For Councils and Boards: President Martin Responds to Compensation Review

A report commissioned by the provincial government comparing levels of public sector compensation was leaked to the media yesterday. The report was undertaken by Ernst & Young and is now available on the Province of British Columbia’s Core Review website.  I encourage local governments that have not yet reviewed the report to do so. I also want to share the perspective of UBCM’s Executive on the approach and content of the report.

In September of 2013, BC local governments unanimously endorsed the Strong, Fiscal Futures (SFF) report at UBCM’s annual convention.  The basic thrust of the report was that while the system of finance for local government was currently sound, increasing cost pressures risked making the property tax unaffordable for many British Columbians.  BC local governments called upon the Province to work with UBCM in a joint process to look at the entire system – expenses as well revenues – to look for ways to improve the system and address its weaknesses.  The report received broad public support, including an endorsement from the BC Business Council.

Following its 2013 Convention, UBCM followed up with Premier Clark and Minister Oakes to secure a commitment to work with the Province in a joint process through the framework set out in SFF.  At the time Minister Oakes told us that the Ministry did not have the resources to engage on SFF since all of its resources were dedicated to completing changes to local government elections legislation.  UBCM went further in April of 2014 by bringing our full Executive to Victoria to meet with nearly thirty Ministers and MLAs to discuss the continued need for a joint working group.  These meetings also failed to gain traction on the issue.

UBCM received the Province’s report, BC Public Sector Compensation Review from the Province on Friday, September 5, 2014. A preliminary analysis by staff raised significant concerns with the quality of the data available to Ernst and Young and the lack of objectivity in the analysis.  Included in this preliminary analysis were the following:

  • The report has been developed under the Core Services Review. However, when UBCM Executive asked Minister Oakes in November of 2013 if local government would be considered under the core review, the Minister’s response was that relevant stakeholders would be consulted for any proposal accepted as part of the Core Review.  As the Compensation Review clearly shows, the authors of the report never consulted UBCM, nor was a request to do so included in the mandate provided to Ernst & Young.
  • For unknown reasons, the report defines local government sector wages to include local governments, fire, police, BC Ferries and TransLink.
  • The report attempts to highlight that local government salaries across several classifications have increased at a higher and faster rate than their provincial counterparts in recent years.  In particular, the report claims that in settlements with bargaining units, those in the local government (or “municipal”) category were double those in core government (the provincial public service) from 2001 to 2012.
  • The report seeks to compare senior local government positions, senior provincial positions (ADM, DM), and CEOs of crown corporations and quasi-governmental organizations. However, the report does not take into account the scope of the roles and responsibilities of the respective positions (e.g. budget, workforce, complexity, services), and readily acknowledges that further investigation is required.
  • Despite referencing ‘stakeholders’ when discussing data sources, the report’s sources are one-sided and limited to government sources. They excluded direct consultation with local governments or unions. Direct consultation focused primarily on government sources, and used secondary sources from the Canadian Federation of Independent Business, Fraser Institute, and the Canadian Taxpayers Federation.
  • The report cites limitations in the data collection on 26 occasions, and acknowledges that a comprehensive review of compensation has not been conducted. It also cites that data is unavailable to support the analysis of compensation in many cases.  Nevertheless, a report was still developed.
  • Despite acknowledging the data limitations and the inability of the data to support robust conclusions, it did not prevent the authors from adopting a strong tone in their word choice and recommendations.
  • The report acknowledges that the Province is beginning to experience talent problems in some areas due to continuous wage freezes, particularly among exempt staff below the ADM level. The report also references a compression between provincial unionized staff wages and those of exempt supervisors and references incidents where unionized staff are unwilling to move up due to a feeling that the positions are not financially rewarded adequately.
  • The report shows very little knowledge of the role and function of local governments and concludes that a better local government compensation environment would exist if this function was centrally controlled. Local government autonomy is not valued in the report, and is instead viewed as a problem.
  • The report has very strong recommendation options with profound consequences to local government autonomy, including: centralized collective bargaining; changing the scope of the Auditor General for Local Government’s mandate to review compensation; implementing tax and expenditure laws and making grants conditional; and challenging and overriding the Community Charter.

The Vancouver Sun reported yesterday that Finance Minister Mike de Jong released a statement on the leaked report that included the following:

There’s only one taxpayer funding multiple levels of government and important public services, and it’s up to the provincial and local governments to ensure we’re working together [s]o those services aren’t costing citizens more than necessary.  This report shows that while there’s alignment in some areas, there’s more work to do at all levels. Some local governments are paying more than market value for similar jobs, compensation levels have increased at local government levels significantly above inflation and the rate of increase in core government (and) the report also shows the Province needs to keep working to manage compensation and spending at Crown corporations — a recommendation that reflects our recent announcement of taxpayer accountability principles for all Crown boards.

Last week Minister Oakes provided correspondence seeking to enter into a “letter of intent” based on the findings of the review.  I replied to the Minister to say that given the lack of direct consultation, the limitations of the report, and the absence of meaningful input from UBCM’s membership, it would be inappropriate to commit to a letter of intent at this time. Instead, I made a commitment to be available for further dialogue that concerns strengthening the system for local government finance and improving taxpayer value. Compensation is an issue that should be considered within a comprehensive framework as set out in SFF.

So where do we stand now?  UBCM has been seeking provincial engagement to address the long-term sustainability of the system for local government finance for a full year.   The Province has now prepared its own report, narrowly focused on compensation comparisons based on an incomplete data set.  The first step in my view is that we need to stop working in isolation and begin working together through a partnership approach.  I will be reaching out to the Province to find an appropriate forum to engage with the broad issues concerning the sustainability of the system for local government finance.  UBCM will also seek to have the Province present to the membership on the findings of its Compensation Review at UBCM’s Convention in Whistler next week.  We will provide details on such a session once they are confirmed.

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