This really doesn't make sense. Pension plan expenses are operating expenses - classifying them any differently is, quite simply, falsifying your financial statements. The government is essentially allowing the universities to do something that would be considered fraudulent in the private sector.

This is the same problem that the auto sector found itself in. The automakers got an exception and/or deferral for pension contributions and then required a substantial bail out from government.

Watch...it will happen with the universities five to ten years from now when they require public money to bail them out of their pension liabilities.

I work at a university and make contributions to my pension every month, matched by the university. The last thing I want to see is a revisitation of the GM-CAW agreement with yet another Liberal government - that of David Peterson - which allowed the 'too big to fail' company to pretend it was funding its members pensions, while the CAW winked in agreement. Liberals' good intention policies are usually followed by application of the law of unintended consequences. Perhaps Dalton, Gordon and Jean can up provincial contributions or free the universities to set tuition as they please.

Perhaps it is time to move away from defined benefit plans.

I spoke with Dr. Dan Lang of the Ontario Institute for Studies in Education today. Dr. Lang is an expert in this area.

I asked him if it thought the current problems were structural in nature. He responded:

"No, I do not think that there are structural problems unrelated to the collapse of equity markets and the effects of the recession on government grants. Under provincial law, university pension plans have to be valuated periodically by external auditors. Structural problems take a long time to develop (and to solve). If there were widespread structural problems they would have been been showing up in the valuations before 2008."

It's worth noting that many universities were forced to stop contributing or take money out of their pension plans because the plan surpluses exceeded 10 per cent at the turn of the century.

The law prevented large surpluses from accumulating. This has changed to 25 per cent now.

If there is a strong rebound in the stock markets, the deficits could "solve themselves" but I suspect we're going to experience a very slow recovery.

- Joey

Dr. Lang's comments and the government's actions do not seem to reconcile.

The government is indicating it is reasonable to grant universities 10 years to address their pension issues. Dr. Lang says that structural problems don't exist. That seems incredibly contradictory. If the problem is cyclical and only structural, it should only take a year or two to address and not 10.

Most universities provide vey cushy defined-benefit plans to "academics" who work part-time for full time pay, what with sabbaticals, short hours etc. The professors I know hardly bust a sweat. No wonder the universities are swamped with debt, their overheads are ridiculous.

The problem was exacerbated by the universities chasing high yield investments with high risk for their pension funds. Not long ago a pension fund was largely invested in low risk lower return bonds. In recent decades the financial wizards who run the campuses switched to much higher risk equities. They used the surpluses to pay operating expenses and to take pension contribution holidays. In the 2008 meltdown, their portfolios lost 20% to 30% so the 10% cushion mandated by the government was inadequate to sustain pensions. Now that they are being told to pay the deficits out of their operating funds, they are squealing.

This is good news, as is the change to the law allowing more of a surplus to accumulate in pension funds. The crisis in pension funds was created by provincial laws which did not allow the funds to rise with the market, because they required pension holidays when times were good and a certain 'surplus' figure was reached. But then when times are bad, predictably, the pension funds fall short, and universities have to use a large portion of their general operating funds to top the funds up.

I'd be counting my lucky stars if I was retiring from these universities this year. The new incoming employees may not have the same pension that they expect.

Teacher Pension Plans Could Trigger Next Big Bailout Crisis

http://politics.usnews.com/opinion/blogs/peter-roff/2010/04/21/teacher-pension-plans-could-trigger-next-big-bailout-crisis.html

This happened to STELCO and the goverment/banruptcy courts pushed them into CCAA and the company was sold to US Steel who have not lived up to their agreement. Obviously the Provinces Pension laws are flawed and need to be changed before more companies are ruined like STELCO.

The pension "deficet" of the OTPP pension fund is the result of using the current prime interest rate rather than anything close to the real rate of return the OTPP has acheived. That's 2.75% versus real return of nearly 10%over twenty years.

One way to think about DC vs DB plans is who carries the risk. In DB plans, it is the employer and the employees (unretired) who carry the risk if the fund's investments cannot meet the solvency requirements. When plan investment yields go down, their contribution rates go up. In DC plans, it is the retired employees who get stuck carrying the risk. If the plan investments tank, then the retirees are screwed because their pension payments must be lower. Where would you prefer to take your risk?

Perhaps this explains why tuitions have been going up for at least twenty years?

As several people have stated, the problem is that university administrations were allowed to switch to higher risk investments and didn't need to run a surplus when the economy was booming. Not surprisingly, now that there's a bust, the value of their investments is short of their obligations. In short, they were able to use accounting tricks to avoid paying as much as they should have to fulfill the promises they made to their workers. The plan to switch to defined contributions instead of defined benefits is just another trick, of the same sort, to cut pensions while pretending cuts aren't happening.

Jay,

I guess the professors you know are very different from the ones I know. Most of the professors I've seen don't have the luxury of a 40 hours work week but have so much juggling to do (publishing, teaching duties, committee work, going to conferences) they're lucky if they get one day off a week and if they can call it a day after 8 hours. Plus they've also had a very intense schedule as grad students (usually 10 years of postsecondary work, may I remind you).

Thank you, Lynn.
As a professor who regularly puts in 70-80 hour weeks (although only 6 "face-time" classroom hours), I am tired of ignorant people who think we work part-time and get paid well for it.
I had 14 years of post-secondary education and make less than most people coming out of a BA.
I work, as I said, VERY long hours.
Sabbaticals are not time off, Jay. Sabbaticals are research-intensive periods where we are expected to produce something major (e.g. a book) as a result.

Governments do not learn. By postponing the inevitabl, i.e. paying there way they and the Ontario government are putting themselves into the same position we saw GM and Chrysler only 18 months ago. The gov gave these corporations long holidays on pension payments and the companies generated billions and billions in liabilities which eventually put the companies into bankruptcy only to be rescued by the taxpayer. Humans just do not have a usefull memory.

Very bad move. Next up for exemption will be the municipalities. A switch to DC will allow a retiree to decide what to do with the pot of money they will have have accumulated and plan retirement based on the existing circumstances. The actuaries hate DC because they are not required but an employer has certainty in funding.

All Public Sector pensions need to be converted to RRSPs or DCP.

To expect taxpayers, the majority of whom do not even have a company pension plan, to potentally cover short falls is just total arrogance and greed by these people.

As well, the Universities & Professors should stop ripping off students for churning out 'revised' text books every year.

JM,
University profs are not the ones encouraging new textbook editions: Publishing companies are.

What's with the professor bashing? Unless you've done the job, you've no idea what it entails.

"...university profs are not the ones encouraging new textbook editions: Publishing companies are...."

I suppose the Publishers are also setting the curriculum in the Universities as well.

What a load of crap.

From a pension expert:

"...It is no surprise that these plans are in trouble. They are in trouble for many reasons.

* OUTRAGEOUS BENEFITS - 70% of final salary for life beginning as young as age 55....

* LOW EMPLOYEE CONTRIBUTION RATES...

* IGNORING PLAN VALUATIONS....

* SKYROCKETING COMPENSATION COSTS...

...The highest paid full professor at Rotman was paid a salary of $328,501.96 while the classics department’s top prof took home a salary of $160,076.04. Eight faculty members broke the $300,000 salary bracket at Rotman last year while no one in classics even broke $175,000.

Of those making more than $100,000, the average salary in the management school is $196,704.78 A salary of $328,000 will generate a pension of 70% or $229,600. If paid out for 30 years this will amount to a total payout of just short of $7 Million.

Even a measly salary of $196,000 will pay out a pension of $137,000. The total payout could exceed $ 4 Million....

http://fairpensionsforall.blogspot.com/2010/08/university-plans-in-ontario-in-trouble.html

These plans are unsustainable !!!

JM
First of all, most profs will let students use old versions of textbooks, and there's always copies for free at the library.
Secondly, to compare a business school to universities as a whole is a ridiculous argument. Business schools run off tuition as profit-making enterprises for the university. The only faculty that can command those salaries are ones that could make twice that in the private sector.

Re: JM

You do not seem to be aware that DB pension plans in the university sector are limited by the Federal Govt rules on the max that can be paid out (the YMPE) - currently this is about $85000 per annum. No way is anyone getting pensions of the size you think.

The plans have been sustainable for years. The issue is the wind-up provisions under recently changed accounting rules. These assume that a university will terminate its business overnight and must have available sufficient pension funds for all concerned should this wind-up occur. Can anyone ever remember this happening to a publicly funded university here or anywhere?

What's wrong with using new editions of textbooks?

I recently completed my Master's and the complaint about having to use the latest version of a textbook really disturbs me. Why are you attending university if you don't want to learn from the latest materials?

Almost 3/4 of the classes that I took during my masters and about half the of the classes during my undergrad education didn't use textbooks. It had nothing to do with cost and everything to do with being the textbook contents being outdated. When you're at university, you're supposed to be learning the latest and greatest. With the length of time involved in a publishing cycle (multiple years from start to finish), I can't imagine someone clamoring to use old textbooks.

When I finished both degrees, I ended up purchasing about half the textbooks from the elective courses I wasn't able to enroll in so that I could continue to learn over the next few years.

I truly find it hard to believe people have a complaint about learning from the most recent materials during their education. What quality of education are you really interested in?

Wall street saw all that money sitting in private sector defined benefit pension plans and concocted a scheme to get hold of it - the 401K. Now that they have fleeced all those poor folks who have lost up to 50% of their pensions they are eyeing the money in the public sector pensions - this is what is really going on here - an excuse to terminate public sector defined benefits and hand the money over to Wall Street.

woodburn - Wall Street manages most of the money that is in defined benefit plans. The richer the pension plans, more often than not, the more money that Wall Street will handle.

The U of C has long been paranoid about student criticism of its tenured, unfireable profs. Recording lectures can get you expelled. And, when I went to the U of C, profs routinely got around allowing student evaluations through various means. While there are many excellent instructors at the U of C, I've had some dreadful cases: an instructor who left midway through the course, in order to work on her book (she left a TA to teach the course), instructors grossly out-of-date in their knowledge, chronically-absent instructors, profs who could barely communicate in English, blatantly nepotistic hiring...about the only fireable offense seems to be sexual harrassment.

Like other Canadian universities, the U of C no longer considers free thought and expression desireable. Since the 1990s, it is verboten to mention the Eurasian immigration theory of the origins of North American native populations--it's considered a 'Eurocentric' denial of Native creation myths. (I guess the outrage over Creationism only applies to Christian fundamentalists.) Religious studies profs no longer feel free (or even safe) discussing the Qur'an as a man-made work, as they do for every other religious text. 'Sexual harrassment' is now so broad that some professors are afraid to show slides of nudes in Art History lectures. 'Hate facts' (politically-incorrect truths), particularilly in sociology and political science courses, are censored. In an environment like this, incompetence is the only thing tenure protects.

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