EI Overhaul Underhanded

CAN CANADIAN workers and employers expect to pay lower employment insurance premiums now that federal Finance Minister Jim Flaherty is turning EI into a self-financing Crown corporation?

Not likely, in our opinion. For it’s hard to imagine premium-payers getting a break if Mr. Flaherty gets away with the huge financial deception that lies at the heart of the underfunded EI restructuring announced in last week’s budget.

In a nutshell, the shell game is this: When EI shifts from government program to Crown corporation, its $54-billion accounting surplus is going to get lost in the shuffle. The Harper government is cynically wiping this debt to EI stakeholders off the books – though you won’t see any admission of this anywhere in the budget papers. Instead, Mr. Flaherty merely tells us that the government will provide the new EI with a $2-billion cash reserve and run the plan on a "go-forward basis."

Now that’s a sweet deal for the finance minister. He’s redeeming the federal government’s $54-billion IOU to EI at four cents cash on the dollar.

It’s not a sweet deal for those who will pay future premiums. For $2 billion is not nearly an adequate financial reserve for EI.

In recent years, EI’s actuary has estimated that $15 billion is a prudent reserve for EI – if we want to ensure the fund can get through a recession, when payouts shoot up, without a dramatic spike in premiums as well.

So where does Mr. Flaherty suddenly get the idea that $2 billion is the appropriate financial back-up for the new fund? The budget, typically, doesn’t say. But it’s probably no coincidence that EI is currently taking in $3 billion more in cash every year than it needs to cover annual benefits. So Ottawa can easily fund a $2-billion reserve for the new EI out of the old EI’s current cash flow. Basically, Mr. Flaherty would be putting nothing into the new corporation beyond the cash raised from EI premiums this year, and maybe not even all of that. This is irresponsible and a disgrace.

.
.
.