A bail out, a bail out ... #nlpoli

Conversation about the province's financial state in the past couple of weeks have turned to talk of bailouts and threats to the province's sovereignty.  A Carlton University economist  told CBC in early January that the provincial government would need a bailout to keep the province from collapsing under the weight of electricity rates once Muskrat Falls arrives. Energy analyst Tom Adams talked about Muskrat Falls with Pete Soucy and Paddy Daly.

The talk about bail-out is related, in one sense, to a refrain some people have been singing for a while now that somehow the provincial government is hard-done-by because it doesn't get Equalization despite having this huge financial mess.  People who say those sorts of things don't understand a thing about Equalization.

Let's take a quick look at the province's finances and the idea of a bail out.  In another post, we'll look at sovereignty.

The Tibb's Eve Accord #nlpoli

Health minister John Haggie said that the health deal signed with Ottawa on Tibb's Eve was the best deal that could be got.

Haggie's probably right.  At least, the deal contains a clause that if another province gets a better deal, we can opt for that one instead.

It's been so very long since we've seen federal-provincial rackets over money that most people in Canada seem to have forgotten what they look like.  Stephen Harper didn't run federal-provincial fiscal relations like other prime ministers so the provinces stopped squabbling publicly.  Even Paul Martin was basically about handing out cash so, aside from premiers who postured entirely for the show of it, there was never really much of the sort of disagreement and negotiation that Des Sullivan reminded us all about on Monday past.

Equalization... again #nlpoli

Equalization is a really simple idea.

In order to ensure that Canadians across the country have access to comparable services regardless of where they live,  the federal government sends money to provinces that don’t make enough on their own.

The federal finance department website describes the scheme pretty well.  We’ve reformatted the website version to take out the bullets.

The Bridge to Ottawa #nlpoli

Premier Dwight Ball said everything is on the table to deal with the massive financial problem facing his administration.

And then, in a string of year-end interviews,  Ball immediately took everything off the table.

No cuts to spending as that would slow the economy.  Ditto for tax increases.  Even “efficiency” went out as Ball told the Telegram’s James McLeod that you couldn’t deliver existing services without the existing staffing levels.

Ball told NTV’s Mike Connors that we “need to find a way to bridge us [from] where we are currently until the commodities rebound and be [sic] the significant contributor we need them to be."

The bridge Ball wants to take is a familiar one.  According to McLeod, Ball is “ counting on infrastructure money from the federal government to help out some, and he’s also taking a close look at the equalization formula, to see if the province can wring any more money out of Ottawa.”

What are Ball’s options in Ottawa?

Blackmail and the Conservative dysfunction #nlpoli

Paul Davis and his cabinet were all smiles and chuckles last week at the election of a new administration in Ottawa.

Optimistic for the future.

Looking forward to a new relationship and all that.

Then came the issue if the tariff on ships of a certain size built outside Canada.  The Conservatives are holding it out as a test of Justin Trudeau and his fellow Liberals.  Forgiving the tariff would be a sign that things had changed in Ottawa.

Federal Presents, the 2015 edition #nlpoli

November 2005.

The Harris Centre at Memorial University issued a report on the number of federal public servants working in Newfoundland and Labrador.

With a Liberal administration in Ottawa and with a provincial Conservative government that enjoyed shooting at foreign enemies,  the whole argument about federal presence was a big deal.

The Federal Boogeyman #nlpoli

The Liberals kept poking at Premier Paul Davis in the House of Assembly on Wednesday about the European free trade deal announced last year.

Specifically, Liberal leader Dwight Ball asked Davis for the second day in a row about a joint federal-provincial fund under the deal that would see the federal government spend $280 million and the provincial government drop in $120 million on something to do with fisheries.  We say “something to do with fisheries” because there really hasn’t been much substance to go with the announcement in the year since the provincial government announced the thing.

Tuesday’s questions led to Davis admitting there was some kind of unspecified problem with the talks.  As the Telegram reported,  Davis told reporters outside the House that he “wouldn’t say [the funding deal was] falling apart, but having not been able to reach a finalized agreement yet is troubling.”

Converting principles to other people’s money #nlpoli

When Premier Kathy Dunderdale spoke to a St. John’s Board of Trade last May,  she claimed the federal government had tried to tie the federal loan guarantee on Muskrat Falls to the European free trade talks.

There’s no evidence that her claim is true, at least based on the selected documents Dunderdale released last week in the House of Assembly on the negotiations.

The documents actually show something else.

The Conservatives and federal-provincial relations #nlpoli

Two news stories last week reminded us once again of the nature of federal-provincial relations for Newfoundland and Labrador over the past decade.

A story in the Chronicle Herald reported on recent comments by Danny Williams about a sharp personal exchange he supposed had with Stephen Harper before the later became prime minister.

The second story was the release late in the week by Premier Kathy Dunderdale of some documents about the provincial government’s position on the Canada- European Union trade agreement. The 80-odd pages of e-mails and letters include an effort by the provincial government to tie search and rescue, an offshore safety agency,  and the federal government’s Hibernia shares in a deal between the federal and provincial governments. 

Familiar tunes amid the Shifting Balance of Power #nlpoli

All the talk the past week or so about negotiations between the crowd in Confederation Building and the crowd in Ottawa  brought out the conventional wisdom about premiers using fights with the feds for political purposes.

The coincidence of a talk on nationalism the week before linked the two ideas together neatly for some people. Kathy Dunderdale was having a row with Ottawa, possibly to boost her polling and maybe as a show of nationalist fervour that we all love.

Yeah, maybe that’s true.

And then again, maybe it just isn’t.

Maybe it’s just you, Kathy #nlpoli

Prime Minister Stephen Harper met with Alberta Premier Alison Redford when the Pm dropped in for the Calgary Stampede.

As the Globe reported:

Carl Vallée, a PMO spokesman who was travelling with Mr. Harper during his Stampede stopover, wouldn’t talk about what was discussed during the Prime Minister’s meeting with Ms. Redford.

“He meets with premiers across the country when he travels out East, out West, everywhere,” Mr. Vallée said. “And he does do that, but we don’t comment on the content of the meeting.”

All’s Not Fairity in Love and War #nlpoli

Premier Kathy Dunderdale should appoint municipal affairs minister Kevin “Fairity” O’Brien to handle intergovernmental affairs.

While Dunderdale is busily lobbing hand grenades at the federal government, Fairity is taking a very different attitude:

The Federal-Provincial Puzzle #nlpoli

Premier Kathy Dunderdale is frustrated.

“Extremely frustrated”

“What is it that we have to do down here to get your attention?” she asked, rhetorically, on Thursday.

She expressed that frustration in the House of Assembly in response to questions from Liberal leader Dwight Ball and in a scrum with reporters.  Dunderdale aimed her barbs most especially at defence minister Peter MacKay.

If the Premier is having trouble getting her message through to the federal government, attacking an influential cabinet minister in public for something he didn’t do won’t help matters.

It just piles bad tactics on top of flawed strategies.

Significant Digits: 2016 #nlpoli

Four years from now, Churchill Falls (Labrador) Corporation and Hydro-Quebec will automatically renew the 1969 power contract for another 25 years.

Everyone knows that, surely.

What you may not recall, though, is that 2016 is the year that the federal government will renew its annual payment of $8.0 million to the Government of Newfoundland and Labrador under Term 29 of the Terms of Union.

In 1996, the provincial government negotiated an advance on the Term 29 payments totalling $130 million. Here’s the quote from the 1996 budget speech:

Under the Terms of Union, the Federal Government is committed to an $8 million annual payment to the Province in perpetuity. In light of our unique economic and financial circumstances, the federal government will advance amounts payable under Term 29 over the next three years, when the funds are needed most. The regular annual payments of $8 million will resume in 20 years.

We will receive $50 million of the advance this year. The federal government has agreed to provide us with another $80 million over the three year period.

Of course, while people call them Term 29 payments, they are actually the amount set by the commission appointed under Term 29 to study the financial position of the Newfoundland and Labrador government within the first decade after Confederation.

The commission was to recommend “the form and scale of additional financial assistance, if any, that may be required by the Government of the Province of Newfoundland and Labrador to enable it to continue public services at the levels and standards reached subsequent to the date of Union, without resorting to taxation more burdensome, having regard to capacity to pay, than that obtaining generally in the region comprising the Maritime Provinces of Nova Scotia, New Brunswick, and Prince Edward Island.”

The legislative authority for the payment comes from the Newfoundland Additional Financial Assistance Act. 

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So then what will they do? #nlpoli

Let’s make no bones about it. 

Even at the deepest darkest moments after the death of Meech Lake, federal-provincial relations were never as bad as they are right now between the crowd in Ottawa and the crowd in Sin Jawns.

Danny Williams put all his political credibility into his anything but Conservative campaign.  He pledged to campaign across Canada to defeat the federal Conservatives.

Williams lost.

Big time.

Sure he changed his goal at the end – as his failure became painfully obvious - and all the local media just repeated his reimagined version of the ABC campaign, but the truth is Williams screwed himself and the rest of us politically with his little ego-stunt.

Kathy Dunderdale decided the best way to fix that was to campaign for Harper in the next election.  Okay, well she thought it best to say she would campaign.  Whether she did or not depends on who you talk to.

And that worked out so well that the Premier of Newfoundland and Labrador can’t get the Prime Minister of Canada to return her phone calls.

The latest idea Kathy had was to give the deputy minister of the intergovernmental affairs secretariat a new job.  He will spend an unspecified amount of time “conducting a horizontal review of federal-provincial agreements to determine their efficiency and effectiveness.”

Does that mean Sean will lie down while he studies?

Seriously.

WTF is a “horizontal review”?

Now this is such an important initiative that the only word of it is in a news release announcing yet another shuffle around of members of the senior public service.  Sean gets this new gig.  Meanwhile, someone will fill in for him. 

No word on what criteria Sean will use to determine efficiency and effectiveness or indeed what federal-provincial agreements they are including in the review.  Most likely it is the deals that shift federal cash into provincial hands so the hands can hand it out to other provincial hands.

These agreements cover things like the federal gas tax transfer to municipalities,  money for bridges,  and big transfers for health, social assistance,  and education.

We are talking big money, too. Last year, federal transfers to the provincial government totalled more than $1.0 billion.

No word on how long Sean will take.

And there’s no word about what the government will do with Sean’s report once he gets it done.

Perhaps Kathy will call Steve and…

Errr… maybe that might not be such a good idea.

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Quebec’s possible new role as an energy player

If exploration turns up a significant amount of oil and gas in the Gulf of St. Lawrence, expect a ton of political weight to shift toward the province at the same time.

Rob Silver went down that road recently in his blog at the Globe and Mail. Silver posed a hypothetical situation in the federal government tried to introduce a carbon offset scheme at a time when Quebec is in the same boat as “Alberta, Saskatchewan and British Columbia”. Quebec’s interest may well shift as does its economic situation, according to Silver.

On the surface that’s a penetrating insight into the obvious. Newfoundland and Labrador, for example, shifted its environmental policy based on nothing more profound than electing what Danny Williams described as a Reform-based Conservative Party.

Now most voters in the province – including a great many Progressive Conservatives - likely didn’t think that’s what they were getting into back in 2001 or 2003, but that’s what they got. No need to wonder any more why the sustainable development act never got farther than it did in 2007. The whole thing was nothing more than a political ploy for an election year.

In any event, Silver’s idea of a provincial government shifting its policy based on a shift in economic interests isn’t an amazing thought.

On another level though, Rob Silver’s comments provoke another thought related to Newfoundland and Labrador. 

Your humble e-scribbler tossed out the idea a couple of years ago that a “few years from now, the poorest province of the country will join the select group of provinces that do not receive Equalization. That will have a major effect on the balance of the forces in the country which is always maintained in the Toronto-Ottawa-Montreal triangle.”

The idea was that a normally outward-looking province and its people could alter the balance of power in the country, especially at the national level, once the province was no longer perceived as an economic basket case. Now part of that idea was premised on a new administration and a new policy beyond the current one and its isolationism and wastefulness.

Admittedly it turned out to be a bit of a stretch. Newfoundland and Labrador today is more isolated than it has been for most of the past century.  Its influence at the national level in Canada has never been lower. The decline is a direct result of reckless provincial policies since 2003.

One can only imagine what might occur in a world where Quebec has significant oil and/or gas resources in addition to its other sources of influence.

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Feds back BC electricity line

The federal government will commit $130 million to help build an electricity line in northern British Columbia.  Total estimated cost of the project is $404 million.

The northwest transmission line, smaller than anything proposed for the Lower Churchill and significantly less costly, is being touted as a way to open up opportunities for new energy projects in the northern most regions of British Columbia. 

The project is also touted as a way of connected Alaska to the North American grid, via BC.

Funding for the project is coming from the Green Infrastructure Fund.

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Gimme your lunch money, dork: the latest editorial version

The Telegram editorial this wintry Wednesday in April tackles the ever-stimulating issue of federal-provincial fiscal relations.

That’s federal transfers of cash to the provincial governments in plainer English.

After covering the litany of complaints from provincial governments about federal transfers, the Telly winds up this way:

Piecemeal doesn't work; different deals for different provinces cause more pain than gain. That being said, there should be some moderation built into the system to deal with revenues from non-renewable resources, so that provinces experiencing brief booms in commodity-based revenues can invest those revenues in a way that can keep them from needing more assistance when the revenues inevitably run out.

What we have here is a federation virtually united in saying that the federal government is mismanaging - and sometimes deliberately damaging - its fiscal relations with the provinces.

It's time for big repairs.

There are a few observations that may have been made before but are worth repeating.

Firstly, the “federation” – that is the provincial governments in it – have always been united in their fundamental belief that the federal government never hands them, individually or collectively, enough cash.

Secondly, since the provincial governments can never find a definition of “enough” which isn’t open-ended, there is absolutely no repair, big or small, which will end the bickering.

Thirdly, that doesn’t mean there can’t be or shouldn’t be changes.  It’s just that we have to bear in mind the first task is to sort through what ought to be in place.

This is a huge matter given that the provinces can’t even agree among themselves.  in the last round of discussions that led to the O’Brien recommendations, the provinces couldn’t agree on how to reform the system that redistributes some taxpayer cash from the federal government to the provincial ones.

Fourthly and flowing from that, one of the things to bear in mind is that provincial governments have a responsibility to manage their own financial affairs.  That’s the way our system is supposed to work and it falls to the public that foots the whole bill to hold them accountable for their actions.

In this neck of the national woods, we’ve set a new standard for unaccountable provincial public spending.  Take as an example, the political charade over “have” status and the federal budget.  The provincial government can spend as it pleases, withhold information from the public and launch yet another jihad over a supposed slight and few if any dare to question whether or not what we were being told is even close to the whole story.

Ask yourself this simple question:  would you have been half as bent out of shape over $414 million in Equalization payments lost to this province in 2009 if you had known in late January or even in November that the provincial government was sitting on $1.8 billion in temporary investments that it planned to use to fuel a $1.3 billion cash shortfall in its upcoming budget? 

By the by, even with that extra federal cash, the provincial government budget would still be out of whack on a cash basis by almost a billion and odds are good that we’d still be staring that $1.3 billion shortfall in the face anyway.  But that’s another story.

Think about who decided to spend $1.3 billion more than the government expected to take in during 2009.

It wasn’t Paul Martin, Jack Layton, Stephane Dion, Michael Ignatieff or even Stephen Harper.

It was Danny, Jerome and the rest of the provincial cabinet.

Before we start yet another round of federal-provincial wrangles over cash, we need to sort out who is responsible for what in the country.

That leads us to the fifth point:  we can’t have a worthwhile discussion if the basic facts of the matter are either ignored or presented wrongly.

As far as ignorance goes, few can match the way in which the talk show hosts at  Voice Of the Cabinet Minister joined the Premier’s January Jihad.  They didn’t need facts.  They didn’t question anything.  They not only accepted at face value the Premier’s premise but also took to adding their own torque.

Check with federal members of parliament and you’ll likely find that the first round of attacks they faced came from some known partisan corners but the largest group started once the government news agency’s on-air crew started encouraging people to pressure their members of parliament to stand up for the province.

The other news media, as influential as they are, were better in some cases but no one seemed to dig into the thing just a wee bit more than the late night newser allowed. This is not so much an exercise in blame – for all but the three talk show hosts – as it is to note that the sources of information on which so many rely can be swept along with the mob.

As for presented wrongly, we’d be remiss not to note the simple, but very important factual error in this Telegram editorial.

This province is dealing with a $414-million shortfall in offshore revenue payments this year, according to the provincial budget.

The $414 million is an Equalization amount, not oil revenues. Those oil revenue payments are down by more than a billion and the feds had nothing to do with it. 

The $414 million amount comes from the difference between what the provincial government was planning to do and what actually occurred.  In 2007, the provincial government planned to switch to O’Brien 50% in 2008/09 – a formula the Premier opposed two years ago(!) – such that the combination of that Equalization formula plus the 1985 Atlantic Accord (the real one) would generate extra cash on top of everything else that was flowing.

As it turned out, the federal government made changes to the formula for one year only in order to forestall an even bigger federal money problem now that Ontario qualifies for the federal hand-out.  Far from being the only province affected by the changes, Newfoundland and Labrador is arguably the least adversely affected.

All that leads us to another contentious point in the editorial, namely the suggestion that:

That being said, there should be some moderation built into the system to deal with revenues from non-renewable resources, so that provinces experiencing brief booms in commodity-based revenues can invest those revenues in a way that can keep them from needing more assistance when the revenues inevitably run out.

This idea has been around for some time, but just a simple look back over the past month should be a clue that this idea is one that needs some serious questioning.

For starters, provincial governments are free to spend their own money as they see fit.  Alberta started just such a heritage fund decades ago and today is infinitely better off as a consequence.

The provincial government could do the same thing here, in order to ensure that they can “invest those revenues in a way that can keep them from needing more assistance when the revenues inevitably run out.”  It’s an idea we’ve pushed among the e-scribbles since at least 2007.

There is nothing stopping the current administration from doing just that, except, of course, that they chose not to do so.

Chose not to do so, of course, as they started accumulating short-term investments they’ll start blowing this year to cover budget deficits.

And how much money are we talking about?

The $1.8 billion in temporary investments and cash is  more than the annual federal transfers to the province in just about any year in the last two decades or more. It’s also more than the provincial government’s own-source revenues 15 years ago (1994).

C0mpare that to the $414 million lost from the elimination of an option the provincial government didn’t even want when it started.

There may well be some repairs needed to federal-provincial fiscal relations.

But before we start that, we’ve got to repair the serious problem with the lack of public knowledge of what is actually going on. 

Federal-provincial repairs are like any others:  if you don’t know what you are doing, you could wind up putting a hammer through something that  didn’t need mending until you started swinging.

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The deafening silence

Federal finance leprechaun Jim Flaherty has been signaling the need to cap the Equalization system this year.

"It's a federal program; we will put a limit on the growth of it," Mr. Flaherty said. "This is not something that is discretionary. We must do this, otherwise the integrity of the program will be under attack."

Flaherty says that in the face of a possible federal deficit for the first time in ages (i.e. the last time the Conservatives ran the place), it won't be possible to have a 15% annual increase in the funds allocated to the federal transfer.

Based on government data, federal transfers to other levels of government have surged 57% in the past five years, to $46.1-billion in the most recent fiscal year from $29.3-billion in 2003-04.

"In this time of fiscal uncertainty, we cannot sustain that rate of growth," Mr. Flaherty said this week.

Flaherty is likely to lay out the whole thing for his provincial counterparts at a meeting in Toronto on Monday. 

Newly minted provincial finance minister Jerome Kennedy will be at the meeting.

Okay.

For the past five years, the current Provincial Conservative administration has been hammering away at the need for increasing federal transfer payments to Newfoundland and Labrador.

For the past two, the entire Family Feud between the Provincial Conservatives and the their federal cousins centred on an effort to get Equalization payments in addition to oil and gas revenues, even if, under ordinary circumstances, Newfoundland and Labrador wouldn't qualify for the Equalization top-up.  In fact, this idea of getting effectively 200% of oil revenues  (all the cash plus Equalization hand-outs) is the original demand Danny Williams made to Paul Martin. 

That's why it is so bizarre that the provincial government talked about anything but Flaherty's remarks over the past couple of days.

Trivia was the order of the day at the cabinet shuffle and what wasn't trivia was pretty much stock stuff. Take a look at the raw scrum tape - via CBC - and you'll see the lightweight routine.

There's a reference to being fine on the current budget, without understanding that means increasing public debt if the budget targets are met.

There's some slagging of the oil sands and a claim that there won't be any delay on Hebron. No one apparently noticed that the Hebron project hasn't been sanctioned yet.  How exactly can you forecast "no delay" in a project that has no timeline yet?

The ultimate superficial commentary came on the matter of representation.  In Ottawa, there's not a problem since it's like the local cabinet where everyone looks after everything everywhere. Later on, the Premier refers to Susan Sullivan and filling in the hole in the dough, giving proper cabinet representation for a region of the province not previously represented in the Conservative cabinet.  Sarah Palin couldn't have reasoned it anymore consistently, right down to insisting - in a manner of speaking - that a little fellow from up the shore could see Labrador from his house.

But nothing of the substantive issues facing the province, beyond a comment that there might theoretically be some difficulty in forecasting oil prices.

As for the consistent set of demands from the current cabinet for more cash hand-outs from Ottawa and Jim Flaherty's comments, there was nary a peep either from the cabinet or from reporters.

The silence was deafening.

Well, except for the CBC audio picking up messages coming to the Blackberries in the room.

The end result is that one wonders what, exactly will be the policy direction taken by cabinet "on a go forward basis".  Until now, the cabinet has been fairly consistent in its remands for reparations from Ottawa, in its insistence that it can go-it-alone provided Ottawa ponies up the cash. The same ministers sit in place today, with a very minor number of exceptions, as sat in place in October 2003.

Yet, there is an evident change in perspective.

It can't be driven by the prospect of going off the Equalization system.  That was forecast in 2004, even without the subsequent transfer deal with Paul Martin.

There's something else behind it.

You can tell by what isn't being said.

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