Bermuda’s debt challenge
Like many Bermudians, I am very concerned about the growing size of our national debt, for which taxpayers are on the hook — both present and future generations.
In today’s daily (March 2, 2021), there is a lot of press given to the finance minister’s recent budget as well as the island’s present debt load, both direct (about $3.2 billion) and indirect (about $1.7 billion). The indirect debt burden — that is the “unfunded liabilities” that the Government (read taxpayer) is on the hook for — includes the various pension programmes for the Civil Service, MPs and senators, and the health insurance for government employees.
There is no doubt that the finance minister, Curtis Dickinson, has his hands full with all this debt mess, but he is approaching the issue thoughtfully and collaboratively, which should be applauded. He noted four options that could help to ameliorate the pension challenge, which include raising the retirement age, increasing contributions, adjusting the investment strategy to try to earn more income and, lastly, adjusting the formula for calculating the final pension payment to retirees.
I’m not sure how the government unions will react to such adjustments, but, frankly, the financial bleeding has to stop!
My recommendation would be that the Government immediately change the government-sector pension programmes from a Defined Benefit structure to a Defined Contribution structure and implement this new regime for any new government employee hired or new MP elected/senator appointed after March 31, 2021, which is the start of the Government’s fiscal year.
At least with a new structure, taxpayers will not be on the hook down the road for government employees and legislators who joined after March 31, 2021. Decades down the road after the Defined Benefit retirees have left the “old plan” and it has wound up, there will never be a future liability for the Bermuda Government and hence future taxpayers.
Sadly, Mr Editor, I’m not hopeful the above strategy will be taken up. I proposed the same solution back when I was actively involved with both the United Bermuda Party when it was in government, and the One Bermuda Alliance when first it was the Opposition and then in government, but to no avail.
If such a decision were made back then, we would have less of a financial burden today. So the question remains: “Does the present government, with its strong majority, have the wherewithal to effect such change?”
The clock is ticking.
ALLAN D. MARSHALL