From the House of Assembly:
PREMIER WILLIAMS: Thank you, Mr. Speaker.
In all fairness to the hon. Leader of the Opposition, she wasn’t there in the scrum yesterday when I indicated exactly what the government’s position was, but I am at a loss to understand - in a situation where CUPE have already accepted what is considered to be a very, very generous wage package of eight, four, four and four over four years, which is front-end loaded, which compounds outs to be 21.5 per cent, we have now seen that PSAC, the public service union, has accepted 6.8 per cent over four years, the Prime Minister of the country, who has referred to the present economic situation as a dangerous situation, and he has also referred, after the G-20 meetings, to it as a near-depression possible situation, and just this afternoon we heard the Opposition House Leader refer to it as a crisis – under those circumstances I am at a loss to understand why I would be considered to be threatening unions when I am indicating to them that if, in fact, the prophecies of the Prime Minister, or even the Opposition House Leader, actually come true and we end up in a depression or a near-depression situation, why they would not take a 21.5 per cent offer right now, when they can have it and when they can get it, rather than in a situation when we are forced to choose between health services or education services or drugs, and not be able to give them that offer.
That was a dose of reality, it was recognition of a very difficult world situation right now, and it was an opportunity, I think, to be frank and open and honest with the people of the Province.
Okay. Let's have a little dose of reality.
It's not like the 21% comes in the first year of any deal, even if signed tomorrow, retroactive to the first of April.
Only 8% is retroactive.
So if all the public sector unions signed a deal today, the only thing they would be guaranteed getting is 8% more this year.
After all, by the Premier's own words:
the statement that I made very clearly said that if oil stays at the price that it is today we would have no choice than to not offer that same wage package under those circumstances because we would be facing multiple deficits of several hundred million dollars every year starting next year.
The awkward grammar of that sentence notwithstanding, it's pretty clear the Premier is saying that after this year there is no guarantee of anything since large public sector deficits would mean the provincial government wouldn't be able to honour wage increases of the kind being offered today when it supposedly has the cash.
But does it have the cash this year even though the Premier put it this way in the legislature:
We will have a good year this year. I indicated yesterday, just outside this House, that we will, in fact, exceed our surplus this year, even if the price of oil is at $50.
The answer is yes, but they will do it by running a deficit and borrowing hundreds of millions of dollars, just as the budget planned to do all along. Incidentally, at US$50 a barrel the provincial deficit would likely be more than $478 million this year.
The problem next year is that the budget deficit next would be even larger than the one likely in this year if you assumed oil at .
Remember that when the Premier talks surplus he's talking accrual accounting. You have to subtract $360 million in imaginary money to get a sense of the real number. What we are using here is the budget as presented in the House, which uses a modified cash basis of accounting.
Let's hold all things as they are in the current budget. Now that's a bit artificial since even this year mineral revenues are dropping and just about every category of revenue should be taking a dip in the second half of the year. What with the Premier threatening possible wage freezes, cuts or rollbacks or anything but the happy increases promised before, he's likely sending a huge chill across consumer confidence. So it's artificial but let's focus on oil to illustrate the scope of the government's problem.
Given:
1. Price = US$50 per barrel.
2. Exchange rate = 25%. That's actually higher than the rate I used before.
3. Annual oil production = 105 million barrels
Therefore:
4. Provincial oil royalty = $1.115 billion.
That's $600 million less than this year's starting point in the budget and, as you are now tired of hearing, the original budget projected a cash shortfall of $414 million plus an additional round of "off book" borrowing of $380 million.
Does anybody really think the provincial government could offer any wage increases with a deficit of $1.3 billion?
Of course not.
Plus they know the Premier's wages versus social programs dichotomy is entirely false since the largest chunk of program spending is wages.
All the Premier has succeeded in doing the past couple of days is further eroding public confidence in the local economy and the provincial government's ability to ride out the financial crisis the Premier likes to talk about to claim.
Well, that is talk about when he doesn't want to forecast doom in order to frighten people as part of his brilliant negotiating strategy.
What we end up with isn't a dose of reality.
We just get someone shaking the magic eight ball again.
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