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The McGuinty Government has been watching the Stelco restructuring
like a nervous mouse, fearing it will be dragged into the trap of
Stelco's $1.3 billion pension debacle.
And it's taken more than a year to summon the courage to walk out onto
the floor and announce the province does not plan to contribute any
funding to help out with the shortfall.
This week James Arnett, special adviser on the steel industry for the
Government of Ontario, told Stelco in a letter that the steelmaker must
start paying off its pension deficit as soon as the company emerges from
bankruptcy protection and "the province was not prepared to
contribute funding to solve the deficiencies."
Incredibly, the announcement was made only days before the end of the
bidding process, a time when it could be very disruptive. Maybe it will
dissuade one or more companies from making a bid.
To be fair, the province has been sending strong hints that various
stakeholders shouldn't expect any provincial assistance.
But the unequivocal announcement this week has definitely thrown a
monkey wrench in the protracted bidding process which ends Monday, the
last day that detailed offers will be accepted.
Yet the essential question remains: Should the provincial government
be able to wash its hands of any pension plan responsibilities with
Stelco?
The fact that Stelco is in this pensions mess is directly attributable
to a decision by the then Rae Government in 1992 to allow large companies
to have unfunded liabilities in their pension plans. The so called
"too big to fall" clause allowed Stelco to build up such a
horrific pension debt.
The legislation permitted Stelco, General Motors, Algoma and other
large corporations to avoid topping up their pension contingency funds.
As long as the company plan had enough to cover current retirees, its
future liability could be put off to another day.
The participating companies paid into a government-administered
Pension Benefit Guarantee Fund (PBGF) so that in the unlikely event of a
"fall," workers would have a place to go to receive part of
their pensions.
But the problem is that big companies did fall. Workers from Algoma
hit the fund hard and now, as of March 31 last year, the PBGF is more
than $100 million in the red.
Clearly a Stelco claim cannot be handled by the PBGF. So given this,
what are the provincial obligations to underwrite this fund that was of
its making?
For the McGuinty Government it may be a case of paying now or paying
later. The province can ante up to try to help bring a restructuring deal
together now. Or it can wait for thousands of retired steelworkers to
come knocking at its door at some point in the future.
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