free allowance is a benefit provided to all provincial legislators by the federal government and saves Albertans around $1.04 million.
“With the tax-free allowance, it saves the province from paying extra taxes to the federal government and if it’s ignored, MLAs’ salaries would need to be increased or ‘grossed up’ to permit them to retain their compensation after paying this income tax,” the report said.
According to Saskiw, Major’s report will be debated by MLAs before the legislature later this month.
