Sullivan financial statement masks deeper issue
Finance minister Loyola Sullivan today released an update on the province's fiscal position. This was done outside the legislature; no word yet on when the session will begin but guesses are that it won't be much before the end of November.
Sullivan said that a combination of increases in different revenues plus changing the way offshore revenue money is accounted have reduced last spring's budgeted deficit of $492 million and turned it into a modest surplus of about $1.5 million.
Other changes to the financial situation include marginal declines in revenue from gasoline taxes and equally marginal increases in operating budgets due to increased gasoline and heating oil prices.
In the news release and actual statement, government is claiming credit for greatly improved finances on the one hand and warning that a major problem remains in the form of the provincial government's $12.0 billion debt.
What all that means is actually pretty simple. If we add up all the provincial government's assets and liabilities on an annual basis, we wind up $1.5 million to the good.
Look more closely at the financial statement and something else pops up: if all other things stay the same, when Loyola Sullivan checks his bank balance next March, he'll find over $300 million in cash he didn't plan on having at hand.
The forecast accrual deficit - the $492 million figure - was comprised largely of unfunded pension liabilities. In other words, the provincial government forecast that while prudent financial management would see government setting aside over $450 million to cover future expenses from public sector pension plans, it wasn't able to do so.
Therefore, there was a large deficit totaling almost $500 million. Just remember, though, that this is a theoretical deficit annually; no money was borrowed to cover it - government actually planned to borrow only $62 million in new money to pay for day-to-day operations.
Remember as well, that with all the new revenue, government hasn't really put anything toward dealing with the unfunded liabilities beyond the modest amounts already negotiated. Nor has government done anything at all to deal with the $12.0 billion accumulated debt other than use it as a boogey man to frighten people who might ask for extra spending this year.
That is the deeper problem with Loyola Sullivan's financial management over the past three years.
Under the Williams administration, Newfoundlanders and Labradorians have no idea what the government will do with the extra cash. In fact, the way Loyola Sullivan likes to report the numbers, he is actually hiding the true picture, all the while claiming he is not telling the fables of some previous provincial finance ministers. He isn't - that much is true. Sullivan simply tells other fiscal fibs.
When the federal government ends up with massive annual surpluses, it has already told people how that money will be spent. Since the late 1990s, the surpluses that in some years add up to almost the total debt in this province have been spent paying off Ottawa's own debt, increasing spending on programs like health care or a combination of the two.
Predictably, Liberal leader Gerry Reid wants to spend the money on something here and now. He has spoken of running small deficits on a cash basis.
In doing so, Reid plays right into Loyola Sullivan's hands. Sullivan's presentation of the province's finances is designed to hide the extra cash in the bank every year. By calling for deficits, Reid allows Sullivan to simple hold up the debt-on-a-stick, wave it about and frighten people, all the while shaking his head at how the approach Reid proposes is what created the province's financial mess in the first place. Sullivan can and will heap praise on himself for having balanced the provincial books in two years when they predicted it might take eight years.
The balanced-books miracle is entirely made up, of course, at least insofar as Sullivan and Premier Williams claiming credit for it is concerned. The PriceWaterhouseCoopers report two years ago deliberately underestimated the short- and medium-term provincial revenues to make the province's financial problems look far worse than they are. The revenues we have actually seen were predictable, even two years ago and even on a conservative - i.e. prudent - basis.
The source of the added cash is also worth noting. The new money does not come from the January deal with Paul Martin. The added money, both the royalties and the added corporate taxes, come entirely from the Real Atlantic Accord from 1985. The royalty regimes put in place by successive Liberal governments, building on the landmark deal under the Peckford Conservatives is pushing the provincial government well into the black. Taken together, the Real Atlantic Accord will add $302 million to the provincial accounts. On an accrual basis, those figures will total at least $330 million above the numbers in the spring budget. Note that this is almost bang on the offshore revenue projections made previously on the Bond Papers.
In fact, aside from the annual draw-downs allowed under the January deal, the interest income from the federal Equalization-like transfer payment is entirely absent from this little financial up-date. Media reports have quoted provincial officials to the effect that the interest on this money is accumulating at a rate of $5.0 million a month. That works out to about $45 million by the end of the fiscal year and that money, in its entirety is available for the province to spend.
Sullivan makes no mention of it at all.
Both Reid and Sullivan miss the point, however, the latter by obvious design.
The public discussion should be about how to be dispose of that cash in the long-term interest of the province. Loyola Sullivan's statement should have contained an honest presentation of the province's finances and a clear statement of what government will do with the hundreds of millions in extra money it has and will have year after year into the future.
Instead, most Newfoundlanders and Labradorians will be bamboozled by numbers. They will be denied the chance to participate in a substantive public policy debate. In the end, and from the perspective of truth in accounting, it is hard to distinguish Sullivan from some of his immediate predecessors.
If past experience is any guide, though, we can make a reasonable prediction as to what government will do with its added cash. Come January 2006, there will be a spending spree, as there was in January 2005. What is genuinely a significant cash surplus will be spent on one-time projects, some of which may be of dubious long-term value. The penchant of this government for quick cash-fixes has been noted here on previous occasions.
And the long-term debt?
It will remain at $12.0 billion, growing steadily each year, all so that Loyola may have a boogeyman with which to frighten the natives.
Update - TD Waterhouse's senior economist made a number of interesting points, but also a number of errors in his comments on CBC radio this morning.
1. As noted above there has been NO action by the provincial government to date to reduce the debt load. The Grimes administration actually managed to retire some of the province's direct debt - a figure the economist referred to when he spoke of a debt t- GDP ratio of 20%. Total and accrual indebtedness continues to climb and will continue to climb under the Conservatives unless corrective action is taken.
2. The January deal is worth more than $2.0 billion. No way. As long as the provincial economy pushes the province off the Equalization rolls, the provincial government will get nothing from the January deal beyond the $321 million already drawn down. The only way to make the deal worth more than the initial hand-out is if oil prices fall well below the TD predictions, i.e. well below US$35, rebounding to US$50.
Showing posts sorted by relevance for query loyola sullivan. Sort by date Show all posts
Showing posts sorted by relevance for query loyola sullivan. Sort by date Show all posts
04 November 2005
14 March 2005
Danny Deficit Billions?
If Loyola Sullivan's worst case scenario comes true, Danny Williams will increase the province's accrual debt by an amount that is 76% of the total direct debt since Confederation.
Loyola Sullivan never flings words around carelessly, especially when it comes to numbers. He has a love of numbers and decimals and fractions that even a mathematician or account would find perverse. So if Loyola actually told CBC Radio on Friday that the accrual debt could hit $17.0 billion then $17.0 billion is well within the range of possibilities.
Let's take another look at Loyola Sullivan's deficit and debt projections and put it in perspective.
He told CBC Radio that "We're going to have significantly more [debt] over the next number of years," he says.
"We're going to have [a] $14-, $15-, $16-, maybe $17-billion debt before we stop this. So, it's a huge problem. Our problem is still growing." That is a direct quote.
If government was able to reduce the accrual deficit from its current level of about $500 million down to zero (a completely balanced budget) in the next four years, the provincial government would add $2.0 billion to the debt. The total debt at the end would be around $14.0 billion, up from the current level of near $12.0 billion.
(Deficit is how much more we spend than we take in during any given year; debt is the accumulation of all the overspending and any other long term borrowing. Direct debt is what the government owes directly. Accrual debt is the total of everything owed by government and its agencies and any loan guarantees and other liabilities backed by the Crown.)
In order to hit that $17.0 billion figure we would have to increase the debt by $5.0 billion. In other words, we would have to incur annual deficits averaging $500 million for another decade.
Observation 1: In order to hit that number for the debt, it would be 2014 at the earliest before the provincial budget would be balanced.
The Commitments:
A. The Budget. In last year's budget, Loyola Sullivan was careful to commit to balancing the books on a cash basis only by 2007-08. He said that "[i]n March 2007, this government will present the people of this province with a budget that is balanced on a cash basis and that will be sustainable into the future."
B. The Blue Book. Loyola Sullivan made reference to the Blue Book commitments in that speech. Specifically, the commitment was to:
- Eliminate the total capital and current account deficit by 2008;
- [Achieve] a net debt to GDP ratio of 40% or less by 2008; and ,
- [Make] [a]nnual payments to the public sector pension funds that will achieve real year-over-year reductions in the unfunded liability of public sector pension plans.
PriceWaterHouse Coopers comments: The Gourley report made the claim that the province could not balance its current and capital account by the same period. These are not exactly the same thing. "Cash" is sometimes used interchangeably with "current" meaning the money spent for salaries and operations.
On that basis the budget is already balanced and should remain balanced if not in surplus for the next five to eight years. As PriceWaterHouseCoopers reports (p. 34):
"These projections show that even with an assumed level of restraint on expenditure growth and growth in oil related revenues from a forecast $160.1 million for 2003-04 to $491.9 million in 2007-08, it will not be possible to eliminate the Province’s cash or consolidated accrual deficits within the next four years."
Assessment 1: There are contradictions between the Blue Book and current government commitments.
The current account has been balanced already consistent with Blue Book and the last budget.
However, the budget speech only committed clearly to balancing current account. There is no commitment to balancing the capital account nor is there a clear commitment to carrying through on the Blue Book promise of tackling the unfunded pension liabilities.
Mr. Sullivan's comments to CBC suggest yet another set of fiscal commitments that do not resemble those made previously except in broad outline.
Based on Mr. Sullivan's comments, government does not intend to reduce the unfunded pension liability in the short- to medium- term. It will also not achieve its commitment to balance the current and capital accounts before the next election. In fact, government may take up to a decade to achieve a balanced budget despite a commitment to attain current and capital balance within four years and achieve "real" reductions in the accrual debt and deficit.
Observation 2: In 2014, there will be less revenue life left in the offshore than we have now. That means the province will balance the books and have all the debt servicing costs associated with that at the very point when provincial government offshore revenues will start to decline.
Go back and have a look at the offshore revenue projections Wade Locke made in his public presentation in February. Locke projected that in 2014, direct offshore revenue would be slightly more than $200 million and would decline annually until 2025. Compare that to 2007/08 when projections have oil revenue being between $600 million and $1.1 billion, depending on the price of oil per barrel.
Observation 3: The current provincial government direct debt is approximately $6.5 billion according to statements from the provincial department of Finance.
In Mr. Sullivan's' worst case scenario (accrual debt = $17.0 billion by 2014), the provincial government debt during the Williams administration would grow by an amount equal to 76% of the accumulated direct debt from 1949 to 2004.
I am still sitting here with mouth agape at the prospect that the provincial government might actually be that far away from its commitments last year.
Maybe Loyola didn't mean it.
But did he not mean what he said last Friday or what he said last year?
Loyola Sullivan never flings words around carelessly, especially when it comes to numbers. He has a love of numbers and decimals and fractions that even a mathematician or account would find perverse. So if Loyola actually told CBC Radio on Friday that the accrual debt could hit $17.0 billion then $17.0 billion is well within the range of possibilities.
Let's take another look at Loyola Sullivan's deficit and debt projections and put it in perspective.
He told CBC Radio that "We're going to have significantly more [debt] over the next number of years," he says.
"We're going to have [a] $14-, $15-, $16-, maybe $17-billion debt before we stop this. So, it's a huge problem. Our problem is still growing." That is a direct quote.
If government was able to reduce the accrual deficit from its current level of about $500 million down to zero (a completely balanced budget) in the next four years, the provincial government would add $2.0 billion to the debt. The total debt at the end would be around $14.0 billion, up from the current level of near $12.0 billion.
(Deficit is how much more we spend than we take in during any given year; debt is the accumulation of all the overspending and any other long term borrowing. Direct debt is what the government owes directly. Accrual debt is the total of everything owed by government and its agencies and any loan guarantees and other liabilities backed by the Crown.)
In order to hit that $17.0 billion figure we would have to increase the debt by $5.0 billion. In other words, we would have to incur annual deficits averaging $500 million for another decade.
Observation 1: In order to hit that number for the debt, it would be 2014 at the earliest before the provincial budget would be balanced.
The Commitments:
A. The Budget. In last year's budget, Loyola Sullivan was careful to commit to balancing the books on a cash basis only by 2007-08. He said that "[i]n March 2007, this government will present the people of this province with a budget that is balanced on a cash basis and that will be sustainable into the future."
B. The Blue Book. Loyola Sullivan made reference to the Blue Book commitments in that speech. Specifically, the commitment was to:
- Eliminate the total capital and current account deficit by 2008;
- [Achieve] a net debt to GDP ratio of 40% or less by 2008; and ,
- [Make] [a]nnual payments to the public sector pension funds that will achieve real year-over-year reductions in the unfunded liability of public sector pension plans.
PriceWaterHouse Coopers comments: The Gourley report made the claim that the province could not balance its current and capital account by the same period. These are not exactly the same thing. "Cash" is sometimes used interchangeably with "current" meaning the money spent for salaries and operations.
On that basis the budget is already balanced and should remain balanced if not in surplus for the next five to eight years. As PriceWaterHouseCoopers reports (p. 34):
"These projections show that even with an assumed level of restraint on expenditure growth and growth in oil related revenues from a forecast $160.1 million for 2003-04 to $491.9 million in 2007-08, it will not be possible to eliminate the Province’s cash or consolidated accrual deficits within the next four years."
Assessment 1: There are contradictions between the Blue Book and current government commitments.
The current account has been balanced already consistent with Blue Book and the last budget.
However, the budget speech only committed clearly to balancing current account. There is no commitment to balancing the capital account nor is there a clear commitment to carrying through on the Blue Book promise of tackling the unfunded pension liabilities.
Mr. Sullivan's comments to CBC suggest yet another set of fiscal commitments that do not resemble those made previously except in broad outline.
Based on Mr. Sullivan's comments, government does not intend to reduce the unfunded pension liability in the short- to medium- term. It will also not achieve its commitment to balance the current and capital accounts before the next election. In fact, government may take up to a decade to achieve a balanced budget despite a commitment to attain current and capital balance within four years and achieve "real" reductions in the accrual debt and deficit.
Observation 2: In 2014, there will be less revenue life left in the offshore than we have now. That means the province will balance the books and have all the debt servicing costs associated with that at the very point when provincial government offshore revenues will start to decline.
Go back and have a look at the offshore revenue projections Wade Locke made in his public presentation in February. Locke projected that in 2014, direct offshore revenue would be slightly more than $200 million and would decline annually until 2025. Compare that to 2007/08 when projections have oil revenue being between $600 million and $1.1 billion, depending on the price of oil per barrel.
Observation 3: The current provincial government direct debt is approximately $6.5 billion according to statements from the provincial department of Finance.
In Mr. Sullivan's' worst case scenario (accrual debt = $17.0 billion by 2014), the provincial government debt during the Williams administration would grow by an amount equal to 76% of the accumulated direct debt from 1949 to 2004.
I am still sitting here with mouth agape at the prospect that the provincial government might actually be that far away from its commitments last year.
Maybe Loyola didn't mean it.
But did he not mean what he said last Friday or what he said last year?
17 February 2012
Fishery reform: the deeper story #nlpoli
NTV’s Thursday report on Loyola Sullivan focused on the union protests and accusations of a conflict of interest from Liberal Jim Bennett.
But the more interesting news on Thursday came from Michael Connors’ tweets about Sullivan’s speech to the employer’s council.
Sullivan is now talking about the economic problems in Europe. He says world's faltering economies are a result of living beyond means.
He's veering back to the debt issue now.
Sullivan talks about governments spending irresponsibly so they could get re-elected.
Sullivan now talking about his own tenure as finance minister. Proud that he brought down first balanced budget in 2006.
Now talking about how province can bring down per capita debt. Dunderdale wants to cut that number in half in 10 years
Sullivan raising concerns about province's debt to GDP ratio.
Sullivan says government should commit to balanced budgets and debt reduction.
Connors called it surreal but what he was really seeing here is a clue to some pretty big political backstories.
Go back in time and it doesn’t take too much imagination to think that Sullivan left the Tory cabinet abruptly in 2006 as a result of a huge disagreement over financial policy. The 2007 budget – an election year budget - that they would have been discussing when Sullivan quit saw a huge increase in pork-barrel spending and set the tone for the rest of Danny Williams’ tenure.
Sullivan wasn’t any great shakes when it came to sound fiscal [planning but his couple of years as finance minister are a model of tight-fistedness compared to the Dipper-esque spending sprees of the Danny Williams/Tom Marshall era.
There was something serious on the go at the time. Danny Williams announced his resignation around the same time. In the months after Sullivan left, Williams got increasingly testier. That’s when the Old man tossed a public threat at your humble e-scribbler and started musing about getting rid of free speech in the legislature.
Slide forward in time to the current day and you can see signs of a pretty big split in the local Tory party that just got a whole lot wider. This OCI versus the government story is about more than the fishery. The Sullivans are a crowd of Big Tories. The family has lots of friends and supporters across the province. Loyola’s a former leader of the party.
When Sullivan made some pointed comments about the current crowd’s lack of financial prowess, he was likely speaking for a large number of local Tories. His comment about the debt was a very clear shot at Tom Marshall and Kathy Dunderdale. You could also add a poke at the Muskrat Falls plan into Sullivan’s comment about the public debt. Muskrat Falls, after all, is about increasing the public debt.
Things are not sunshine and roses inside Tory circles and they haven’t been for some time.
Loyola Sullivan’s speech on Thursday is a sign of how big a rift there is
- srbp -
14 November 2006
Demand management
CBC television's David Cochrane gave some highlights of what he believes will be in finance minister Loyola "Rain Man" Sullivan's financial update due on Thursday.
Halfway through its fiscal year, the provincial government apparently expects a deficit - presumably on current account - of about $60 million. The shortfall is apparently due to the production shutdown at Terra Nova being longer than planned. The floating production and storage offloading ship (FPSO) was due to be out of service for three months; that turned into six months.
[Left: Finance minister Loyola Sullivan grimaces during last November's mid-year financial update. Photo: Greg Locke.]
Cochrane noted that there is a possibility this projection will disappear since the provincial budget was based on assumption that oil prices would run at an average of US $55 per barrel. It is current trading at US$56 but has been considerably higher than that for most of the year.
The most striking thing about Cochrane's figure is that it is low. A $60 million shortfall is nothing for the Newfoundland and Labrador government. It is nothing in the context of a budget that calls for spending $5.3 billion. That's a 1% variance.
Whoopee ding.
The figure is also low when one considers the problems and setbacks in the economy:
- Terra Nova: In June, Sullivan predicted the anticipated downtime would cost the province $200 million in deferred revenue. It isn't really a loss since the oil that would have been pumped in June will be pumped later at whatever the price is at the time.
- Stephenville: The budget obviously took into account the loss of jobs and business taxes resulting from the closure.
- No Hebron. The provincial budget was decided around the time the negotiations were in their last stages. There doesn't appear to have been any allowance for Hebron but the financial picture would have been considerably rosier if Hebron was underway.
- Fishery fiasco: The fishery is in the slings. Exports are down and Fishery Products International's processing facilities are not working, or certainly aren't working at capacity. That means there is a measurable difference in government revenue from people collecting employment insurance who ordinarily would collecting a paycheque.
Cochrane attributed the small deficit to oil and that's the surest thing anyone can say. The provincial government is raking in so much money from oil exports that it really doesn't need to blink over a mere $60.
[Right: Provincial budget officials rework spending and revenue projections for the FY 2006 during a recent lunch meeting in the West Block cafeteria. Calculations later showed the deficit would be about $100.]
To be frank, though, given Sullivan's horrendous record of budget predictions this $60 million could be a surplus 10 times larger than his projected shortfall.
Sullivan projected a $6 million surplus when he tabled the budget last spring. The year before he wound up with a surplus $76.2 million in Fiscal Year 2005 having predicted a deficit of $492 million.
But wait, that really isn't what happened either.
The so-called cash statement released in August, showed the government's performance in handling its annual operating budget: the current and capital spending. That figure is the one to notice since it reflects the actual annual performance of government itself.
The numbers Sullivan usually bandies around are accrual numbers and contain all manner of debts and theoretical liabilities. The "cash" statements, usually released in November as part of the audited public accounts were released in August during the poll-goosing period since they purported showed the provincial government had a modest surplus of sixty-odd million more than projected.
But even that wasn't a straightforward statement of the cash performance. Sullivan's Budget 2006 showed that capital and current accounts were in deficit by about $62 million.
By August, the revised figures showed the provincial government finished FY 2005 (year end 31 March 2006) with a surplus of...wait for it...
$524 million.
That's right and it's there in black and white on page three. Now Sullivan doesn't call it a surplus; instead it's a cash "contribution".
But it's there.
Those variations are matched by every single budget Sullivan has introduced. He has predicted horrendous deficits in some years and wound up in surplus by almost the same amount.
However, 2005 was a record year, even for Sullivan. Incidentally, the current account was in surplus by over $700 million. By the time he accounted for a deficit in the capital account spending, the thing came down to half a billion dollars.
At no point has Sullivan indicated whether that was just a paper surplus, i.e. money budgeted but not spent or if it was real, as in cash he had sitting in the bank to roll over into the current fiscal year.
Fundamentally, Loyola Sullivan's track record as finance minister has been spotty when it comes to predictions. It's also bordering on the deceptive in the way he has switched from talking about "cash" accounts and accrual accounts. He talks about "cash" when he wants good news to goose a poll, for example and even then he very carefully chooses his words - "$60 million more than expected" versus $524 million - so people have a hard time seeing what actually occurred.
But at other times, Sullivan trots out a deficit - on an accrual basis - when he wants to tamp down expectations. Far from being genuinely transparent and accountable, Sullivan engages in the same verbal gymnastics of some of his predecessors, tossing out figures in mesmerising detail to suit his political purposes.
These days Sullivan has to tamp down expectations. Pharmacists are clamouring for more money. Bridges need to be replaced, roads paved and ferries built. If people knew exactly what the financial state of the province was, they might actually expect cabinet to spend some money.
If all that wasn't bad enough, the cabinet has been taking a hammering in its ethical standards with announcement of public money for a private sector cable deal.
And so, despite having announced budget consultations well in advance, Sullivan suddenly postponed them for an "update" and, as one might sometimes expect a leaked set of figures to reporter.
The political goal of the leak and Sullivan's Thursday statement is two-fold.
First, Sullivan wants to shut down demands for spending. It's that simple.
Second, he wants people to start focusing on possible budget cuts, he wants them to keep feeling the province's finances are shaky, so they will stop thinking about the cable controversy. In political circles, that's called wagging the dog or changing the channel.
Fundamentally, though, Sullivan knows that his prediction of a deficit - accompanied with his usual dour delivery - is just a diversion to suit a transitory purpose.
Sullivan knows the true financial picture isn't anything as bad as he says it is.
Sullivan knows his own abysmal record of fiscal accountability better than anyone else.
Halfway through its fiscal year, the provincial government apparently expects a deficit - presumably on current account - of about $60 million. The shortfall is apparently due to the production shutdown at Terra Nova being longer than planned. The floating production and storage offloading ship (FPSO) was due to be out of service for three months; that turned into six months.
[Left: Finance minister Loyola Sullivan grimaces during last November's mid-year financial update. Photo: Greg Locke.] Cochrane noted that there is a possibility this projection will disappear since the provincial budget was based on assumption that oil prices would run at an average of US $55 per barrel. It is current trading at US$56 but has been considerably higher than that for most of the year.
The most striking thing about Cochrane's figure is that it is low. A $60 million shortfall is nothing for the Newfoundland and Labrador government. It is nothing in the context of a budget that calls for spending $5.3 billion. That's a 1% variance.
Whoopee ding.
The figure is also low when one considers the problems and setbacks in the economy:
- Terra Nova: In June, Sullivan predicted the anticipated downtime would cost the province $200 million in deferred revenue. It isn't really a loss since the oil that would have been pumped in June will be pumped later at whatever the price is at the time.
- Stephenville: The budget obviously took into account the loss of jobs and business taxes resulting from the closure.
- No Hebron. The provincial budget was decided around the time the negotiations were in their last stages. There doesn't appear to have been any allowance for Hebron but the financial picture would have been considerably rosier if Hebron was underway.
- Fishery fiasco: The fishery is in the slings. Exports are down and Fishery Products International's processing facilities are not working, or certainly aren't working at capacity. That means there is a measurable difference in government revenue from people collecting employment insurance who ordinarily would collecting a paycheque.
Cochrane attributed the small deficit to oil and that's the surest thing anyone can say. The provincial government is raking in so much money from oil exports that it really doesn't need to blink over a mere $60.
[Right: Provincial budget officials rework spending and revenue projections for the FY 2006 during a recent lunch meeting in the West Block cafeteria. Calculations later showed the deficit would be about $100.]To be frank, though, given Sullivan's horrendous record of budget predictions this $60 million could be a surplus 10 times larger than his projected shortfall.
Sullivan projected a $6 million surplus when he tabled the budget last spring. The year before he wound up with a surplus $76.2 million in Fiscal Year 2005 having predicted a deficit of $492 million.
But wait, that really isn't what happened either.
The so-called cash statement released in August, showed the government's performance in handling its annual operating budget: the current and capital spending. That figure is the one to notice since it reflects the actual annual performance of government itself.
The numbers Sullivan usually bandies around are accrual numbers and contain all manner of debts and theoretical liabilities. The "cash" statements, usually released in November as part of the audited public accounts were released in August during the poll-goosing period since they purported showed the provincial government had a modest surplus of sixty-odd million more than projected.
But even that wasn't a straightforward statement of the cash performance. Sullivan's Budget 2006 showed that capital and current accounts were in deficit by about $62 million.
By August, the revised figures showed the provincial government finished FY 2005 (year end 31 March 2006) with a surplus of...wait for it...
$524 million.
That's right and it's there in black and white on page three. Now Sullivan doesn't call it a surplus; instead it's a cash "contribution".
But it's there.
Those variations are matched by every single budget Sullivan has introduced. He has predicted horrendous deficits in some years and wound up in surplus by almost the same amount.
However, 2005 was a record year, even for Sullivan. Incidentally, the current account was in surplus by over $700 million. By the time he accounted for a deficit in the capital account spending, the thing came down to half a billion dollars.
At no point has Sullivan indicated whether that was just a paper surplus, i.e. money budgeted but not spent or if it was real, as in cash he had sitting in the bank to roll over into the current fiscal year.
Fundamentally, Loyola Sullivan's track record as finance minister has been spotty when it comes to predictions. It's also bordering on the deceptive in the way he has switched from talking about "cash" accounts and accrual accounts. He talks about "cash" when he wants good news to goose a poll, for example and even then he very carefully chooses his words - "$60 million more than expected" versus $524 million - so people have a hard time seeing what actually occurred.
But at other times, Sullivan trots out a deficit - on an accrual basis - when he wants to tamp down expectations. Far from being genuinely transparent and accountable, Sullivan engages in the same verbal gymnastics of some of his predecessors, tossing out figures in mesmerising detail to suit his political purposes.
These days Sullivan has to tamp down expectations. Pharmacists are clamouring for more money. Bridges need to be replaced, roads paved and ferries built. If people knew exactly what the financial state of the province was, they might actually expect cabinet to spend some money.
If all that wasn't bad enough, the cabinet has been taking a hammering in its ethical standards with announcement of public money for a private sector cable deal.
And so, despite having announced budget consultations well in advance, Sullivan suddenly postponed them for an "update" and, as one might sometimes expect a leaked set of figures to reporter.
The political goal of the leak and Sullivan's Thursday statement is two-fold.
First, Sullivan wants to shut down demands for spending. It's that simple.
Second, he wants people to start focusing on possible budget cuts, he wants them to keep feeling the province's finances are shaky, so they will stop thinking about the cable controversy. In political circles, that's called wagging the dog or changing the channel.
Fundamentally, though, Sullivan knows that his prediction of a deficit - accompanied with his usual dour delivery - is just a diversion to suit a transitory purpose.
Sullivan knows the true financial picture isn't anything as bad as he says it is.
Sullivan knows his own abysmal record of fiscal accountability better than anyone else.
27 January 2006
Double talk can't protect double dip
No matter how hard Loyola and Loyola try and double-talk the coming changes on the Equalization program, there's little doubt the Equalization offsets in the Atlantic Accord will be factored into the calculations.
After all, the 1985 Accord and the 2005 deal are both designed to hand this province Equalization as if oil revenues didn't exist.
The new Harper proposal is designed to hand us Equalization as if oil and gas and other non-renewables didn't exist.
And in the Rob Antle story below, you'll even see Loyola talking about the new Equalization proposal as an Atlantic Accord in perpetuity.
So, it doesn't take a rocket scientist to realise that if the new Equalization deal is done, there is no need for Ottawa to double pay the province with offsets on things that don't need to be offset because they are already offset.
Confused? You would be if you listened to Loyola.
Or Loyola.
No one is going ask for the money back - Loyola is an old enough war horse to understand you can say something silly like that knowing full well it won't come true.
It's called misdirection.
Of course what neither Loyola will say is the simple truth:
In all likelihood, the money already received or provided under the Atlantic Accord (1985) will be looked on as an advance on any new Equalization entitlements. It will be deducted from future payments. Once the advance is gone the old Danny Deal will be dead, just like the offset provisions of the Brian Deal.
There's no way to keep the Equalization offsets off the table.
After all, the 1985 Accord and the 2005 deal are both designed to hand this province Equalization as if oil revenues didn't exist.
The new Harper proposal is designed to hand us Equalization as if oil and gas and other non-renewables didn't exist.
And in the Rob Antle story below, you'll even see Loyola talking about the new Equalization proposal as an Atlantic Accord in perpetuity.
So, it doesn't take a rocket scientist to realise that if the new Equalization deal is done, there is no need for Ottawa to double pay the province with offsets on things that don't need to be offset because they are already offset.
Confused? You would be if you listened to Loyola.
Or Loyola.
No one is going ask for the money back - Loyola is an old enough war horse to understand you can say something silly like that knowing full well it won't come true.
It's called misdirection.
Of course what neither Loyola will say is the simple truth:
In all likelihood, the money already received or provided under the Atlantic Accord (1985) will be looked on as an advance on any new Equalization entitlements. It will be deducted from future payments. Once the advance is gone the old Danny Deal will be dead, just like the offset provisions of the Brian Deal.
There's no way to keep the Equalization offsets off the table.
Thursday, January 26, 2006
"‘Can'’t turn back the clock"’
By Rob Antle, The Telegram
The Williams administration is welcoming prime minister-designate Stephen Harper'ss planned changes to the federal equalization program.
But Finance Minister Loyola Sullivan said the $2-billion up-front payment from last year'’s Atlantic Accord agreement should not factor into any modifications to the formula.
"“That was a deal, it was an up-front payment with no strings attached, as a minimum payment,"” Sullivan told The Telegram Wednesday.
"“We can only go forward, we can'’t go back in the annals of history and do adjustments to the past."”
Harper'’s policy platform included a pledge to exempt non-renewable resource revenues, such as oil and gas, from equalization calculations.
Such a change would likely add more dollars to the provincial treasury, Sullivan said.
It would also effectively enshrine the key principle of the Accord - — sheltering 100 per cent of non-renewable revenues, such as oil and gas, from equalization - — for all provinces.
"“We'’re going to get that break forever, if he took non-renewables out and left them out,"” Sullivan said. "“It'’s going to be an Atlantic Accord in perpetuity."
The Accord deal signed last year expires in 2012, with a renewal provision that could see it extended to 2020.
As part of the agreement with the outgoing Martin government, the province received an upfront payment of $2 billion for enhanced offshore benefits.
Sullivan insisted that cash should not be included in any future fiddling with equalization rules.
"“Look, the federal government has booked this and paid it out in the '’05-'’06 fiscal year. That'’s gone. That'’s an expenditure; that'’s booked. That'’s going to show up in their public accounts for the last fiscal year.
"“They can'’t come back and say, '‘Uh-oh, we want money back two years later on that.'’ If we go forward with a new formula - they can'’t turn the clock back on that."
Conservative MP Loyola Hearn - — pegged as a likely pick for Harper'’s cabinet - — said he doesn'’t think it will be a problem.
"“What we'’re talking about is something above and beyond the deal that was done entirely," ” said Hearn, MP for St. John'’s South-Mount Pearl.
"“It certainly shouldn'’t play any role, from my perspective. I don'’t think it will. I'’ve never heard it mentioned in that light.
"“When we got the commitment on the Accord, then (the Liberals) tried to fool around with every little loophole that they had. I mean, that'’s what we fought against, so we'’d be a bit hypocritical to try and play the same game."”
Harper is expected to take over as prime minister within two weeks.
Sullivan said he will write the new finance minister then to broach the topic.
By the end of the 2006-07 fiscal year, the province will have spent $541 million of the $2 billion Accord pre-payment, Sullivan said.
That leaves $1.46 billion he said should remain exempt from review.
Accord aside, the planned equalization changes should benefit the province, Sullivan said.
Nearly 20 per cent of the province'’s total revenues derive from the oil and gas sector, he noted. That'’s a much larger proportion than most other provinces.
And other non-renewable resources - — such as the mining sector, with Voisey'’s Bay coming on stream - — would also be exempted from equalization, the finance minister said.
"“We would benefit more than we would benefit just by having this Atlantic Accord now,"” Sullivan noted.
Equalization is an important issue for the province.
Newfoundland and Labrador received $861 million in equalization from Ottawa this year, according to the province'’s 2005-06 mid-year fiscal update.
That'’s in addition to hundreds of millions in offshore royalties and new Accord benefits.
The overall budget clocks in at about $4.3 billion.
The planned equalization changes could be detrimental to other provinces, however. Quebec, New Brunswick and Prince Edward Island, for example, have relatively little or no revenues from non-renewable resources.
The Conservative platform promises "“we will ensure that no province is adversely affected from changes to the equalization formula,"” but does not offer further details.
rantle@thetelegram.com
07 February 2006
Equalization changes: Williams and Harper/Sullivan compared
Provincial finance minister Loyola Sullivan is claiming that Stephen Harper's proposals for Equalization reform are perfect for this province but his claim suggests that he and premier Danny Williams are once more at odds over the province's finances.
Their last public conflict came in June 2004 during the offshore discussions when Sullivan backed Stephen Harper in preference to the provincial government's position, represented by Danny Williams. That's the same basic problem again, but it certainly isn't clear that Loyola Sullivan, whose love of digits borders on being a pathological condition, is correct in his math.
Given the importance of these issues to the province and in light of the coming federal-provincial negotiations on federal transfers, a frank assessment of the merits of the province's position will be necessary if the general public are to fully appreciate the issues and the implications.
The following calculations are based on the province's mid-year fiscal statement and the current Equalization fiscal capacity determinations, using 2004/05 as a typical year to demonstrate the impacts of the two proposed approaches to Equalization.
Note: These calculations are approximations based on provincial budget estimates and estimates of per capita fiscal capacity. A more detailed analysis would be needed to produce a definitive comparison.
Danny Williams' position
In his letter to the federal party leaders, Danny William proposed a simple approach to the Equalization formula that would increase provincial transfers from Ottawa and give full effect to the Equalization offsets in both the Atlantic Accord (1985) and the January 2005 offshore deal with Paul Martin.
Under the current Equalization system, Newfoundland and Labrador would cease to qualify for Equalization within the next fiscal year and therefore would be entitled to small, declining offsets. The total value of the 2005 agreement for example would likely never exceed the $2.0 billion advanced already.
In his letter to federal party leaders, Williams proposed that Equalization be based on a formula which includes all provincial sources of revenue in calculating per capita fiscal capacity based on a 10 province standard. As a result, Alberta's economic performance would produce a significant cash result for this province. Williams also proposed that debt servicing costs be considered when calculating entitlements.
The most obvious impact of the Williams approach would be to raise the national per capita fiscal capacity above the one currently resulting from the five province standard. In 2004/05, the national standard per capita capacity would have been approximately $6600 (10 prov.) versus $6200 (five prov.) Newfoundland and Labrador's per capita fiscal capacity was $4900.
This would have provided $878, 900, 000 in Equalization based on a population of 517, 000 people.
Since Newfoundland and Labrador would likely remain an Equalization receiving province over the entire 16 years of the offshore deals, the province would receive Equalization offsets for its oil royalties equal to 100% of those revenues. Oil and gas revenues in that period will exceed all other non-renewable revenues.
This would have produced an Equalization offset of approximately $234, 420, 000 in 2004/05, for a total of $1, 113, 320,000.
That does not include the province's non-renewable resource revenues which the provincial government collects and retains in full.
The Harper/Sullivan Approach
The federal Conservative proposal for Equalization would calculate provincial entitlements on a 10 province standard but without using revenues from non-renewable resources.
The most obvious impact of this approach would be to keep the national per capita fiscal standard at or below the current level established using five provinces. Newfoundland and Labrador's fiscal capacity would be reduced by the amount of natural resource revenues, which for the purpose of this example will be estimated at $248, 845, 000 or $481 per capita.
This produces an Equalization entitlement of $920,777, 000. 1
Since offshore oil and gas revenues are already offset under this model, no further transfers would flow to the province under either the 1985 or 2005 offshore agreements.
Discussion
1. The major advantage of the Williams approach for the 2004/05 sample year is the impact of the offshore Equalization offset agreements. This produces revenue over and above Equalization entitlements since they compare the province's per capita capacity without offshore royalties to its entitlement under the 10 province standard that includes Alberta's natural resource revenues.
2. It should be noted that in 2004/05, mining revenue was slightly more than $14, 000, 000. Since no one has released provincial revenue figures from Voisey's Bay production there is no way, at this point, of determining the longer term impact of the Harper/Sullivan approach compared to the Williams proposal.
3. That said, as provincial offshore revenues increase, the level of additional offset from the 1985 and 2005 accords increase directly for the full 16 years of the 2005 deal. Unless mining royalties were to exceed the considerable sums coming from offshore oil and gas in the next decade, the 1985 and 2005 agreements should deliver their full potential. This should more than make up for any Equalization declines owing to growth in mining royalties under the Williams proposal.
4. Neither the Williams nor the Harper/Sullivan proposal offsets the impact of a major renewable resource revenue development such as construction of the Lower Churchill.
5. The Williams proposal offers the potential for additional revenue from adjustments related to debt servicing costs that are not contained in the Harper/Sullivan approach. These figures are not included here since they are unknown and cannot be calculated. Williams did not make any suggestions as to what weight he expected to be given to debt servicing costs in making the Equalization calculations.
6. Overall, it is incumbent on Loyola Sullivan to make public his own departments calculations of the financial impacts of both the Williams and the Harper/Sullivan models. Sullivan's public pronouncements to date have been vague, bordering on the vacuous.
His references to an "Atlantic Accord forever" smack of some communications director's idea of clever sound bites rather than a substantive appraisal based on disclosed evidence.
Conclusion
The following conclusions can be made:
- The Williams proposal is consistent with the general approach to Equalization taken across the country to date, in that it is formula driven and uses as many sources of revenue as possible to accurately reflect actual provincial fiscal capacity.
- The Williams approach is supported by most provincial governments and is likely to gain wider support.
- The Harper/Sullivan approach would see at least four provinces facing significant decreases in Equalization entitlements. As a result, this approach would be more difficult to implement. Changes to Equalization would require unanimous agreement of all provinces.
- The Harper/Sullivan approach is designed to reduce federal government transfers to provinces. Irrespective of the rationales offered, the primary goal of the Harper/Sullivan approach is to lower federal government transfers. Before the election, there had been some discussion that the Harper administration would address the supposed vertical fiscal imbalance by reducing federal taxation and thereby allowing the provinces to increase their own direct revenues by raising taxes.
The Harper/Sullivan Equalization changes give the federal government the ability to do exactly that by reducing federal expenditures or at least reducing the rates of increase to allow the program to function on smaller annual expenditures than might otherwise be the case..
----------------------------
Notes:
1 [6200-(4900-481) X 517, 000]
Their last public conflict came in June 2004 during the offshore discussions when Sullivan backed Stephen Harper in preference to the provincial government's position, represented by Danny Williams. That's the same basic problem again, but it certainly isn't clear that Loyola Sullivan, whose love of digits borders on being a pathological condition, is correct in his math.
Given the importance of these issues to the province and in light of the coming federal-provincial negotiations on federal transfers, a frank assessment of the merits of the province's position will be necessary if the general public are to fully appreciate the issues and the implications.
The following calculations are based on the province's mid-year fiscal statement and the current Equalization fiscal capacity determinations, using 2004/05 as a typical year to demonstrate the impacts of the two proposed approaches to Equalization.
Note: These calculations are approximations based on provincial budget estimates and estimates of per capita fiscal capacity. A more detailed analysis would be needed to produce a definitive comparison.
Danny Williams' position
In his letter to the federal party leaders, Danny William proposed a simple approach to the Equalization formula that would increase provincial transfers from Ottawa and give full effect to the Equalization offsets in both the Atlantic Accord (1985) and the January 2005 offshore deal with Paul Martin.
Under the current Equalization system, Newfoundland and Labrador would cease to qualify for Equalization within the next fiscal year and therefore would be entitled to small, declining offsets. The total value of the 2005 agreement for example would likely never exceed the $2.0 billion advanced already.
In his letter to federal party leaders, Williams proposed that Equalization be based on a formula which includes all provincial sources of revenue in calculating per capita fiscal capacity based on a 10 province standard. As a result, Alberta's economic performance would produce a significant cash result for this province. Williams also proposed that debt servicing costs be considered when calculating entitlements.
The most obvious impact of the Williams approach would be to raise the national per capita fiscal capacity above the one currently resulting from the five province standard. In 2004/05, the national standard per capita capacity would have been approximately $6600 (10 prov.) versus $6200 (five prov.) Newfoundland and Labrador's per capita fiscal capacity was $4900.
This would have provided $878, 900, 000 in Equalization based on a population of 517, 000 people.
Since Newfoundland and Labrador would likely remain an Equalization receiving province over the entire 16 years of the offshore deals, the province would receive Equalization offsets for its oil royalties equal to 100% of those revenues. Oil and gas revenues in that period will exceed all other non-renewable revenues.
This would have produced an Equalization offset of approximately $234, 420, 000 in 2004/05, for a total of $1, 113, 320,000.
That does not include the province's non-renewable resource revenues which the provincial government collects and retains in full.
The Harper/Sullivan Approach
The federal Conservative proposal for Equalization would calculate provincial entitlements on a 10 province standard but without using revenues from non-renewable resources.
The most obvious impact of this approach would be to keep the national per capita fiscal standard at or below the current level established using five provinces. Newfoundland and Labrador's fiscal capacity would be reduced by the amount of natural resource revenues, which for the purpose of this example will be estimated at $248, 845, 000 or $481 per capita.
This produces an Equalization entitlement of $920,777, 000. 1
Since offshore oil and gas revenues are already offset under this model, no further transfers would flow to the province under either the 1985 or 2005 offshore agreements.
Discussion
1. The major advantage of the Williams approach for the 2004/05 sample year is the impact of the offshore Equalization offset agreements. This produces revenue over and above Equalization entitlements since they compare the province's per capita capacity without offshore royalties to its entitlement under the 10 province standard that includes Alberta's natural resource revenues.
2. It should be noted that in 2004/05, mining revenue was slightly more than $14, 000, 000. Since no one has released provincial revenue figures from Voisey's Bay production there is no way, at this point, of determining the longer term impact of the Harper/Sullivan approach compared to the Williams proposal.
3. That said, as provincial offshore revenues increase, the level of additional offset from the 1985 and 2005 accords increase directly for the full 16 years of the 2005 deal. Unless mining royalties were to exceed the considerable sums coming from offshore oil and gas in the next decade, the 1985 and 2005 agreements should deliver their full potential. This should more than make up for any Equalization declines owing to growth in mining royalties under the Williams proposal.
4. Neither the Williams nor the Harper/Sullivan proposal offsets the impact of a major renewable resource revenue development such as construction of the Lower Churchill.
5. The Williams proposal offers the potential for additional revenue from adjustments related to debt servicing costs that are not contained in the Harper/Sullivan approach. These figures are not included here since they are unknown and cannot be calculated. Williams did not make any suggestions as to what weight he expected to be given to debt servicing costs in making the Equalization calculations.
6. Overall, it is incumbent on Loyola Sullivan to make public his own departments calculations of the financial impacts of both the Williams and the Harper/Sullivan models. Sullivan's public pronouncements to date have been vague, bordering on the vacuous.
His references to an "Atlantic Accord forever" smack of some communications director's idea of clever sound bites rather than a substantive appraisal based on disclosed evidence.
Conclusion
The following conclusions can be made:
- The Williams proposal is consistent with the general approach to Equalization taken across the country to date, in that it is formula driven and uses as many sources of revenue as possible to accurately reflect actual provincial fiscal capacity.
- The Williams approach is supported by most provincial governments and is likely to gain wider support.
- The Harper/Sullivan approach would see at least four provinces facing significant decreases in Equalization entitlements. As a result, this approach would be more difficult to implement. Changes to Equalization would require unanimous agreement of all provinces.
- The Harper/Sullivan approach is designed to reduce federal government transfers to provinces. Irrespective of the rationales offered, the primary goal of the Harper/Sullivan approach is to lower federal government transfers. Before the election, there had been some discussion that the Harper administration would address the supposed vertical fiscal imbalance by reducing federal taxation and thereby allowing the provinces to increase their own direct revenues by raising taxes.
The Harper/Sullivan Equalization changes give the federal government the ability to do exactly that by reducing federal expenditures or at least reducing the rates of increase to allow the program to function on smaller annual expenditures than might otherwise be the case..
----------------------------
Notes:
1 [6200-(4900-481) X 517, 000]
01 September 2005
The New Approach to hand-outs and whining
Doubts about Loyola Sullivan's ability to grasp the picture beyond moving around digits on a page grows with this release on the federal government presence in Newfoundland and Labrador. The release turned into this story on VOCM.
It's hard to know how Sullivan came up with the numbers he prints in the release. Then again, Sullivan has never been straight with people about his own budget numbers. He seems to be able to be in perpetual fiscal crisis despite having gobs of cash coming in from all quarters.
There are two points here:
First, Sullivan's numbers and percentages are wrong.
Second, and more importantly, Sullivan's interpretation, that this represents a massive loss to the local economy just doesn't hold up to logical scrutiny or his own previous statements.
Let's just forget, for the time being, that Sullivan is the guy who, shortly after he took up the finance job, was complaining about the disproportionately large number of public servants in the province.
At the end of Fiscal Year 2004, there were 7, 189 federal public servants in the province, compared to roughly the same number at the end of each fiscal year since 1998. Those figures were obtained by the Bond Papers from the Government of Canada.
Sullivan uses 1990 as the base year for his calculation, likely because that happens to be one of the periods in which federal employment peaked in every province. He claims that federal employment decreased by 39% in Newfoundland and Labrador compared to a national average of 18%. That's a 21% disparity.
Well, at the end of Fiscal Year 1990, there were 415, 414 federal employees across the country. At the end of the last fiscal year, there were 371, 257. That represents 44, 157 fewer positions or about 10.6%.
The total number of Canadians employed by the federal public service is 1.15% of the total population.
In this province, the numbers went from 10, 140 to 7, 189 - a drop of 2, 951 jobs or 29% in the same period.
Still, federal employees in Newfoundland and Labrador represent 1.36% of the population, a proportion higher than Ontario (1.22%) and Quebec (0.98%).
Sullivan also doesn't talk about the increases in federal presence in places like Goose Bay, nor does he talk about the likelihood that the St. John's taxation data centre will be increasing its staffing levels soon and handling work from across the country.
But here's an interesting thing. In Nova Scotia, the 23% drop in federal employees in that province represents a loss of 7, 240 positions. That's more than double the drop in this province in absolute numbers, even though the percentage change is smaller.
Beyond that though, Sullivan claims that those federal job losses totaled up to almost double the reported figure - he says the 2, 774 jobs lost added up to equal 5, 300 jobs. Unfortunately, Loyola doesn't explain why that might be so. Truth is, I doubt he can. Whoever cooked up these digits for Loyola appears to have used typical multipliers for spin-off jobs for the private sector and applied them to public sector jobs.
However, public sector jobs - like say the 16 people at the weather office in Gander - don't produce the same spinoffs in the service and supply sector as a comparable number of jobs in the oil industry, manufacturing or the fishery. That's because the work they do by itself doesn't generate added economic benefit.
Suck a few hundred jobs out of paper manufacturing in central Newfoundland and on the west coast of the island and you are going to get almost double the jobs losses in banking, insurance, office supplies and other support services.
Screw with the fishery needlessly and you'll shag the economy out of hundreds of millions of dollars of real economic activity that brings much-needed foreign exchange into an economy that depends heavily on trade. You'll also muck around with tens of thousands of direct and indirect jobs.
Take a few people out of Gander or the small Public Service Commission office in St. John's and they won't have quite the same effect.
Overall, Sullivan's main argument - that the feds are steadily decreasing their presence in Newfoundland and Labrador - just doesn't add up. Federal job numbers in the province have hovered around the same level for the better part of a decade. The small changes seen recently like Gander, fall within the seasonal fluctuations there have been anyway from month to month.
Beyond that, Sullivan is simply talking through his hat when he argues this province has a right to a "fair share" of federal employees. The same cock-eyed approach led the Mulroney government to create something called the naval Presence in Quebec program. It was a cash fiasco, ripped apart by the auditor general.
No province has a "right" to a proportion of federal jobs. Federal public servants aren't booty. They aren't spoils. They aren't a form of Equalization. Canadians deserve to have their federal services delivered cheaply and effectively. We don't need to fatten the payroll so that we can have people running a navy section in Manitoba.
On a local level, Sullivan should recall the disastrous Tobin policy of relocating public servants to communities across the province. It was poorly conceived, poorly executed and an admission that Tobin had failed completely in his efforts to come up with a single new idea for developing the local economy. Saskatchewan fell into the same trap with equally harsh consequences for Saskatchewan taxpayers.
Sullivan's release shows a few things:
1. Loyola can't do basic math.
2. Loyola can't see the big picture.
3. Loyola and the government of which he is a part are wedded forever to hand-outs from Ottawa - The January Deal (a massive Equalization transfer) and now federal jobs.
Underneath it all, it would appear the provincial government is now in the position Brian Tobin was in after two years in office: totally lacking in a single new idea.
Whining about Ottawa is hardly a New Approach.
It's hard to know how Sullivan came up with the numbers he prints in the release. Then again, Sullivan has never been straight with people about his own budget numbers. He seems to be able to be in perpetual fiscal crisis despite having gobs of cash coming in from all quarters.
There are two points here:
First, Sullivan's numbers and percentages are wrong.
Second, and more importantly, Sullivan's interpretation, that this represents a massive loss to the local economy just doesn't hold up to logical scrutiny or his own previous statements.
Let's just forget, for the time being, that Sullivan is the guy who, shortly after he took up the finance job, was complaining about the disproportionately large number of public servants in the province.
At the end of Fiscal Year 2004, there were 7, 189 federal public servants in the province, compared to roughly the same number at the end of each fiscal year since 1998. Those figures were obtained by the Bond Papers from the Government of Canada.
Sullivan uses 1990 as the base year for his calculation, likely because that happens to be one of the periods in which federal employment peaked in every province. He claims that federal employment decreased by 39% in Newfoundland and Labrador compared to a national average of 18%. That's a 21% disparity.
Well, at the end of Fiscal Year 1990, there were 415, 414 federal employees across the country. At the end of the last fiscal year, there were 371, 257. That represents 44, 157 fewer positions or about 10.6%.
The total number of Canadians employed by the federal public service is 1.15% of the total population.
In this province, the numbers went from 10, 140 to 7, 189 - a drop of 2, 951 jobs or 29% in the same period.
Still, federal employees in Newfoundland and Labrador represent 1.36% of the population, a proportion higher than Ontario (1.22%) and Quebec (0.98%).
Sullivan also doesn't talk about the increases in federal presence in places like Goose Bay, nor does he talk about the likelihood that the St. John's taxation data centre will be increasing its staffing levels soon and handling work from across the country.
But here's an interesting thing. In Nova Scotia, the 23% drop in federal employees in that province represents a loss of 7, 240 positions. That's more than double the drop in this province in absolute numbers, even though the percentage change is smaller.
Beyond that though, Sullivan claims that those federal job losses totaled up to almost double the reported figure - he says the 2, 774 jobs lost added up to equal 5, 300 jobs. Unfortunately, Loyola doesn't explain why that might be so. Truth is, I doubt he can. Whoever cooked up these digits for Loyola appears to have used typical multipliers for spin-off jobs for the private sector and applied them to public sector jobs.
However, public sector jobs - like say the 16 people at the weather office in Gander - don't produce the same spinoffs in the service and supply sector as a comparable number of jobs in the oil industry, manufacturing or the fishery. That's because the work they do by itself doesn't generate added economic benefit.
Suck a few hundred jobs out of paper manufacturing in central Newfoundland and on the west coast of the island and you are going to get almost double the jobs losses in banking, insurance, office supplies and other support services.
Screw with the fishery needlessly and you'll shag the economy out of hundreds of millions of dollars of real economic activity that brings much-needed foreign exchange into an economy that depends heavily on trade. You'll also muck around with tens of thousands of direct and indirect jobs.
Take a few people out of Gander or the small Public Service Commission office in St. John's and they won't have quite the same effect.
Overall, Sullivan's main argument - that the feds are steadily decreasing their presence in Newfoundland and Labrador - just doesn't add up. Federal job numbers in the province have hovered around the same level for the better part of a decade. The small changes seen recently like Gander, fall within the seasonal fluctuations there have been anyway from month to month.
Beyond that, Sullivan is simply talking through his hat when he argues this province has a right to a "fair share" of federal employees. The same cock-eyed approach led the Mulroney government to create something called the naval Presence in Quebec program. It was a cash fiasco, ripped apart by the auditor general.
No province has a "right" to a proportion of federal jobs. Federal public servants aren't booty. They aren't spoils. They aren't a form of Equalization. Canadians deserve to have their federal services delivered cheaply and effectively. We don't need to fatten the payroll so that we can have people running a navy section in Manitoba.
On a local level, Sullivan should recall the disastrous Tobin policy of relocating public servants to communities across the province. It was poorly conceived, poorly executed and an admission that Tobin had failed completely in his efforts to come up with a single new idea for developing the local economy. Saskatchewan fell into the same trap with equally harsh consequences for Saskatchewan taxpayers.
Sullivan's release shows a few things:
1. Loyola can't do basic math.
2. Loyola can't see the big picture.
3. Loyola and the government of which he is a part are wedded forever to hand-outs from Ottawa - The January Deal (a massive Equalization transfer) and now federal jobs.
Underneath it all, it would appear the provincial government is now in the position Brian Tobin was in after two years in office: totally lacking in a single new idea.
Whining about Ottawa is hardly a New Approach.
14 March 2005
Loyola's Brush: Sullivan signals return to Tobinism
Be afraid.
Be very afraid.
In a CBC Radio story this morning, finance minister Loyola Sullivan, newly stripped by the Premier of his spine - read Flo Delaney, is now warning the people of the province that the government's debt will continue to spiral unchecked under the Progressive Conservatives.
Sullivan is warning that the government's accrual deficit (the difference between revenue and spending) will hover around $500 million for each of the next three years. That adds another $1.5 billion to the province's debt and will eat up every single nickel of the money so lavishly worshipped in the recent Valentine's Day offshore deal celebrations.
Holy Cow.
Think about it this way:
- Sullivan predicted last year that the cash shortfall would be almost $400 million this year alone, with an all-inclusive deficit of a little over $900 million.
- Through a combination of spending restraint, economic growth and windfalls from increased oil prices, the provincial government is expected to post a modest surplus on a cash basis this year. The only thing seriously out of whack in the provincial government's budget will remain the unfunded pension liabilities found chiefly in the teacher's pension fund.
- These huge deficits are projected to come at a time when oil revenues will hit their peak - almost $1.0 billion by some projections - and at a time when the new oil deal will continue to ship federal transfers to the province.
- These huge deficits will occur despite added revenues from White Rose and Voisey's Bay, both of which come on stream within the next three years. The deficits will occur despite the likelihood Hebron Ben Nevis will start swelling government coffers before the decade is out.
In other words:
despite massive record-setting increases in the provincial government record-high revenue - even without the extra $2.0 billion from Ottawa - Loyola Sullivan is warning that we will continue to run record deficits and add to our already record-high debt load.
Sullivan's comments today signal an end to the restraint program announced last year in the Premier's hideous January 5 speech. A seeming long-term program to sort out the provincial government's eternal fiscal problems has been abandoned at the end of Year One.
Instead, there seems to be a return to Tobinesque spending on short-term projects designed primarily to boost the government's (read the Premier's) political popularity.
It sounds like the provincial government isn't going to expend a single penny on fighting the unfunded pension liabilities. Government could set aside an amount from the oil money in a pension fund which would progressively reduce the unfunded liability, even if it did not wipe it out altogether and even in the absence of an agreement with teachers. Make no mistake though teachers are going to have to ante up and help fix their pension problems. Danny Williams should be applying his considerable power to tackling those labour problems, as unpopular as that may make him.
That would be a start and would lower the projected deficit without consuming all the new money flowing.
This is unthinkable.
If Loyola Sullivan wants to be truly accountable, he would release some detailed financial projections with his new budget. We need to see all the figures he has access to. We need to see the basis on which government is making its projections. Then, during his next round of budget "consultations", he might get a rude shock.
The "consultations" might actual contain some concrete directions from his real boss - the voters - as to what he should be doing in order to keep his job.
If Loyola thinks people turned on Brian Tobin after they'd had a good look at thim, wait 'til they get a hard look at a bunch of guys that have more money than anybody else running the place ever had and still manage to spend more and more and more besides.
Be very afraid.
In a CBC Radio story this morning, finance minister Loyola Sullivan, newly stripped by the Premier of his spine - read Flo Delaney, is now warning the people of the province that the government's debt will continue to spiral unchecked under the Progressive Conservatives.
Sullivan is warning that the government's accrual deficit (the difference between revenue and spending) will hover around $500 million for each of the next three years. That adds another $1.5 billion to the province's debt and will eat up every single nickel of the money so lavishly worshipped in the recent Valentine's Day offshore deal celebrations.
Holy Cow.
Think about it this way:
- Sullivan predicted last year that the cash shortfall would be almost $400 million this year alone, with an all-inclusive deficit of a little over $900 million.
- Through a combination of spending restraint, economic growth and windfalls from increased oil prices, the provincial government is expected to post a modest surplus on a cash basis this year. The only thing seriously out of whack in the provincial government's budget will remain the unfunded pension liabilities found chiefly in the teacher's pension fund.
That represents a changed cash flow of almost $700 million, seemingly the largest error in provincial government budget calculations in more than 15 years.
- These huge deficits are projected to come at a time when oil revenues will hit their peak - almost $1.0 billion by some projections - and at a time when the new oil deal will continue to ship federal transfers to the province.
- These huge deficits will occur despite added revenues from White Rose and Voisey's Bay, both of which come on stream within the next three years. The deficits will occur despite the likelihood Hebron Ben Nevis will start swelling government coffers before the decade is out.
In other words:
despite massive record-setting increases in the provincial government record-high revenue - even without the extra $2.0 billion from Ottawa - Loyola Sullivan is warning that we will continue to run record deficits and add to our already record-high debt load.
Sullivan's comments today signal an end to the restraint program announced last year in the Premier's hideous January 5 speech. A seeming long-term program to sort out the provincial government's eternal fiscal problems has been abandoned at the end of Year One.
Instead, there seems to be a return to Tobinesque spending on short-term projects designed primarily to boost the government's (read the Premier's) political popularity.
It sounds like the provincial government isn't going to expend a single penny on fighting the unfunded pension liabilities. Government could set aside an amount from the oil money in a pension fund which would progressively reduce the unfunded liability, even if it did not wipe it out altogether and even in the absence of an agreement with teachers. Make no mistake though teachers are going to have to ante up and help fix their pension problems. Danny Williams should be applying his considerable power to tackling those labour problems, as unpopular as that may make him.
That would be a start and would lower the projected deficit without consuming all the new money flowing.
This is unthinkable.
If Loyola Sullivan wants to be truly accountable, he would release some detailed financial projections with his new budget. We need to see all the figures he has access to. We need to see the basis on which government is making its projections. Then, during his next round of budget "consultations", he might get a rude shock.
The "consultations" might actual contain some concrete directions from his real boss - the voters - as to what he should be doing in order to keep his job.
If Loyola thinks people turned on Brian Tobin after they'd had a good look at thim, wait 'til they get a hard look at a bunch of guys that have more money than anybody else running the place ever had and still manage to spend more and more and more besides.
06 March 2007
Sullivan explains secret bonus
Former finance minister Loyola Sullivan, whose surprise resignation from the legislature in December spurred days of speculation, has defended $2875 in bonus payments made to members of the legislature in 2004 but not made public until earlier this year.
What Sullivan - who, along with other members of the Internal Economy commission, approved the bonus payment - didn't explain is how the House of Assembly consistently overspent the allowances budget line item in 2004 and 2005 by a total of almost $1.0 million after the supposed restraint measures were implemented. That couldn't have been done without Sullivan's knowledge and approval.
Since Loyola Sullivan's letter raises once again the numerous questions about what happened before June 2006, who knew, what they knew and what they did about it, Loyola has done the public a tremendous service:
he has given us yet another reason to hold a public inquiry.
In his letter to [Speaker Harvey] Hodder, Sullivan said not all the facts and context about how the bonus decision was made have been explained.Oddly enough, the details of the spending decision were made public by Hodder before Sullivan's letter was sent in mid-February.
Sullivan said restraint measures at the legislature included a two-year wage freeze and a five-per-cent rollback on constituency allowances.
Sullivan added the IEC also "created efficiencies" throughout the house of assembly's operation, including the library and Hansard, "which meant hundreds of thousands of dollars of savings."
The IEC then eliminated a $4,800 discretionary component of constituency allowances, for which members did not need to submit receipts.
Sullivan said in March-April 2004, some MHAs reported they had exhausted their constituency allowances but still had incurred expenses.
What Sullivan - who, along with other members of the Internal Economy commission, approved the bonus payment - didn't explain is how the House of Assembly consistently overspent the allowances budget line item in 2004 and 2005 by a total of almost $1.0 million after the supposed restraint measures were implemented. That couldn't have been done without Sullivan's knowledge and approval.
Since Loyola Sullivan's letter raises once again the numerous questions about what happened before June 2006, who knew, what they knew and what they did about it, Loyola has done the public a tremendous service:
he has given us yet another reason to hold a public inquiry.
30 August 2005
Loyola and "sound fiscal management" - oxymoron [Revised]
Loyola Sullivan turned himself in knots these past few days trying to explain why the province won't be offering any systematic help to low and fixed income earners struggling with high heating costs this winter.
According to Sullivan, we have a huge debt which grows each day.
Ok Loyola.
But you're the finance minister.
What is your plan to stop the bleeding from our budget, Loyola? That's what people elected you to do. That's what you were talking about when you mention all the financial evil the other guys did when they were in power.
Fixing the financial mess was what you promised to do once you got elected.
Truth is Loyola doesn't have a debt reduction plan. He didn't have a real deficit reduction plan either: that was taken care of by the growing economy.
There is no plan, despite promises made by the Premier two years in a row.
As Loyola Sullivan said earlier this year, the Williams government intends to let the debt grow by about $500 million each year for the foreseeable future. If that approach to sensible financial management lasts for 10 years, as Sullivan mused, the debt of the province will be the better part of $ 20 billion. That's the same size as the economy currently. That would put us in the same mess the Wells government inherited in 1989: a debt load equal to the size of the economy.
Talk about living beyond your means.
In interviews yesterday, Sullivan referred to this as being somehow a matter of sound fiscal management.
I call it grossly irresponsible, especially in light of the Great Offshore Deal [editor's note: That was sarcasm] Danny brought home last year. When we are flush with cash, we should be fixing the long-term debt problem so that when the oil runs out, we can still pay the bills.
Piling up more debt is not the way to do that. It isn't what the Williams administration promised before they got elected.
I can see the campaign slogan now:
Vote for Danny and Loyola for Responsible Irresponsibility.
What people will see is Danny and Loyola: Oxymorons.
According to Sullivan, we have a huge debt which grows each day.
Ok Loyola.
But you're the finance minister.
What is your plan to stop the bleeding from our budget, Loyola? That's what people elected you to do. That's what you were talking about when you mention all the financial evil the other guys did when they were in power.
Fixing the financial mess was what you promised to do once you got elected.
Truth is Loyola doesn't have a debt reduction plan. He didn't have a real deficit reduction plan either: that was taken care of by the growing economy.
There is no plan, despite promises made by the Premier two years in a row.
As Loyola Sullivan said earlier this year, the Williams government intends to let the debt grow by about $500 million each year for the foreseeable future. If that approach to sensible financial management lasts for 10 years, as Sullivan mused, the debt of the province will be the better part of $ 20 billion. That's the same size as the economy currently. That would put us in the same mess the Wells government inherited in 1989: a debt load equal to the size of the economy.
Talk about living beyond your means.
In interviews yesterday, Sullivan referred to this as being somehow a matter of sound fiscal management.
I call it grossly irresponsible, especially in light of the Great Offshore Deal [editor's note: That was sarcasm] Danny brought home last year. When we are flush with cash, we should be fixing the long-term debt problem so that when the oil runs out, we can still pay the bills.
Piling up more debt is not the way to do that. It isn't what the Williams administration promised before they got elected.
I can see the campaign slogan now:
Vote for Danny and Loyola for Responsible Irresponsibility.
What people will see is Danny and Loyola: Oxymorons.
19 August 2015
From agreement to disagreement #nlpoli
On June 4, 2004, Danny Williams delivered a keynote speech to delegates at the oil and gas conference organized annual by the association that represented offshore service and supply companies.
“Newfoundlanders and Labradorians should not support any candidate or any party in the upcoming federal election” he said, “that does not clearly and unequivocally provide us with a commitment to keep 100 per cent of our provincial revenues under the Atlantic Accord.”
The day after Williams’ speech, Martin was in St. John’s as part of his election tour of Eastern Canada. Martin told the CBC that in an early morning conversation with Williams, “I have made it very clear that the proposal that he has put forth is a proposal that we accept."
21 March 2005
Budget Spin Control 1: You read some of it here first!
The budget for fiscal year (FY) 2005 is now public.
It makes for some interesting reading and I'll have more in the days ahead.
Here are a couple of interesting little things that I noticed, some of which will sound awfully familiar to those who read this blog faithfully.
One thing to make clear up front. Forget any spin that you are hearing about all this new spending being due to the new oil deal. That's a crock of the highest order. All the new spending is due to a combination of direct provincial revenues that have no connection whatsoever to the new oil deal, new federal money for health care and, well, good old fashioned deficit spending. The only new oil money that shows up in this budget is the relatively small amounts from the first two years of the deal. We haven't seen the money flying yet from the rest of the new $2.0 billion federal transfer.
1. Record increase in direct debt. Loyola Sullivan - the man who supposedly hates deficits - added more to the direct debt in one year than any other finance minister in the province's history. Over the last years of the Tobin and Grimes administrations, the province's direct debt (the amount owed directly by the provincial government) declined annually. Yes, that's right. It declined, as in went down, lessened, was reduced, got smaller, shrank.
This year alone it climbed by 10% from $6.087 billion to $6.743 billion.
There is no obvious explanation, although it is possible this may be related to government contributions to deal with the unfunded liability for some public sector pensions. If it is, then consider this an Emily Litella moment.
Loyola needs to give an answer for that one; I suspect most reporters in the budget lock-up missed it.
2. Mysterious Government focus on "cash" accounting. While in Opposition, the Progressive Conservative Party criticized government for reporting budget information on a cash basis. They claimed this hid the significant deficit in the annual budget, especially for capital spending.
The Blue Book election platform pledged to balance the current and capital account budgets by 2007-2008.
For the last two budgets, Loyola Sullivan has consistently focused on the "cash" surplus or deficit. The confusion between last year's pledge to balance the books on a "cash" basis and the Blue Book commitment is just one of the problems with Loyola's conversion to the traditional way of spinning the budget.
The other problem is that by mixing "cash" and "accrual" reporting, Loyola gets to spread some whopping great falsehoods, like the one about the Liberals causing these record high deficits. The "cash" deficit Loyola faced last year is actually less than the ones faced in the early 1990s. Loyola's "cash deficits" are actually fictional ones created by his spinning the budget numbers, rather than by an accurate reporting of the government accounts.
3. Danny loves deficits or I have money and I'm not afraid to spend it. There is a lot of small cash being spent in this budget, but there have been some other expenditures that are, well, shall we say curious.
For example, and for some currently unexplained reason, the provincial government had so much cash on hand this year that it actually spent $117 million to pay off the entire cost of building The Rooms and something called the Education Investment Corporation. If they hadn't done that, the government would have posted at least a $103 million surplus on current account instead of the $14 million deficit they are reporting on a "cash" basis.
Government predicts it will continue to run deficits on an accrual basis, as noted in a couple of posts here on Loyola's prediction the total debt load will hit $17 billion before the Tories are finished. Government is also planning run some "cash" deficits over the next couple of years even though the government books were actually in surplus this year and likely will be in surplus next year as well.
Check out the budget speech where Loyola forecasts a "cash" deficit next year of $62 million. If he carried forward his surplus from this year - even if he paid off The Rooms alone - Loyola could have had a surplus this year and balanced the books next year, thereby achieving his pledge in a single year. That doesn't even take into account his lowballing of oil revenues.
Forget the "cash" nonsense. This government plans to keep overspending by record amounts for their entire first term and beyond if re-elected despite their Blue Book commitments to tackle the debt and deficit.
Colour me disappointed.
4. Last year's budget was a crock. It looks to me like the provincial government undertook a lot of spending in the last little while to save the embarrassment of showing that their first budget was just completely out-to-lunch when it came to reporting revenues.
The provincial government was never in the financial mess Loyola and Danny claimed.
It wasn't even close.
Thank heavens these guys weren't around when things were really bad.
Like say, 1992.
5. You read it here first! In yet another example of shameless self-promotion, I have to draw attention to yet another accurate prediction from the Bond Papers. In previous posts, I predicted that offshore revenues plus offsets from the Real Atlantic Accord would be over $300 million in FY 2004 and would likely top $400 million.
Guess what?
I was dead on.
Combined royalties plus offsets last year was officially $363, 762, 000 according to Budget 2005. Add to it the other revenues the province collects under the Real Atlantic Accord and you can see we were way over $400 million. [Guesstimate the other revenues at about $ 100 million.]
But that's not all.
6. Pull the other one, Loyola. Despite having a nice chart in his budget speech that forecasts continued high oil production and continued high oil prices, Loyola Sullivan forecasts that his oil royalties will actually drop next year. Pardon me, Mr. Sullivan?
Offshore royalties, Budget 2004: $136, 970, 000
Offshore royalties, Actual 2004: $234, 420, 000
Offshore royalties, Budget 2005: $215, 370, 000
Expect next year's revenues to be at least the same as this year since everyone predicts continued high oil prices. In fact, some forecasts suggest that oil prices will be higher in future, but certainly not below US$40 per barrel. Government forecasts are apparently lowballed, using US$38 per barrel for next year and US$32 per barrel for 2006.
7. 100% is 100%. or is it? As a last point, I'll leave you with this little poser.
During the Great Crusade for the Atlantic Accord, Danny Williams eventually got around to insisting on offsetting 100% of provincial offshore revenues.
He claims he got that.
Well, let me put it this way:
Offshore royalties - not revenues - this fiscal year were around $234 million. The existing Accord offsets plus the amount agreed upon by Williams add up to $263 million. That would mean other revenues like corporate taxes added up to only $29 million.
Hmmm.
Something isn't right there, and based on what has been happening all along with government's reporting of its oil revenues, I don't think the problem is here at the Bond Papers.
Of course, the combined amount is still $500 million, slightly more than the accrual deficit this year!
But I digress.
It makes for some interesting reading and I'll have more in the days ahead.
Here are a couple of interesting little things that I noticed, some of which will sound awfully familiar to those who read this blog faithfully.
One thing to make clear up front. Forget any spin that you are hearing about all this new spending being due to the new oil deal. That's a crock of the highest order. All the new spending is due to a combination of direct provincial revenues that have no connection whatsoever to the new oil deal, new federal money for health care and, well, good old fashioned deficit spending. The only new oil money that shows up in this budget is the relatively small amounts from the first two years of the deal. We haven't seen the money flying yet from the rest of the new $2.0 billion federal transfer.
1. Record increase in direct debt. Loyola Sullivan - the man who supposedly hates deficits - added more to the direct debt in one year than any other finance minister in the province's history. Over the last years of the Tobin and Grimes administrations, the province's direct debt (the amount owed directly by the provincial government) declined annually. Yes, that's right. It declined, as in went down, lessened, was reduced, got smaller, shrank.
This year alone it climbed by 10% from $6.087 billion to $6.743 billion.
There is no obvious explanation, although it is possible this may be related to government contributions to deal with the unfunded liability for some public sector pensions. If it is, then consider this an Emily Litella moment.
Loyola needs to give an answer for that one; I suspect most reporters in the budget lock-up missed it.
2. Mysterious Government focus on "cash" accounting. While in Opposition, the Progressive Conservative Party criticized government for reporting budget information on a cash basis. They claimed this hid the significant deficit in the annual budget, especially for capital spending.
The Blue Book election platform pledged to balance the current and capital account budgets by 2007-2008.
For the last two budgets, Loyola Sullivan has consistently focused on the "cash" surplus or deficit. The confusion between last year's pledge to balance the books on a "cash" basis and the Blue Book commitment is just one of the problems with Loyola's conversion to the traditional way of spinning the budget.
The other problem is that by mixing "cash" and "accrual" reporting, Loyola gets to spread some whopping great falsehoods, like the one about the Liberals causing these record high deficits. The "cash" deficit Loyola faced last year is actually less than the ones faced in the early 1990s. Loyola's "cash deficits" are actually fictional ones created by his spinning the budget numbers, rather than by an accurate reporting of the government accounts.
3. Danny loves deficits or I have money and I'm not afraid to spend it. There is a lot of small cash being spent in this budget, but there have been some other expenditures that are, well, shall we say curious.
For example, and for some currently unexplained reason, the provincial government had so much cash on hand this year that it actually spent $117 million to pay off the entire cost of building The Rooms and something called the Education Investment Corporation. If they hadn't done that, the government would have posted at least a $103 million surplus on current account instead of the $14 million deficit they are reporting on a "cash" basis.
Government predicts it will continue to run deficits on an accrual basis, as noted in a couple of posts here on Loyola's prediction the total debt load will hit $17 billion before the Tories are finished. Government is also planning run some "cash" deficits over the next couple of years even though the government books were actually in surplus this year and likely will be in surplus next year as well.
Check out the budget speech where Loyola forecasts a "cash" deficit next year of $62 million. If he carried forward his surplus from this year - even if he paid off The Rooms alone - Loyola could have had a surplus this year and balanced the books next year, thereby achieving his pledge in a single year. That doesn't even take into account his lowballing of oil revenues.
Forget the "cash" nonsense. This government plans to keep overspending by record amounts for their entire first term and beyond if re-elected despite their Blue Book commitments to tackle the debt and deficit.
Colour me disappointed.
4. Last year's budget was a crock. It looks to me like the provincial government undertook a lot of spending in the last little while to save the embarrassment of showing that their first budget was just completely out-to-lunch when it came to reporting revenues.
The provincial government was never in the financial mess Loyola and Danny claimed.
It wasn't even close.
Thank heavens these guys weren't around when things were really bad.
Like say, 1992.
5. You read it here first! In yet another example of shameless self-promotion, I have to draw attention to yet another accurate prediction from the Bond Papers. In previous posts, I predicted that offshore revenues plus offsets from the Real Atlantic Accord would be over $300 million in FY 2004 and would likely top $400 million.
Guess what?
I was dead on.
Combined royalties plus offsets last year was officially $363, 762, 000 according to Budget 2005. Add to it the other revenues the province collects under the Real Atlantic Accord and you can see we were way over $400 million. [Guesstimate the other revenues at about $ 100 million.]
But that's not all.
6. Pull the other one, Loyola. Despite having a nice chart in his budget speech that forecasts continued high oil production and continued high oil prices, Loyola Sullivan forecasts that his oil royalties will actually drop next year. Pardon me, Mr. Sullivan?
Offshore royalties, Budget 2004: $136, 970, 000
Offshore royalties, Actual 2004: $234, 420, 000
Offshore royalties, Budget 2005: $215, 370, 000
Expect next year's revenues to be at least the same as this year since everyone predicts continued high oil prices. In fact, some forecasts suggest that oil prices will be higher in future, but certainly not below US$40 per barrel. Government forecasts are apparently lowballed, using US$38 per barrel for next year and US$32 per barrel for 2006.
7. 100% is 100%. or is it? As a last point, I'll leave you with this little poser.
During the Great Crusade for the Atlantic Accord, Danny Williams eventually got around to insisting on offsetting 100% of provincial offshore revenues.
He claims he got that.
Well, let me put it this way:
Offshore royalties - not revenues - this fiscal year were around $234 million. The existing Accord offsets plus the amount agreed upon by Williams add up to $263 million. That would mean other revenues like corporate taxes added up to only $29 million.
Hmmm.
Something isn't right there, and based on what has been happening all along with government's reporting of its oil revenues, I don't think the problem is here at the Bond Papers.
Of course, the combined amount is still $500 million, slightly more than the accrual deficit this year!
But I digress.
06 January 2007
Brokeback Mountain of Crap
Bill Rowe's column in this week's weekend Telegram is noteworthy for two reasons:
First of all, he repeats a story not realising that it is actually used by the less enlightened as a backhanded insult to both Loyola Sullivan and others from the Southern Shore. Rhyming off the times tables is not a mark of genius in any part of the world - except Bill Rowe's corner, apparently. The astute people from Da Shore apparently understand that far better than the townie columnist.
Second, Rowe plants so many passionate kisses on Sullivan's penny-pinching arse that one wonders if readers should avert their eyes for having stumbled, innocently but no less embarrassingly on the literary rendering of some school-child's first crush.
Loyola Sullivan was more commonly known as the Rain Man among denizens of the East Block for his ability to recite digits but assign them no deeper meaning than their mathematical value. He was indeed a well-respected politician, as are many and in Sullivan's case the high regard in which he was held was well deserved.
But beyond that and offering us no less than two reminders in two back-to-back sentences that Rowe was once in the same general vicinity as power (As Danny's ambassador to Hy's), Rowe's column gives us absolutely no insight into one of the political events of a year already chock-full of political events that will be long- remembered and oft-pondered.
Why did Sullivan give Danny a political kick in the goolies that evidently sent Danny's teeth a chattering just as it sent tongues wagging across the country? Do not look to Rowe for a possible answer, any more than one might look to him for an explanation of why he voted for the Churchill Falls deal. This is the print version of Rowe's host-talk-caller-listen show.
Such is the sheer inanity of the second half of Rowe's column, that he had the first PIFO Award sewn up until a few mouse clicks revealed the a better work by that other inveterate anony-quoter, Warren Kinsella.
But here's one for William to ponder: if Loyola Sullivan is such a penny-pincher with public funds, how could he sanction overspending $3.2 million of public money through the House of Assembly members accounts from 1998 to 2005, with the bulk of the overspending occurring while he sat both on the house management committee and as finance minister?
First of all, he repeats a story not realising that it is actually used by the less enlightened as a backhanded insult to both Loyola Sullivan and others from the Southern Shore. Rhyming off the times tables is not a mark of genius in any part of the world - except Bill Rowe's corner, apparently. The astute people from Da Shore apparently understand that far better than the townie columnist.
Second, Rowe plants so many passionate kisses on Sullivan's penny-pinching arse that one wonders if readers should avert their eyes for having stumbled, innocently but no less embarrassingly on the literary rendering of some school-child's first crush.
Loyola Sullivan was more commonly known as the Rain Man among denizens of the East Block for his ability to recite digits but assign them no deeper meaning than their mathematical value. He was indeed a well-respected politician, as are many and in Sullivan's case the high regard in which he was held was well deserved.
But beyond that and offering us no less than two reminders in two back-to-back sentences that Rowe was once in the same general vicinity as power (As Danny's ambassador to Hy's), Rowe's column gives us absolutely no insight into one of the political events of a year already chock-full of political events that will be long- remembered and oft-pondered.
Why did Sullivan give Danny a political kick in the goolies that evidently sent Danny's teeth a chattering just as it sent tongues wagging across the country? Do not look to Rowe for a possible answer, any more than one might look to him for an explanation of why he voted for the Churchill Falls deal. This is the print version of Rowe's host-talk-caller-listen show.
Such is the sheer inanity of the second half of Rowe's column, that he had the first PIFO Award sewn up until a few mouse clicks revealed the a better work by that other inveterate anony-quoter, Warren Kinsella.
But here's one for William to ponder: if Loyola Sullivan is such a penny-pincher with public funds, how could he sanction overspending $3.2 million of public money through the House of Assembly members accounts from 1998 to 2005, with the bulk of the overspending occurring while he sat both on the house management committee and as finance minister?
26 June 2006
The Commission of Internal Economy - background
Like all legislatures that follow the parliamentary tradition, the House of Assembly in Newfoundland and Labrador uses a committee of members to manage the operations of the legislature.
The Internal Economy Commission Act establishes the membership and powers of the commission. House of Assembly operations include television broadcast of the legislature, production of a record of debates known as Hansard and maintenance of a legislative library to support the Speaker and the members in their duties.
The Act also provides other powers, such as the mechanism for reviewing members' salaries, allowances and other benefits.
Prior to 2000, money for House operations was maintained in accounts run by the legislature itself. Budget allocations were made each year but the House of Assembly maintained its own accounts as it had done since 1855. The Auditor general had full access to the accounts and supporting documents for expenditures.
In 2000, the House of Assembly approved amendments to the IEC Act that provided, among other things:
- money for House operations would come from the Consolidated Revenue Fund, maintained by the finance department through the Comptroller General, thereby eliminating the requirement for the House to maintain its own accounts;
- power for the IEC to determine who would audit the House accounts; and,
- power for the IEC to determine what, if any, documentation/information would be provided to the Comptroller General to support requests for funds in order to make payments.
The amendments bill went through all three legislative stages in a single day - May 11, 2000 - without amendment. There were surprisingly few comments by members.
Beaton Tulk, then government House leader said this - and only this - on second reading:
At no point has anyone asked the former members of the IEC why they decided no documents needed to be sent to the Comptroller General, a practice which apparently remained in place until 2004 or may have remained in place until very recently. Itt was this decision which frustrated the checks and balances built into standard government administrative practices. As much as anything else, this decision facilitated any misappropriation of funds that may have taken place.
Since a number of people have been curious, following is a list of members of the IEC in 2000, 2002 and 2004. This list was compiled based on the official record of the House of Assembly.
Internal Economy Commission, 2000
Chairman: Speaker of the House of Assembly Lloyd Snow
Members: Doug Oldford, Deputy Speaker
Beaton Tulk, Government House Leader
Paul Dicks, Minister of Finance and Justice
Kevin Aylward, Minister of Forestry and Agriculture
Loyola Sullivan, Opposition House Leader
Tom Rideout, Opposition member
Secretary: Clerk of the House John Noel
Internal Economy Commission, 2002
Chair: Lloyd Snow
Members:
Bob Mercer, Deputy Speaker
Tom Lush, Government House Leader
KevinAylwardd
Joan Marie Aylward, Minister of Finance
Ed Byrne, Opposition House Leader
Loyola Sullivan, Opposition member
Internal Economy Commission, 2004
Chairman: Speaker Harvey Hodder
Members:
Roger Fitzgerald, Deputy Speaker
Ed Byrne, Government House Leader
Loyola Sullivan, Minister of Finance
Elizabeth Marshall, Minister of Health and Community Services
(replaced Nov 04 by Tom Marshall, Minister of Justice)
Kelvin Parsons, Opposition House Leader
Percy Barrett, Opposition member
The Internal Economy Commission Act establishes the membership and powers of the commission. House of Assembly operations include television broadcast of the legislature, production of a record of debates known as Hansard and maintenance of a legislative library to support the Speaker and the members in their duties.
The Act also provides other powers, such as the mechanism for reviewing members' salaries, allowances and other benefits.
Prior to 2000, money for House operations was maintained in accounts run by the legislature itself. Budget allocations were made each year but the House of Assembly maintained its own accounts as it had done since 1855. The Auditor general had full access to the accounts and supporting documents for expenditures.
In 2000, the House of Assembly approved amendments to the IEC Act that provided, among other things:
- money for House operations would come from the Consolidated Revenue Fund, maintained by the finance department through the Comptroller General, thereby eliminating the requirement for the House to maintain its own accounts;
- power for the IEC to determine who would audit the House accounts; and,
- power for the IEC to determine what, if any, documentation/information would be provided to the Comptroller General to support requests for funds in order to make payments.
The amendments bill went through all three legislative stages in a single day - May 11, 2000 - without amendment. There were surprisingly few comments by members.
Beaton Tulk, then government House leader said this - and only this - on second reading:
Mr. Speaker, I don'’t intend to belabour the points in this bill much except to say that some of the language that we see in laws governing the Internal Economy Commission Act dates back to responsible government days. What this bill clearly does is set out the duties of the IEC and the kind of duties that the IEC should carry out. They are more clearly defined in this bill. I would ask my colleagues to quickly move on passing the bill.His Opposition counterpart, Loyola Sullivan said merely the following:
I have just a few brief comments because it is pretty straightforward and pretty routine. It does include that the accounts here shall be audited annually. I think as members of the House we have no problems with being subject to an annual audit here, and as elected representatives I guess we should be accountable there. We certainly endorse that increased accountability of Members of the House of Assembly, and we support that.The longest comment came from Jack Harris:
I think it is symbolic in a way that the funds of this House were looked after by this House, that whatever was voted for the House was looked after internally by the House of Assembly, and that was recognized by the provision that had the Clerk physically handle the funds of the House. That is obviously being changed to bring it into line with the Consolidated Revenue Fund and the normal handling of accounts by government, with provisions to ensure that the Internal Economy Commission and the House retains its autonomy.In the controversy over the Auditor General's access to the house accounts in 2002, Sullivan reportedly sided with his fellow members of the IEC and backed keeping Elizabeth Marshall from her investigations. He now denies this, although there does not appear to be any public record of his objections anywhere.
Similarly, we have a new provision which requires an annual audit of the accounts of the House of Assembly which I think is appropriate; that there be accountability through an annual audit. We are satisfied to support this bill and that the Internal Economy Commission should ensure that this annual audit is done, and that the auditor be appointed by the Commission as is provided for in the legislation.
At no point has anyone asked the former members of the IEC why they decided no documents needed to be sent to the Comptroller General, a practice which apparently remained in place until 2004 or may have remained in place until very recently. Itt was this decision which frustrated the checks and balances built into standard government administrative practices. As much as anything else, this decision facilitated any misappropriation of funds that may have taken place.
Since a number of people have been curious, following is a list of members of the IEC in 2000, 2002 and 2004. This list was compiled based on the official record of the House of Assembly.
Internal Economy Commission, 2000
Chairman: Speaker of the House of Assembly Lloyd Snow
Members: Doug Oldford, Deputy Speaker
Beaton Tulk, Government House Leader
Paul Dicks, Minister of Finance and Justice
Kevin Aylward, Minister of Forestry and Agriculture
Loyola Sullivan, Opposition House Leader
Tom Rideout, Opposition member
Secretary: Clerk of the House John Noel
Internal Economy Commission, 2002
Chair: Lloyd Snow
Members:
Bob Mercer, Deputy Speaker
Tom Lush, Government House Leader
KevinAylwardd
Joan Marie Aylward, Minister of Finance
Ed Byrne, Opposition House Leader
Loyola Sullivan, Opposition member
Internal Economy Commission, 2004
Chairman: Speaker Harvey Hodder
Members:
Roger Fitzgerald, Deputy Speaker
Ed Byrne, Government House Leader
Loyola Sullivan, Minister of Finance
Elizabeth Marshall, Minister of Health and Community Services
(replaced Nov 04 by Tom Marshall, Minister of Justice)
Kelvin Parsons, Opposition House Leader
Percy Barrett, Opposition member
07 March 2006
Williams' offshore deal helped break Equalization system
Here's a story by Rob Antle from today's Telly that is being posted here for posterity.
On the second point from this story, Loyola Sullivan's insistance that Equalization offset deals in the Atlantic Accord and the January 05 side deal won't factor into the new discussions is just not sensible. There is no way that the province can have its oil revenues doubly hidden from Equalization.
While Chong claims he can't say how the side-deals will factor in, here's a good guess: they are dead. Deader than dead. The $2.0 billion that Sullivan just dropped on the pension liability is the last of the cash coming from the deals. At least, that's what will happen if Loyola Sullivan - who backs the Harper plan - gets his way.
If Danny Williams gets his way, then the deals will have their full impact plus the province will continue to collect Equalization.
There's a gap between the premier and Sullivan on this issue, but that's not what people here would like to talk about.
------------------------------------
"The equalization formula is a complete mess - it's broken," [federal intergovernmental affairs minister Michael] Chong told the Sun. "And it's a direct result of one-off, ad hoc deals, late- night negotiations, the high stakes poker game that (former prime minister Paul) Martin played in the dying days of his administration, whether that be with the one-off deals with the provinces in the east or with Ontario."Forgive the chuckling but Newfoundlanders and Labradorians were told at the time and some still insist that Stevie Harper supported the Accord side-deals. Apparently his IGA minister has a different view about the value of those deals; maybe Chong's view is the real Conservative party view. Around here, the Bond Papers took Steve at his word: he would change the Equalization system, not make side deals.
On the second point from this story, Loyola Sullivan's insistance that Equalization offset deals in the Atlantic Accord and the January 05 side deal won't factor into the new discussions is just not sensible. There is no way that the province can have its oil revenues doubly hidden from Equalization.
While Chong claims he can't say how the side-deals will factor in, here's a good guess: they are dead. Deader than dead. The $2.0 billion that Sullivan just dropped on the pension liability is the last of the cash coming from the deals. At least, that's what will happen if Loyola Sullivan - who backs the Harper plan - gets his way.
If Danny Williams gets his way, then the deals will have their full impact plus the province will continue to collect Equalization.
There's a gap between the premier and Sullivan on this issue, but that's not what people here would like to talk about.
------------------------------------
'A complete and utter mess'; Harper minister cites Accord deal among reasons for 'broken' equalization system
by Rob Antle
The Telegram
March 7, 2006
Page A1
Side deals like last year's new Atlantic Accord have resulted in "a complete and utter mess with regard to fiscal arrangements" between Ottawa and the provinces, federal Intergovernmental Affairs Minister Michael Chong says.
Chong made the comments in a weekend interview with the Ottawa bureau of Sun Media.
The story ran in Sun papers in Edmonton, Calgary, Toronto and Ottawa.
"The equalization formula is a complete mess - it's broken," Chong told the Sun. "And it's a direct result of one-off, ad hoc deals, late-night negotiations, the high stakes poker game that (former prime minister Paul) Martin played in the dying days of his administration, whether that be with the one-off deals with the provinces in the east or with Ontario."
Ottawa and the Williams administration reached a new offshore revenue-sharing arrangement last January, after months of hot-and-cold negotiations. The deal included a guaranteed, $2-billion upfront payment.
Nova Scotia reached a similar deal on its offshore resources.
Ontario later got its own separate multibillion-dollar arrangement with the Martin government to address the so-called "fiscal imbalance" between Ottawa and the province.
Chong reiterated to Sun Media the Conservative election pledge to remove non-renewable resources from the complex set of calculations that comprise the equalization program.
The Tories made the commitment to "put back the principle of equity into the equalization formula for all regions of the country," Chong told the Sun.
"I can't tell you exactly how that's going to happen or what form it's going to take. The prime minister's going to be taking the lead on this file."
Offshore oil is a non-renewable resource. That Conservative campaign promise would effectively enshrine the key principle of the Accord indefinitely. The Accord expires in 2012, with the possibility of renewal until 2020.
No one knows how the $2-billion upfront prepayment for enhanced Accord benefits would play into any such changes.
Last month, officials with the federal Department of Finance declined to answer such questions, calling them "hypothetical."
'That was the deal'
The Williams administration has insisted that the $2 billion should not be a factor at all.
"That was a deal, it was an up-front payment with no strings attached, as a minimum payment," Finance Minister Loyola Sullivan told The Telegram in late January.
"We can only go forward, we can't go back in the annals of history and do adjustments to the past."
The Newfoundland and Labrador government has since announced that it plans to dump the majority of the $2 billion into unfunded pension liabilities for teachers.
That will reduce the province's debt to $10 billion, and free up about $150 million in interest charges every year.
The province has welcomed the proposed Conservative changes to equalization, saying they will likely benefit the local treasury.
Though it may lack the cachet of other issues, equalization is of vital importance to the province.
The program is aimed at ensuring all provinces can provide a similar, baseline level of services.
Newfoundland and Labrador received $861 million in equalization from Ottawa this year, according to the province's 2005-06 mid-year fiscal update.
That's in addition to hundreds of millions in offshore royalties and new Accord benefits.
The provincial budget totals about $4.3 billion.
The federal Conservatives have pledged that no province will be "adversely affected from changes to the equalization formula," but have not provided any details.
Officials in the Privy Council Office, which oversees intergovernmental affairs, did not return The Telegram's calls Monday.
rantle@thetelegram.com
11 January 2008
Rideout misrepresents former cabinet colleague's remarks
Fish minister and deputy premier Tom Rideout must be having a bad day.
Not only is he now on the hook repaying several thousands dollars of taxpayers cash he received but was not entitled to, but it turns out his rebuke of former cabinet colleague Loyola Sullivan is based on Rideout's misrepresentation of Sullivan's comments.
Here's Tom's version, as reproduced by CBC:
We were astounded and surprised at the view taken by [fisheries ambassador Loyola Sullivan] when he made the remark that we're 10 years too late for the fight," Rideout said in a statement, describing Sullivan's appearance at a Fur Institute of Canada meeting in St. John's earlier this week.
Here's the next bit of the CBC story, giving Sullivan's actual words.
However, Sullivan's precise comment while speaking with reporters was substantially different than Rideout's rendering of it.
"It's difficult because it's advanced so far," Sullivan said, describing the effectiveness of campaigns by groups protesting the seal hunt.
"I would love to have been in this position 10 years ago, to be able to advance it before it got such a foothold."
It's like the different between an office and a house.
Last month, The Telegram revealed that Rideout had claimed rent of a house in his constituency, even though House of Assembly rules at the time didn't allow members to claim rent or mortgage costs for property in the districts they represented.
Confronted with the claims totalling $23,000 over eight years, Rideout initially defended the expenses saying that he had permission from administrative staff at the legislature for the arrangement. On Friday, Rideout took a very different position:
"I have personally concluded that the way in which these residential expenses were billed to my constituency allowance was not appropriate," he said during a news conference.
"I take full responsibility for that and it is therefore my responsibility to ensure that it is rectified."
Rideout's initial defence started to come apart at the seams when he made incorrect statements on a local radio talk show. As reported previously, Rideout said that he had only claimed per diems for meals and similar expenses. Documents obtained by the Telegram showed Rideout claimed both per diems for meals as well as per diems for accommodations even though he was occupying a house and office already being paid for by taxpayers.
Rideout was a member of the House internal management committee at the time he began the expense claim arrangement. During Rideout's term on the committee, it approved changes to legislation governing the House administration that led, in one instance to the auditor general be barred from auditing the legislature's own accounts. The period was well described by Chief Justice Derek Green in his recent report on the period.
-srbp-
Related links:
"Beholder, beheld and beholden", a post that notes the curious change in perspective on the Rideout affair from a newbie local blogger once the Premier spoke on the subject:
If Deputy Premier Tom Rideout had permission from the House of Assembly, and thus a special arrangement, to claim for accommodations in Lewisporte, then what has he done wrong? The accommodations exist, permission was granted to claim a legitimate expense, and he has done nothing illegal.
Wonder what the view is now that even Rideout admits there was something wrong in the billing arrangement.
29 November 2005
Rain Man needs some help deciding
Loyola Sullivan, known to some as the Rain Man for his ability to rattle off figures like ""about a hundred million dollars. uh huh. a hundred million dollars" without really saying anything, got some big help today from auditor general John Noseworthy.
The AG made some really obvious but sensible suggestions about the uses to which the offshore revenue windfall could be put. They are obvious to anyone except, maybe, the Rain Man.
Noseworthy noted that as it currently sits in the bank, the offshore cash is earning interest at a rate of about $60 million annually. Putting that cash toward the unfunded pension liabilities would produce an additional $90 million (or a total of $150 million per year) than can be directed to program spending or used to pay down the long-term debt.
In a media scrum outside the legislature, a grinning Sullivan said he has made recommendations to cabinet on how to dispose of "surplus cash" the government may have on hand. Truthfully, it is hard to know what Sullivan has to grin about.
First of all, he should have developed a plan for debt and deficit reduction - and announced it - long before now.
Second, his talk of "surplus cash" makes a mockery of his own announcement within the past few weeks that he had eliminated the current deficit and produce a surplus - overall - of less than $2.0 million. Sullivan's previous statement made it appear as though the cash surplus this year of well over $300 million by year end - had already been allocated and spent.
His comments today confirm the point made on the Bond Papers that in fact, Sullivan had erroneously hinted that he had no surplus on a cash basis. Face it, if there was no surplus cash - or very little - then there'd be no need for a cabinet paper.
Third, there is every sign that other cabinet ministers including the Premier have covetous eyes on the offshore cash. And that is the truly alarming prospect, as noted ">here previously. We will have considerable pressure to spend our future coming from within the provincial government. It might be too late for Loyola Sullivan to take good advice and do what is in the long term best interest of the province.
His fascination with numbers and decimal points seems to have overshadowed his ability to develop a sound plan and get on with the real job of a cabinet minister - making decisions.
The rain Man got some free advice today.
He should take advice from John Noseworthy and get on with the job of being finance minister...
rather than patting himself on the back when it suits his purpose and trotting out large numbers to frighten people when that suits his purpose.
Then Sullivan would have something to grin about.
And so would the rest of us.
The AG made some really obvious but sensible suggestions about the uses to which the offshore revenue windfall could be put. They are obvious to anyone except, maybe, the Rain Man.
Noseworthy noted that as it currently sits in the bank, the offshore cash is earning interest at a rate of about $60 million annually. Putting that cash toward the unfunded pension liabilities would produce an additional $90 million (or a total of $150 million per year) than can be directed to program spending or used to pay down the long-term debt.
In a media scrum outside the legislature, a grinning Sullivan said he has made recommendations to cabinet on how to dispose of "surplus cash" the government may have on hand. Truthfully, it is hard to know what Sullivan has to grin about.
First of all, he should have developed a plan for debt and deficit reduction - and announced it - long before now.
Second, his talk of "surplus cash" makes a mockery of his own announcement within the past few weeks that he had eliminated the current deficit and produce a surplus - overall - of less than $2.0 million. Sullivan's previous statement made it appear as though the cash surplus this year of well over $300 million by year end - had already been allocated and spent.
His comments today confirm the point made on the Bond Papers that in fact, Sullivan had erroneously hinted that he had no surplus on a cash basis. Face it, if there was no surplus cash - or very little - then there'd be no need for a cabinet paper.
Third, there is every sign that other cabinet ministers including the Premier have covetous eyes on the offshore cash. And that is the truly alarming prospect, as noted ">here previously. We will have considerable pressure to spend our future coming from within the provincial government. It might be too late for Loyola Sullivan to take good advice and do what is in the long term best interest of the province.
His fascination with numbers and decimal points seems to have overshadowed his ability to develop a sound plan and get on with the real job of a cabinet minister - making decisions.
The rain Man got some free advice today.
He should take advice from John Noseworthy and get on with the job of being finance minister...
rather than patting himself on the back when it suits his purpose and trotting out large numbers to frighten people when that suits his purpose.
Then Sullivan would have something to grin about.
And so would the rest of us.
29 December 2006
Danny Williams resignation: Bond Papers news story of 2006
While many stories vied for contention, Danny Williams' resignation is Bond Paper's news story of the year for 2006 and Danny Williams is the newsmaker of the year.
Williams announced his resignation - actually that he would not seek a third term in 2011 - in comments made to VOCM and then repeated in subsequent year-end interviews.
Williams' resignation, likely to come in 2009 or 2010 after a decision on the Lower Churchill, comes at the end of a year of continued set-backs for the premier who has been in equal measures petulant and posturing. His announcement will further limit his ability to accomplish anything of substance on his own agenda in his remaining time in office. His cabinet and caucus will be reluctant to implement major initiatives that would limit harm their political fortunes and as government members begin to jockey for the leadership, government operations will slow.
Hebron fails
Hebron fails
The past year marked a turning point for the Williams administration. The first setback was the collapse of negotiations on the Hebron oil field. After achieving an apparent agreement on January 26 covering royalties and local benefits, Williams introduced new conditions for a settlement including a 4.9% "equity stake" and so-called super-royalties that would see the province collect additional royalties as long as oil prices stayed above US$50 per barrel.
Bond Papers attributed the failure of the Hebron talks to a combination of a miscalculation by the Premier and a fundamental conflict of interest in the negotiations that saw the future equity partner sitting as the province's chief negotiator on benefits and royalties.
The economic impact of the Hebron failure was immediate. Housing prices in the St. John's area dropped dramatically, with some reporting a 25% decline in higher end properties. Oil companies drastically reduced their local offices. Chevron, for example, redeployed the 60 or so staffers working on Hebron, leaving behind a skeleton crew of five or six to oversee Chevron interest in existing production.
In April, Husky Energy's John Lau said the company would sideline its reported interest in natural gas exploration pending release of the province's gas royalty regime in the fall of 2006. By the end of 2006, Williams delayed announcement of the royalty regime and the province's energy plan until sometime in 2007.
The local oil and gas industry looked forward to starting construction of a major new field at Hebron. Construction was expected to pump the better part of $2.0 billion into the local economy and the royalty projections held the provincial government would receive between CDN$8.0 and CDN$10.0 billion in royalties over the life of Hebron production. Industry insiders anticipated the positive mood resulting from a Hebron deal would boost exploration which had recently seen increasing interest.
Instead, activity is likely to shrink with no construction at all and drilling programs. A decision on developing South Hibernia's 300 million barrels of light sweet crude has been delayed, with insiders speculating that the Williams administration will veto any approval of the project by the offshore regulatory board. A recent land sale by the board saw three parcels receiving no bids. In another sale, six of eight parcels received bids with the work commitments being primarily for seismic research. Delineation drilling on existing fields is largely completed and the only exploration drilling planned for 2007 is a pair of wells in the deep waters of the Orphan Basin.
More slipping and sliding in the oil patch
Williams met the Hebron failure with threats of expropriation, a tactic he tried with Abitibi Consolidated and its Stephenville operation. When Williams tried to elicit federal support for so-called fallow field powers, he was rejected flatly by Conservative Prime Minister Stephen Harper. This was one of several examples of Williams' inability to gain support in Ottawa.
Williams was also shut down in efforts to install St. John's mayor Andy Wells as chairman and chief executive officer of the offshore regulatory board. The federal government under Paul Martin was prepared to appoint Wells as chairman of the board, but Williams rejected the offer in favour of an effort to have Wells occupy both positions. An independent arbitration panel rejected Williams' choice in favour of a candidate who met all the provincial government's agreed upon selection criteria.
The successful candidate was forced to take legal action to secure his appointment. Williams fought the action, inventing a definition of one clause of the Atlantic Accord that was soundly rejected by the province's Supreme Court.
Lard of the Rings
In year-end interviews, Premier Danny Williams described the House of Assembly scandal as his single greatest regret of 2006. The province's auditor general alleged that some $4.4 million had been inappropriately spent by the legislature between 1997 and 2005. The accusations - which included members in all parties - cost Williams one of his senior ministers and cast a pall over the entire legislature.
But the handling of the scandal suggests Williams may be unwilling or unable to address serious problems. The Auditor General's reports account for less than half the overspending during the period. Williams has been contradicted by his finance minister - Loyola Sullivan [left]- on at least one occasion, namely the question of recovering money allegedly misappropriated. Williams favoured waiting until all investigations and reviews were finished; Sullivan moved to recover money from five current and former members of the legislature immediately. In a broader sense though, Sullivan's continued handling of the file suggests problems within the administration that speak directly to the Premier's inability to control his administration or his reluctance to do so. Either way, the problems are deep.
Sullivan has been a member of the legislature's management committee for much of the period currently being investigated by three separate agencies. As well, he has been minister of finance since 2003 and has such has been or ought to have been aware of overspending. Bond Papers demonstrated that some of the most significant overspending occurred in the years after the October 2003 election.
Yet Sullivan remains as finance minister and cabinet has approved investigations and reviews which specifically avoid looking at actions by the legislature's Internal Economy Commission. As finance minister, Sullivan received the reports from Auditor General John Noseworthy [right] that alleged misappropriations and overspending.The existence of this fundamental conflict of interest suggest that the premier is either unwilling or unable to take decisive action. The ease with which Sullivan won the fight over repayments suggests Williams is increasingly impotent within his own cabinet.
Sullivan's power: the clash over Equalization
This is not the first or most example of Sullivan's ability to contradict his boss in public and win. In the 2004 federal election, Sullivan endorsed the Conservative's Equalization plans while Williams publicly declared their impact could not be calculated.
In 2005/2006, Williams declared that the provincial government officially favoured inclusion of all provincial revenues in Equalization calculations as part of an overall reform of the major federal transfer to the provinces. Sullivan endorsed Harper's proposal.
By mid-2006, Williams was picking fights with Ottawa but based entirely on the position Sullivan had favoured. Sullivan's political partner, federal cabinet minister Loyola Hearn praised Sullivan as being the best negotiator on behalf of the province. This was a direct and calculated slap at Williams who bills himself as built a reputation for negotiating good deals on behalf of clients and avoiding bad deals.
Williams' political impotence likely to grow
Bond Papers selected Danny Williams as newsmaker of the year for the obvious and significant impact he had on the province and its economy in 2006. That impact will continue in 2007. The full - and likely negative - impact of the Hebron failure will be seen in the years beyond Williams' planned departure. In the same way, the full impact of Williams' announced departure from the premier's office will have an increasing impact on public life over the next three years. For that reason, Williams' resignation is the news story of this year.
By his own calculation, Williams' last years in politics will be focused on developing the Lower Churchill. A "go/no-go" decision is expected in 2009. It is possible there will be a flurry of activity in the months leading up to the fall 2007 general election and immediately after, but experience suggests otherwise.
Williams' administration has been characterised by extreme slowness in implementing even the most simple of initiatives. It took six months after his first cabinet was sworn in to find names for his departments. His own department - Business - languished for three years without staff appointments. The energy plan - inherited from previous Liberal administrations - has taken a further three years to develop under Williams and is slated for release some time in 2007.
An accountability act that was supposedly the centrepiece of Williams' ethics agenda sat un-proclaimed until December. It was only proclaimed after public criticism from the province's auditor general but even then departments and agencies have been given a further two years - until 2008 - to comply.
Typically, though, lame duck first ministers are unable to implement major initiatives the closer they get to leaving office. The reason is simple: those who will carry on, especially his likely successor won't want to take political hits on his behalf. The new leader will want as free a hand as possible to bring in his or her own agenda once in office.
The period from Brian Tobin's departure in October 2000 to Roger Grimes' swearing-in in early 2001 was a period of near complete inactivity within the provincial government. As a general election grew closer, Grimes' administration was unable or unwilling to implement any major initiatives that would likely draw public criticism. Senior public servants grew tired of complaining of the impotence of cabinet collectively.
The same thing occurred in 1988/89 in the period after Brian Peckford announced his resignation. It also occurred in 1979 in the wake of Frank Moores' departure.
The growing leadership fight within the Progressive Conservative party will be one of the other sources of friction within an administration already known for gear-grinding tardiness. Prospective leaders will devote increasing amounts of time to luring political support. Even if Williams requires declared candidates to resign from cabinet, political attention will inevitably turn increasingly away from governing and towards leadership issues for 12 to 18 months before Williams departure.
None have declared yet but early speculation suggests several current ministers will look to replace their current boss. Loyola Sullivan is a former party leader with a strong power base. Tom Rideout [left], currently fisheries minister and deputy premier, is a former premier who has longed to get his old job back. InTRD minister Trevor Taylor has potential.Williams may shuffle his cabinet early in 2007 to change assignments. In the current cabinet configuration, any leadership fight involving Sullivan and Rideout - for example - has the potential to paralyse cabinet with two senior ministers jockeying for advantage. A change of assignments would also allow Williams to shrink from public scrutiny and focus on the one thing that may be his legacy: a Lower Churchill deal.
No matter how you assess the situation, there's no escaping the conclusion: Danny Williams' resignation is not only the news story of 2006, it will be be at the heart of news for the next three years.
-srbp-
Subscribe to:
Posts (Atom)