Alberta’s United Conservative Party Has Seized Control of Its Public-Sector Pension Funds
As part of its anti-union agenda, Alberta’s right-wing government has wrested control of workers’ retirement funds from a joint board that gave them a guaranteed say. Workers in the province are preparing to mount a legal challenge to the power grab.
Alberta finance minister Travis Toews (L) shakes hands with the province's premier, Jason Kenney (R), at their 2019 swearing in. (Alberta Government)
- Interview by
- Dan Darrah
In 2019, Alberta’s United Conservative Party (UCP) passed surprise legislation making the publicly owned Alberta Investment Management Corporation (AIMCo) the sole investment manager of public-sector pension funds in the province. Previously, pension fund boards could choose between different investment managers. The legislation, Bill 22, also deregulates certain areas — new energy projects, for example, can be streamlined.
This move enraged Albertan workers. Teachers represented by the Alberta Teachers Association (ATA) have been the most vocal opponents of the new legislation. A joint committee, the Alberta Teachers Retirement Fund (ATRF), had managed their funds for almost eighty years. The ATRF safeguarded its contributors’ interests by ensuring that teachers accounted for 50 percent of board member positions.
Now, the investment management of pension funds worth C$18 billion are being transferred, in the name of cost saving, to AIMCo, an institution whose judgement and credibility have frequently been questioned. There are serious concerns about how much influence the ATRF will have over what’s being done with its members’ money.
Last month, Alberta finance minister Travis Toews imposed an investment management agreement (IMA) by decree, without any input from the ATRF. The Alberta Federation of Labour (AFL) has branded the IMA as “pension theft.” The AFL and the ATA are discussing the possibility of legal challenges. While the ATRF will set the direction of investment, AIMCo has, as the teachers association noted, an “effective veto” on the ATRF’s decisions.
The province’s labor unions believe the government may direct pension funds to support the energy sector. These suspicions stem from recent capital flight from fossil fuel–rich Alberta and the UCP’s unswerving pro-oil position. The commitment of Alberta premier Jason Kenney and the UCP to resource extraction is enough to trump their otherwise rigid disapproval of intervention in the free market.
In an interview with Jacobin, school principal and longtime ATRF board member and chair Greg Meeker explained some of the dynamics at play.
It’s fair to say that the UCP is generally pretty hostile to public-sector workers. But this still seems like a flagrant, next-level move on their part.
I think you could say, without exception, that they’re hostile. It’s not just teachers that have experienced this. This government has picked a fight with doctors and changed legislation so it doesn’t have to negotiate with them in the same way during a pandemic. Never mind teachers, never mind public-sector workers in general. It is next level. But I don’t think the UCP mentality behind it is anything new.
How have workers responded to the AIMCo plan so far?
The anger goes all the way back to Bill 22, which, of course, has been instituted in Alberta for a little over a year now. Teachers were angry at the beginning. Workers in general were angry, but teachers were really angry because they have had jointly run pension funds since 1939.
For eighty years, we have had a board that is half appointed by the government, half appointed by the Alberta Teachers Association; that is the fiduciary for the plan. That’s the highest legal obligation you can have under the law. But now, all of a sudden, you have the minister that’s responsible for the ATRF board getting in and monkeying around with the investment management of the plan.
That’s not going to go over well. The minister isn’t the fiduciary; the minister is not the trustee of the plant. The investment management was a plan that teachers were quite happy with. And, in fact, performance data indicates that the investment management of the plan has been high quality.
The ATA, the Alberta Teachers Association, have now announced they’re going to sue the government over this imposed IMA. And the other unions have said that they are going to sue the government now, too.
It seems like the new model frames the management of the fund as a negotiation, now just with a new partner who holds the key to the funds: AIMCo. But it appears that the ATRF can really only offer direction — it’ll be AIMCo or the UCP that makes the final decision.
The way it is supposed to work, in theory, is that the ATRF board is still the trustee and fiduciary, and sets the high-level investment policy, which includes asset allocation, and then it transmits that investment policy and asset allocation to AIMCo, and AIMCo carries it out.
But there is a provision in the investment management agreement that allows AIMCo to ignore the instructions of ATRF in certain situations. In the legislation, it straight up says, “If you can’t come to an agreement, the minister will impose one.” If the minister imposes an agreement, is it going to come down in favor of the ATRF or in favor of AIMCo?
AIMCo is a solely owned Crown corporation of the Alberta government. The Ministry of Treasury Board and Finance appoints the board, without any input from the people whose money is invested.
The ATRF board is a joint board. It represents the interests of both teachers and the government. But the Government of Alberta is the sole shareholder of AIMCo. Teachers are angry because the Government is dishing out instructions.
They’ve gone from a situation where they had a joint organization for eighty years. All of a sudden, this has developed in secret, because the government didn’t publish this plan, unlike all the other ministerial orders.
To me, the million-dollar question is why. How do you read the government’s move to hand over the pension funds to AIMCo?
Well, there’s been lots of speculation, and no one really knows. The speculation has gone down a couple different lines. One is the possibility that the government wanted to make these pension funds prop up the oil and gas industry, which is having trouble finding institutional capital for obvious reasons.
I don’t give that theory a huge amount of credibility — I think it has more to do with another reason, which is that Jason Kenney has expressed a desire to withdraw from the Canada Pension Plan (CPP) and have an Alberta pension plan. One of the things you need if you’re going to withdraw from CPP is somebody to manage the assets. And I think they screwed over teachers in the process so as to build a bigger, stronger AIMCo that would be able to pick up, say, $30 billion worth of assets that might come out of CPP if Alberta withdrew.
Now, the minister of finance, of course, says this is all about costs: “We’re gonna save on investment costs, we’re gonna save $40 million a year.” When the minister did this, they had a business case that was written by AIMCo. That’s a massive conflict of interest, right? Every asset manager under the sun wants more assets.
I’m curious about AIMCo as an organization. I don’t know much about it, but I do know it’s been embroiled in scandal.
They lost $2 billion in March. To give you an idea, AIMCo has about $100 billion. And it does most of the public-sector pension plans, which, last spring, had the ability to leave AIMCo. Before that, they were bound to AIMCo. Bill 22 has now taken away their ability to leave.
AIMCo had a strategy that went badly — really, really badly — during the pandemic last March. They ended up losing $2 billion in a couple of weeks. The investment strategy they lost money on is called VOLT. The “V” stands for volatility. If markets go really, really badly, you can lose a whole lot of money, and that’s what happened.
I think that’s where it all started. I think AIMCo was really worried about the other public-sector pension plans leaving in order to set up their own investment managers or go with private ones. I think they talked to the government and exploited its natural hatred of unions to get them to lock these other plans to AIMCo.
So you don’t necessarily read this as a desperate attempt to resuscitate the oil and gas industry?
Well, I don’t think they’re that dumb. But you know what? We have yet to find the bottom of that particular barrel.
There are other people in Alberta that do feel like that is how it’s going to go. In the AIMCo Act, section 19 says the minister of finance may give directives to AIMCo, and by carrying out any such directives, it could be deemed to have executed its fiduciary duty — so it gets them off the hook.
The minister of finance is trying to act like imposing this IMA was just the regular course of business — so it’s death by a thousand cuts. To me, you can interpret this as the IMA solidifying his grip on this cash, and before you know it, he might have to issue a couple of directives. And potentially those directives could be, “Hey, prop up oil and gas.” “Hey, lay some pipe.” “Hey, Keystone Part 2.”
Do you think the UCP is going to suffer from this in 2023?
If you mess with people’s pensions in some undeclared plan, they are never going to forget that — not in a million years. Is that gonna be their number one issue? Yeah. Is it gonna affect them? Absolutely.
So you’re a former ATRF board member and chair who served the maximum term you could serve. You’re also a principal. Do you like that work?
I love it. I’m doing what I’m meant to do. But I was also meant to help take care of other teachers. And make sure their money isn’t thrown away on an uncapped volatility hedge.