15 March 2012

To Encourage the Others #nlpoli

Lots of people look to leaders in a crisis to see what lessons they can learn.

Well, Kathy Dunderdale is special.

She is an excellent  example for any leader – political or not – who wants to know how not to handle a major financial problem.

The Telegram editorial on Wednesday does an excellent job of summarising the convoluted, contradictory and confused way Kathy Dunderdale has talked about job losses and budget cuts in Newfoundland and Labrador.

Think about Kathy Dunderdale’s comments in a slightly different way and you can get a sense of the magnitude of her problems.  Instead of lay-offs, imagine she was announcing another life-altering decision. You can summarise her statements this way:  we will have to kill some people, maybe.  If we do kill them, there won’t be a lot of bodies, so they should all relax until we figure out how many. And even if we do wind up killing a few people they all knew they would only be here temporarily anyway so this is pretty much what they should have expected anyway.  It’s in their contract.

An exaggeration to be sure, but for the thousands of people in this province across the province, that’s not far off the chilling effect Dunderdale’s words have had. 

The provincial government budget covers about 20% or more of the provincial labour force.  That’s a heck of a lot more than 2100 people who Dunderdale has said are going to be randomly thrown out of work – possibly – in a few weeks time.

All those people have families, mortgages and other bills and all sorts of plans they’ve been making on the expectation they’ll have a job in a few weeks time.

All of them know that when any Premier starts talking about layoffs, program reviews and spending cuts, they aren’t likely to be just limited to this year and a couple of people.  Things must be bad. Lots of them have been through it before. 

And even if things don’t turn out as badly as those public servants might fear, prudence will likely dictate what experience might not.  They are going to change their plans for the next year or so.  New home?  New car?  Renovations?  Trip? Maybe not.  Those who get laid off will have to cut their spending, find a new job and start again.  And those who don’t will scale back just to be on the safe side.

That’s the practical economic impact Kathy Dunderdale will have on tens of thousands of people across the province.

Then there’s the impact on her bottom line.  Provincial sales tax is the second largest source of money for the provincial government, after oil royalties.  We already know oil royalties will drop this year.  Now factor in a drop in sales taxes due to the Dunderdale-induced chill. 

Drop sales tax revenue by 10%  - for argument’s sake - and you have about the same amount of money the Premier says she wants to save, that is, less than $100 million.  It would actually be around $82 million.

So the Premier and her colleagues cut $82 million from the budget – theoretically – with their job cuts.  And in addition they have induced another $82 million revenue loss as a result of the chill in the economy.  Dunderdale’s cocked-up communications have effectively She’s actually doubled the effect of her cut.

At this point, though, we don’t know how much the provincial government will chop.  Anything more than a small handful of jobs lost, coupled with reassurance that those few are all, and the Premier can guarantee the lost revenue and the economic contraction will be much larger. 

Now factor in cuts to federal spending and a loss of federal jobs that will come on March 29. Incidentally, that’s the real reason the provincial government is delayed until April.  All this talk of internal reviews and such is just fluff and nonsense. 

The provincial government will introduce its budget likely around the end of the first week of April.  They are waiting  - and the only thing they are waiting for – is to see what the feds do.  Provincial finance officials likely have some ideas of what will come.  They should have gotten them from their federal counterparts and their colleagues in other provinces. That’s what happens every year. 

The provincial officials have contingency budgets with adjustments here and there in the figures, based on what the feds do.  They can make any last minute adjustments and get the provincial budget out quite quickly afterward. For the most part, the whole thing is done.

The cuts Kathy Dunderdale is talking about may appear to be new to the Telegram editorialist’s reckoning but they aren’t. Dunderdale and her cabinet have apparently settled on them some time ago. How big the cuts will be may depend on the federal budget. 

What the telly-editorialist and others might wonder about more profitably, though, is how a government with billions in cash laying about is thinking about laying off a single solitary employee based on the size of the hand-outs the provincial government will get from Ottawa.

Now that is something to marvel at.

- srbp -