This originally appeared in The Telegram, 30 Jan 2019.
Budget consultations are not the place for serious
discussions of government finances at the best of times but in an election
year, the usual charade becomes something else again.
This year, people lined up asking a government that is
the better part of a billion dollars short on its budget this year to spend
even more money that it doesn’t have next year.
There are the usual cries from the usual special interests to hire more
of their members but even groups that two years ago were calling for drastic
action to curb spending are now sticking their hands out toward the government
election-year goodie bag in hopes a few treats.
For its part, the government is playing along. There will likely be a tax cut this year and
a few other bits of retail politics. But what you won’t hear about is that the
government probably won’t hit its target of delivering a surplus budget in
2022. That is a major problem. There are
three reasons for it.
First, there is the politics of it. The bond-rating
agencies doubted from the start that the provincial government could stick to
its modest plans. They were right. The
current administration abandoned its 2016 budget plan in 2017. It put off all the elements related to public
sector unions to an undefined point in the future, which means never.
If the Progressive Conservatives win the next general
election, their plan to handle every problem by fighting with the federal
government sounds like a return to the policies that created the current
financial problems in the first place.
More of the same is no change at all.
If the Liberals are re-elected, they are unlikely to
shift off their current tack. Fixed election dates coupled with the reality
that Dwight Ball is likely in the last year or two of his political career put
the Ball Liberals – like the PC’s before them - in constant fear of an imminent
election. That means they have no interest in talking about potentially
controversial issues let alone actually do anything that might make some people
a bit grumpy.
Second, the government’s stake in the Bay du Nord
offshore oil field will add another $1.0 billion in new spending that will come
from new borrowing. The project also adds significant and thus-far undisclosed
financial risk of cost over-runs and environmental issues during development and
operation. None of that was in the original plan to balance the books by the
early 2020s.
Third, the Premier’s commitment on electricity rates –
no one in the province will have to pay for Muskrat Falls through rates or
taxes – is unrealistic. Thankfully no
one believes it anyway. That’s because
every approach the government has been looking at would cost upwards of $500
million or more in new spending or diverted revenues that the government budget
plans don’t allow for. There is little
likelihood of a federal commitment to give that sort of money to Newfoundland
and Labrador over the next 20 years, let alone the 50 to 65 years the original
Dwight Ball and current Ches Crosbie plans call for. As a result, any rate mitigation plan will
drive up government costs about the size of the current deficit without any offsetting
income.
Whatever the political parties promise and whatever
people demand in new spending during the upcoming election must be balanced
against the cold reality of the provincial government’s financial
problems. We can and must improve the
way government works and what it does for Newfoundlanders and Labradorians. But
at the same time, we must be financially responsible to ourselves and future
generations. Otherwise, we may find that
if we turn the corner the finance minister talks about, we are staring at an
even bigger wall than the one we smacked into four years ago.
-srbp-