It's council budget time as we all grapple with rate rises and the super slug

April 28, 2011

Dear councillors, local government officers and a few others,

Greetings for the first time since our bumper April email edition sent last Tuesday.

It's budget season for the public sector with the Victorian Government promising a horror budget next Tuesday and then the Feds following through seven days later on May 10.

At Manningham City Council, we're going public with our budget tonight. No doubt, we'll all get busy with those comparisons of rates rises across the sector.

Our proposed 5% rate rise for 2011-12 will be the highest in four years but is expected to be lower than most of our neighbouring councils.

We did publish some earlier comparative figures in this edition but have since learned they were only private estimates and not yet endorsed by councillors.

Some country councils, especially those hit by the recent floods, are seeking direct assistance from the State Government and also going for heavy rate rises. We'll endeavour to assemble a comprehensive list so please send through details of your proposed 2011-12 rate increases to

Meanwhile, check out this story which was sent to the full 51,000-strong Crikey email data base an hour ago. It's a classic example of how local government is treated differently to our state and federal peers.

Whilst I'm not arguing against fully funding officer super as the liability is accrued and measured, it is ironic in the extreme that the Federal and State governments do not impose the same straight jacket on themselves. If you'd like to post a comment, here is the web version of the story or you can email if you'd like some feedback to appear in tomorrow's Crikey email edition. Meanwhile, here is today's Crikey yarn:

10. Victorian Councils slugged for super, why not Commonwealth and the States

Stephen Mayne writes:

Peter Costello nicely stitched up Wayne Swan in his Fairfax column this morning, pointing out how Labor has squandered the best terms of trade in generations.

However, Costello was also typically sneaky with the description of his own record when he wrote the following about the federal financial position five years ago:

"The federal government was running budget surpluses. It had paid off its debt so it established a sovereign wealth fund – the Future Fund – to save for the future. This was to prepare for a time when things were more normal and to cover the costs of the ageing population. About $60 billion was deposited into it."

If the Howard government had really "paid off" all of Labor's debt, then what on earth were the $58 billion of Federal government bonds on issue when Kevin Rudd came to power in November 2007?

Sure, the home page of the federal borrowing authority now reveals it is up to $189.84 billion, but Labor didn't start with no debt.

Costello's description of the Future Fund as "a sovereign wealth fund" is also completely misleading because it is nothing more than a half-funded superannuation scheme for current and past federal public servants, as Crikey has regularly pointed out over the years.

And it was Costello who recklessly allowed unfunded Commonwealth public section superannuation liabilities to blow out by $29 billion to $98 billion over his first 10 budgets before the Future Fund was established.

Costello then did the right thing and pumped in a quickfire $50 billion as the commodities boom started to take hold in the final two years of the Howard-Costello years.

It didn't take Labor long to squander the surplus and simultaneously end additional contributions to the Future Fund, which will now take decades to be fully funded, rather than 2020 as the first Swan budget claimed.

Contrast all this with what the Victorian local government sector has been through over the past few months.

Vision Super, which handles the superannuation of all current and past council workers, slapped Victoria's 79 councils with a $71 million bill earlier this year to top up the defined benefit elements of the liability.

Darebin, an inner-city council led by mayor Diana Asmar, who is married to a Stephen Conroy staffer, was hit with a $2.7 million bill and paid in cash on March 31. This hit will be fully reflected in Darebin's 2010-11 budget outcome and the 2011-12 budget.

Indeed, many Victorian councils are jacking up rates by more than they had planned because of the $71 million cash slug to maintain fully funded super schemes.

Manningham City Council is having a special meeting of council tonight to approve the 2011-12 budget and our first ever 10-year financial plan. The officers have proposed a 5% rate rise and this is expected to be approved, even though the past two years have both been lower at 3.7% and 4.8% respectively.

The superannuation slug was the final straw that saw a majority of councillors move back to the long-term plan of compounding 5% rate rises.

The Manningham budget reveals a total provision for the super blowout of $2.5 million, comprising $1.34 million in 2010-11 and $1.14 million in 2011-12.

Even after this slug, Manningham remains completely debt free with $50 million of cash in the bank, although some of this is restricted cash for liabilities such as nursing home bonds and long-service leave.

But none of that cash includes funds set aside for superannuation, as this is handled off balance sheet by Vision Super. In other words, Manningham really does have no debt and a net cash position after considering all liabilities, unlike the Commonwealth during the Costello years.

Contrast that with Peter Costello and Wayne Swan who, for all but two of the 14 budgets between them, have failed to properly fund ballooning liabilities for public sector superannuation, the majority of which relates to ridiculously generous defined benefit pensions for the military.

In the case of Costello, he has even erroneously claimed that the inadequate funds that have been set aside for military pensions are somehow equivalent to a sovereign wealth fund like those run by genuine saving countries such as Norway and Singapore.

The very simple question for Peter Costello and Wayne Swan goes as follows: if Victorian councils are forced to fully fund defined benefit blowouts as soon as any shortfall is identified, why not the Commonwealth and why not states like NSW and Victoria which together have more than $40 billion in unfunded super liabilities?

Disclosure: Stephen Mayne is a Manningham City councillor who receives no superannuation from council and was not paid for this contribution.


Does the ASU have a conflict on Vision Super board?

Does it seem strange to anyone else that people associated with the Australian Services Union dominate the Vision Super board. The ASU is the union which handles enterprise bargaining negotiations across the local government sector.

A successful tactic in the past has been to negotiate generous deals with Labor dominated councils and then seek to use the precedent to force generous pay claims across the sector.

However, does the ASU ever go through these negotiations and say to themselves: "Hmmm, if we negotiate too hard this will blow out the liabilities of the local government super fund we help run."

Lo and behold, it is the ASU-dominated Vision Super board which demanded Victorian councils produce $71 million in cash with just a few months notice. The Labor dominated councils certainly won't turn around in the next EBA and try to recoup some of the costs with the workforce. More likely, it will just be passed on to ratepayers through higher than inflation rate rises.

Meanwhile, why don't the ASU also insist that state and federal schemes are fully funded, rather than just draining the third tier of government of scarce cash reserves?

Pokies update: backing Wilkie in The Sunday Age

On Thursday afternoon we were strolling around the lake at Nagambie with the kids, half way to RACV Cobram, when the call came in from The Sunday Age seeking an opinion piece on Andrew Wilkie and the pokies situation.
Click here to see the result.

Also, check out the latest from Paul Bendat's Pokieact website and this package of our past pokies coverage.

And try watching this 30 second anti-pokies ad made by Paul Bendat two years ago featuring our daughter Alice, who was 6 at the time:

Donate to help settle the better half down after loss of $1000 bet revealed

The Mayne Report has wracked up plenty of losses since it was launched in October 2007 and we moved to a free model in June 2009 after struggling along seeking subscriptions for the first 21 months. This was partly because getting accidentally elected to Manningham City Council in November 2008 meant there was no longer time to produce a comprehensive subscription service. Besides, there was also the obvious conflict of interest of putting information about Manningham behind a paywall.

As most councillors know, it is hard to pursue a profession or a business when you're doing 20-30 hours a week on council business.

The better half, Paula Piccinini, hasn't been overly thrilled with all of this and is particularly grumpy right now having just stumbled across this story in The Manningham Leader about my losing a $1000 bet over who would replace former deputy mayor Fred Chuah.

It has been nice to receive more than $10,000 worth of donations over the past two years and if you fancy strengthening the domestic argument about why all of this should keep happening, this afternoon would be a particularly opportune time to come through with a small donation.

If you're up for it, just click on the image below:

From the press room: credit ratings, Woodside's carbon dodge and paper review

After resisting most requests to do the "what the papers say" segment on ABC News Breakfast, we've relented and agreed to do next Monday, which is the first day Virginial Trioli and Michael Rowland will be appearing on ABC1.

It's a tough gig as you've got to be in there by 6.15am and on air at 6.45am having got right across the papers to handle a 5 minute discussion.

In other recent media gigs, we had a 5 minute chat to Lindy Burns on 774 ABC Melbourne last Wednesday about the threat to the USA's AAA credit rating, plus a brief mention of a carbon resolution at the Woodside AGM earlier that day.

It was good that Crikey gave the Woodside AGM vote this solid run on Thursday as it was barely mentioned elsewhere in the mainstream press.

Tales from the talk circuit

The keynote address filling in for GetUp's CEO Simon Shiek in front of 500-plus internal auditors at the big SOPAC conference in Melbourne last month has produced this evaluation from participants.

As a speaker it is always good to get comprehensive feedback rather than just anecdotal comments. Whilst the overall feedback was good, clearly I should have had some slides to accompany the fast-paced rave about Wikileaks, governance and social media.

Meanwhile, click here to read other feedback after speeches and click on the image below if you fancy an engagement:

Sign up for campaign and governance Tweets

Click on the image above to join more than 4000 followers on Twitter. We are regularly dropping out observations about journalism, politics, breaking stories, local government and shareholder activism and here are some of the more recent Tweets.

April 27:
Oh dear, the missus has just found this:

April 27:
Climate Institute & Woodside AGM

April 27:
Praising Wilkie in Sunday Age

April 20:
Climate Institute (which has AFL CEO Demetriou on board) got $1.26bn worth of stock supporting Woodside resolution today. $20.45bn against!!

April 20:
Doing ABC Melbourne shortly on US credit rating. US 10 year bonds yield 3.37% and Oz Govt did $700m 10yr bond yield today at 5.6%. Go figure

April 20:
Bunnings have shelled out more than $20m for a prime 3 acre site on Doncaster Hill between Westfield and our new $38m civic building.

That's all for now.

Do ya best, Stephen Mayne

* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.