They are called key messages. In the uncomms-speak of the government bureaucrats, they are KMs, pronounced Kay-Emmzzz.
On Thursday, two rating agencies downgraded the province's rating with a negative outlook. Not surprising but definitely not helpful since the government has already exhausted its political capital for nothing thanks to the complete disaster last spring.
Anyway, let's take a look at what Moody's said about the government's finances. Specifically let's look at what they said about the negative trending.
Moody's is concerned about what it calls "execution risk." They describe the current plan as aggressive. But to keep to it will require some further aggressive moves.
"Among the risks Moody's sees is the province's commitment to
keep program expenditure growth essentially flat across the [seven] year horizon,
viewed as an ambitious target given the pressures stemming from certain
departments such as health care which must cope with an aging population."
The political challenge of meeting the targets isn't the only risk. "The negative outlook also reflects the forecast that Newfoundland
and Labrador will have fully exploited its fiscal
flexibility across the medium-term, once the budget plan is fully exercised.
The province therefore faces increased risk that it will be unable to react to
further downward pressures should these pressures arise."
In other words, just meeting the current plan will tap the province out. If the situation deteriorates - like say with a drop in revenues - the provincial government won't be able to cope.
Here's what the provincial news release said: "While Moody's has adjusted the province's credit rating to
Aa3, with a negative outlook, they indicated that the outlook could be revised
to stable if the province implements and achieves the required revenue and
expenditure targets and demonstrates an ability to restrict debt accumulation
as planned."
That's pretty much word-for-word from Moody's. Problem is all of that took one sentence. One sentence. Everything else was about the risk of not hitting the aggressive targets. Frankly, if you added in the complete lack of strategic direction the government has at the moment with a Premier at record low levels of public support and you can magnify those risks quite dramatically.
A really good example of that came this week with news that the government had caved into demands from NAPE relentless campaign to dictate the composition of government's negotiating team for upcoming talks with the public sector unions. They gave in to one demand, with NAPE pledging to get rid of the government's external legal help as well.
If they have nothing else, the government can fight back with great KMs all generated cheaply in-house:
"This government has worked very hard to lay out an action
plan that will return this province to surplus and will protect the vital
programs and services that each and every Newfoundlander and Labradorian have
come to appreciate and count on. Through Budget 2016, our government took
decisive actions to help our province through some very challenging economic
times. Both [Standard and Poor's] Global Ratings and Moody's have recognized that
action plan."
They've "recognized" the government's "action plan."
Gives ya goose bumps.
Don't you feel safer already?
-srbp-