Bollocks #nlpoli

Kill the wabbit?

Moody’s has changed its outlook on the provincial government’s debt from stable to negative while sustaining the A1 rating it gave the province in July 2019. That, by the way, was a downgrade.

In a statement issued Wednesday, Moody’s said the change in outlook reflects the company’s view that the provincial government’s “credit profile will weaken due to the sharp decline in oil prices and its reduced budgetary flexibility to adjust to this shock. Under Moody's base case, oil prices are expected to average $40-$45/bbl in 2020 before returning to $50-$55/bbl in 2021…”.

Moody’s expects the provincial deficit for 2020 could reach 25% of revenue in 2020 and about 11% in 2021. Previously, Moody’s had forecast deficits of 11%  and 4% respectively for those years.

Moody’s expects the provincial debt will reach 270% of revenue by 2023 with pressure that this will increase after 2023.  In other words, Moody’s doesn’t believe that the government will balance the budget in 2023.

The Turmoil and Topsy Turvy #nlpoli

With so much changing in any office,  what has "always" been done really only goes back to the time of the last person who came in the door.

In Newfoundland and Labrador,  the provincial government has been censoring laws since 2012.

That's sounds absolutely insane to anyone in the province and outside, but that is undeniably the case.

Orders-in-Council are a type of law.  They are the decisions of the Lieutenant Governor-in-Council under powers granted by specific laws or from something called the Royal prerogative.  They are public documents and in every Westminster-style government they are published regularly, without any form of redaction or censoring.

Except in Newfoundland Labrador.

Even in Newfoundland and Labrador, the idea of secret laws in a democracy would be downright sinister if it wasn't for the comical way the whole nonsense started and the reason it carries on.

Turmoil, unusual #nlpoli

A petro-state with political instability is a pretty weird idea 

but then again we *are* talking Newfoundland and Labrador.

The Government in Newfoundland and Labrador brings in money revenue per person living in the province than any other government in Canada except Alberta.  It's been like that since 2009.

In fact, for a couple of years before 2009, the provincial government posted record cash surpluses based solely on the world price for oil.

At the same time,  though, Newfoundlanders and Labradorians have seen an unprecedented period of change in the most senior positions in their provincial government.  Political and public service jobs have changed hands at an unprecedented rate.

Highly Diffused Government #nlpoli

By now, plenty of people in Newfoundland and Labrador have likely heard finance minister Jerome Kennedy’s comments about his party’s last election platform.

“You used the word promise,”  Kennedy said to the Telegram’s James McLeod.  “I’m not sure that the Blue Book can be described as a promise.”  Kennedy said that the platform contained a bunch of what he called “initiatives” that his party planned to implement between 2011 and 2015.  Everyone had to bear in mind that “there’s always the caveat that the commitments will be made having regard to the fiscal situation of the province.”

Make out of that what you want.  Some people have already made fun or harrumpfed through the odd Tweet or two.  McLeod noted in an story on Wednesday that Kennedy’s new warning about calling them “promises” is at odds with the Conservative during the election.

What’s more interesting thing to what McLeod might call a political uber-nerd is what the transcript reveals about how the Conservatives operate.

Political Will and Public Policy #nlpoli

The SIDI simulation of government spending that we’ve run this past week might not be everyone’s cup of tea, but these sort of thought exercises are always useful.

The most striking thing is the amount of money from oil and mining that the provincial government has spent in the past seven years:  $15.6 billion.  That’s enough to wipe out the entire public debt plus the unfunded pension liability and have a couple of billion left over for an unprecedented capital works program. 

It’s a staggering amount of money and the only thing more amazing than how much money there was is how easy it was to do something far more productive than just spending all the money, as the current provincial government has done.

The SIDI simulation included:

• a steady, sustainable increase in spending each year,
• an unprecedented, sustainable capital works program,
• a $3.675 billion real decrease in public debt,
• the prospect of a complete elimination of public debt within a decade, and,
• an income fund that would continue to grow with further oil money and generate new income for the provincial government for as long as the fund existed.

The only thing needed to make the simulation a reality was a political desire to do it.  Had the provincial government done any one of the elements of the SIDI approach, then the provincial government could have either avoided the current crisis altogether or significantly altered the profile of the crisis and the prospects for coping with it.

Well on the way to Debt Freedom #nlpoli

According to economist-consultant Wade Locke, the provincial government’s “Sustainability” Plan includes a debt commitment:

The long-run target is to bring the province’s net per capita debt gradually down to the all-province level within ten years.

Locke made it clear in another part of his March 25 memo to finance minister Jerome Kennedy that the purpose of any surpluses the provincial government achieves within the next decade will be to fund Muskrat Falls.

For those who haven’t figured it out yet, the Locke-Conservative plan isn’t actually to reduce public debt.  They want to book the Muskrat Falls asset and – since that’s what net debt is -  make it appear they have lowered public debt when they likely haven’t moved it down very much at all.

By contrast, the SIDI model shows that the provincial government could have reduced direct public debt by $3.675 billion.  The net debt would currently stand at $4.6 billion with a downward trend.  According to Budget 2013, the net debt is is forecast to be about $8.5 billion, continuing an upward trend.

Big difference.

Responsible Public Spending #nlpoli

You don’t need drugs or alcohol to get the feeling of dizziness or stupor like you smacked your head with a hammer. Hard. Repeatedly.

Just listen to a representative of one of the special interest groups talking about the provincial budget and public spending. It doesn’t matter which one.  As your humble e-scribbler was finishing off this post on Tuesday, a representative of the appropriately named St. John’s BOT was on television talking about how government had to cut public sector jobs and tear into public sector pension benefits because of the hideous unfunded pension liability. 

Corporate lawyer Denis Mahoney even quoted the distorted, misleading government claim about the unfunded liability as a share of only a fraction of the public debt to bolster his position. He never mentioned the billions going to subsidize his members, of course. 

In the process, Mahoney looked about as convincing as the labour mouthpieces like the Canadian Centre for Policy Alternatives who said in 2004 that the government wasn’t spending too much.  It just didn’t have enough money.  Of course, they never mentioned that the government was outspending just about every other province on a per capita basis.

Listen to this sort of mindless crap long enough and you don’t have to wonder why people wander around in a daze.

To clear your head, take a look at a chart showing the actual government spending from 2005 to 2012 (in blue) compared to the income from sources other than oil and minerals (in red).

The Road Not Taken #nlpoli

The number is a hard one to wrap your mind around.

$15.6 billion.

That’s the amount of oil royalties and mining royalties the provincial government collected from 2005 to 2012.

Once you think you have that figure in your mind and understand what it means, think about this:  with the exception of about $1.4 billion, the money is apparently gone. 

Spent.

Never to come again.

If you want to understand how the provincial government got itself into the mess, just think about all that money.  Newfoundland and Labrador is a “have” province with a government that is laying people off and cutting programs.  Then realize that for all that cutting the government is still planning to spend upwards of a half a billion dollars a year more than it is taking in.

The idea is staggering.

Well, be prepared to be floored completely.

Rentierism at the national and sub-national level #nlpoli

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This is the third in a four part series on the current financial crisis the provincial government is facing.  The first instalment – “The origins of rentierism in Newfoundland and Labrador” – appeared on Tuesday and the second – “Other People’s Money”  - appeared on Wednesday.

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A rentier is a person who lives off the income from property and investments.  That distinguishes a rentier from a person who earns income through labour.

For the past 40 years or so some political scientists and economists have studied something called a rentier state.  In simplest terms, a rentier state is one that derives a significant portion of its national government income from the money they get from oil and other high-value, but volatile commodities.  [FN 1]

For our purposes, we’ll rely on a definition of “significant portion” as being 40% or more of  government income.  [FN 2] We’ll also focus the discussion on states that derive most of their income from oil.

What we are talking about here goes by several names including  the Dutch Disease or even the resource curse.   Jeffrey Frankel of the Kennedy School of Government put it this way:

It has been observed for some decades that the possession of oil, natural gas, or other valuable mineral deposits or natural resources does not necessarily confer economic success. Many African countries such as Angola, Nigeria, Sudan, and the Congo are rich in oil, diamonds, or other minerals, and yet their peoples continue to experience low per capita income and low quality of life. Meanwhile, the East Asian economies Japan, Korea, Taiwan, Singapore and Hong Kong have achieved western-level standards of living despite being rocky islands (or peninsulas) with virtually no exportable natural resources. Auty (1993, 2001) is apparently the one who coined the phrase “natural resource curse” to describe this puzzling phenomenon. …

Structural Versus Cyclical: a quick look #nlpoli

Is the government facing a structural or cyclical deficit?

Good question.  Their economist says it is a structural problem but his comments to the Telegram on March 13 suggest he is approaching the problem as if it would sort itself out.

The whole structural versus cyclical question hinges in part on the question of government revenue when the economy is working at full output versus when it isn;t.  Well, in Newfoundland and Labrador, that is a bit hard to figure, especially when the government claims that locally everything is great but that it doesn’t have any money.

People get confused.

Well, one  way to start getting a handle on this is to look at the 2011 and 2012 budgets and the related income and spending.

The Origins of Rentierism in Newfoundland and Labrador #nlpoli

______________________________________________

Over the next four days, SRBP will offer an interpretation of the political underpinnings of the current financial crisis.  This series goes beyond the immediate to place recent events in both historical and comparative, international perspective. 

The first two instalments briefly describe some characteristics of the political system and Newfoundland political history before 1934 and from 1949 to about 1990.  The third post will look at the concept of the rentier state and the relationship between dependence on primary resource extraction and politics at the subnational level (states and provinces).  The fourth post will place recent developments in Newfoundland and Labrador in the larger context. 

_______________________________________________

Before 1949, the Newfoundland government’s main source of income was taxation of imports and exports.  The Amulree Commission reported, for example, that the government brought in around $8.0 million dollars in the fiscal year ending in 1933.  Of that, 71%  - $5.7 million  - came from customs and excise duties.  The next largest amount was $700,000 (about 9% of total) that came from income tax while the third largest source of income was postal and telegraph charges totalling slightly more than $587,000.

Newfoundland also had almost no experience of local government before the Commission Government in 1934.  St. John’s was the only incorporated municipality and the city council was quasi-independent of the national government. 

Beyond the capital city, the national government “managed a highly centralized system through the stipendiary magistrates stationed in each electoral district, “in the words of historian James Hiller in his recent note on the Trinity Bay controverted election trial in 1895(FN 1).  The central government also appointed the members of some local  boards to manage education and roads.  The money for all of it came from accounts controlled by St. John’s.

The members of the House of Assembly had enormous control over government and that public money.

The Arse that Laid the Golden Turd #nlpoli

The provincial cabinet has been burning the midnight oil the past couple of nights. 

Literally. 

Late night sessions that ended God-knows-when, night after night.

Apparently, they are trying to figure out what to do in order to get out of the massive financial and political hole they have dug for themselves over the past decade.

As bizarre as that might seem to some people,  the politicians who created the mess have no idea yet what they are going to do.  All that Premier Kathy Dunderdale and finance minister Jerome Kennedy have been able to offer lately are lots of vague comments about when the budget might be or how many lay-offs there might be. Dunderdale put a number of 500 lay-offs out there a few days ago but frankly, that’s about as reliable as her forecasts from last year. 

And when Jerome told David Cochrane that they were still working out the Sustainability Plan, he was not bullshitting.  He meant it, even though he claimed they had already started implementing the plan last year.

If you are familiar with government budgets and how these things normally get sorted, then odds are you are reading this now that someone has been able to revive your unconscious form.  

Pennies and Pounds #nlpoli

In May 2011, the provincial public works department issued a call for proposals to replace the lift bridge in Placentia.

In August 2011, the department scrapped the project and went back for a re-think.  They got only one proposal for $43.25 million, which upset them given that they had figured it would only cost $24 million.

In March 2013, they accepted a tender for $40.6 million to replace the bridge. The release noted that the new tender was $2.5 million less than the one they’d cancelled.

Nice thought, that, but it actually isn’t a true reflection of the situation, is it?

Fiscal conservative, you say? #nlpoli

One of the more curious comments from provincial Conservative supporters lately has been the claim that they support the current Connie administration provincially because they – the supporters – are fiscal conservatives.

labradore has already challenged one such claim with a look at the provincial labour force figures.  Here’s the chart from labradore’s post. It shows the public sector as a share of the total provincial work force:

Yes, friends, the “fiscally conservative” provincial government has produced a massive increase in the size of the provincial public service since 2007.  And, lest any of these “fiscal conservatives” try to justify the Connie actions with talk about the unions’ favour excuse – catch-up – notice that the chart shows that Newfoundland and Labrador had no catching up to do.

While you are at it recall that the current labour force in the province is the largest it has been for quite a while.  So the current “fiscally conservative” provincial Conservatives employ a larger percentage of a larger labour force in a very fiscally unconservative way.

But there’s more to it than that.

All they want is fairity #nlpoli

The people who run the province’s town and cites are looking to get a new financial arrangement from the provincial government.

Last week, the municipalities federation held an emergency meeting to discuss recent developments:

“What we’re asking government for today is very clear,” said Rogers. “Short-term help in this 2012 budget and a commitment to participation in the development of a long-term, strategic plan for the municipal sector.”

Sounds reasonable enough. 

Odds are they won’t get anything in the near term. Give a listen to what municipal affairs minister Kevin “Fairity” O’Brien said at the outset of an interview with On Point with David Cochrane this past weekend. O’Brien quickly started into a recitation of how much money the provincial government has spent since 2008 on municipal infrastructure and things like fire trucks. he finishes off with the warning that any new financial arrangement has to be sustainable for taxpayers.

Coming from a guy who has helped boost provincial government spending to irresponsible, unsustainable heights without a toss about such ideas, those words sound a bit like a lead bell.  

O’Brien is using coded language.

What he really was telling municipalities president Churence Rogers is a simple “f*ck off”.  No one should be surprised if Rogers has heard something along those lines over the past few weeks, perhaps even from O’Brien himself.  Maybe no one used the “f” word exactly, but language likely would have had the finger buried in it.

You see it all comes down to money, power and control.

Right now the provincial government has all of it.

And they will not give up any of it.

The provincial government isn’t interested in changing municipal funding at all.  Any change to funding would have to transfer some of the provincial cash or the ability to raise cash over to the towns and cities. 

If the province doesn’t have that cash, then it no longer has the power to control what goes on in the province.  Fairity O’Brien may not have deliberately mentioned infrastructure and fire trucks, but there’s no coincidence that he did.  That money and those items are part of the old pattern of politics in this province: patronage. 

And that’s the money, power and control we are talking about.

None of that has anything to do with the very serious problem in many towns and cities in the province but frankly provincial politicians like O’Brien don’t give a rat’s backside about that. 

Many parts of the province aren’t really doing all that well, despite the reports you may have heard.  They don’t have the municipal tax base to come up with the sort of cash of their own they need to put into road work, water and sewer projects and other infrastructure.

Problems in the fishery, the loss of paper mills have all taken their toll.  People may be working in Alberta and still living in Stephenville and Grand Falls-Windsor but it’s local companies that pay the taxes that help to keep the street lights on, quite literally.

What’s more, way too many of the towns on the island are full of retirees and not much else.  People on fixed incomes don’t have the ability to tax up the tax slack.  Those towns also have problems finding people to volunteer for municipal services like firefighting.

There’s a bit of a false impression of a boom in some places.  People in Grand Falls-Windsor thinks everything is smurfy.  Ditto Gander.  But in both these towns the major economic engine is the provincial government and a level of spending that we know is unsustainable. 

What’s more, the provincial government doesn’t pay taxes to municipalities.  They do – however – collect taxes on every municipal purchase through the harmonised sales tax (HST).  The effect is to claw back a portion of the money the province grants in the first place.  Until the fictitious oil royalty claw back, though, this one actually reduces the amount of money the towns and cities in the province have available to actually spend on services to residents.

And then when towns and cities go looking for cash, politicians like Kevin O’Brien start coming up with all sorts of excuses for why things must remain as they are.  The miserable, dark joke in all that shouldn’t be lost.  Towns and cities in the province are looking for a fair shake on provincial funding.  Kevin O’Brien is the guy who told us all that the province just wanted “fairity in the nation.”

David Cochrane exposed the fundamental bullshit of government’s position.  Cochrane asked why it was that O’Brien was talking about the impossibility of making commitments of funds for a few millions in the short term to towns and cities while government was prepared to forecast the price of oil for 55 years in order to justify Muskrat Falls.  All O’Brien had was talking points.

O’Brien also couldn’t explain or justify the four years that it has taken for O’Brien to start getting around to talking about a new financial arrangement for towns and cities.  Municipal leaders have asked for predictable funding.  All O’Brien has said is that he and his colleagues in government are willing to talk.

The real bottom line is that people like O’Brien who have politicized the purchase of bed pans and fire trucks simply want complete control over spending in the province for their own, pork-barrel, patronage reasons.

All municipal leaders want is fairity.

They aren’t going to get it from Kevin O’Brien.

- srbp -

. 

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 -

Dundernomics 101: Public Sector Employment Numbers #nlpoli

In an interview with CBC’s David Cochrane, Premier Kathy Dunderdale said that the public service has grown by more than 2,100 jobs in the past eight years and that total employment in the public service is about 9,000.

Well, not exactly.  That depends on what you consider to be public sector and “public service”.

As labradore noted last July, the entire public service sector in this province – federal, provincial, municipal and Crown corporations accounts for was more than that.

The growth in public sector employment alone 11,500 between 2006 and 2011.

If you look at figures for 2010, the totals are way more than what the Premier talked about:

In the first quarter of 2010, approximately 53,780 people in Newfoundland and Labrador worked in some portion of the provincial public sector: 11,550 in the provincial civil service, 20,400 in public health-care and social services establishments, 10,900 at Memorial University and the public colleges, and 10,930 employed by the various public school boards.*

Even if we allow that the Premier defined “public service” pretty narrowly in 2012,  you can see that in early 2010 there were 2,500 more people working in the public service,  that is, just working directly for the provincial government than the Premier currently claims work for government in total.

And yes, that is way more than the 2,100 jobs the Premier claims she and her colleagues added – in total – since 2003.

Confused?

Well, obviously the Premier is.

And if she doesn’t understand what is going on now and what has gone on in the recent past – stuff she actually lived through and decided already – then it is going to be very hard for her to understand whatever the current review comes up with.

Confusion about the basics also explains why the Premier could claim that 3% of what she herself has called almost $8.0 billion in public sector spending is about $100 million.

Three percent would be $240 million.

Two percent would be $160 million.

One point two five percent (that is 1.25%) comes out to $100 million.  And for anyone who is still unsure, 1.25% is closer to one percent than it is to two percent.

All those jobs come at a price.  Here’s another pretty chart from labradore to give you a sense of what those payroll costs are:

The figures are for early 2011 and the total bill hits about $2.65 billion.

None of that is about whether the jobs are needed or not, whether the people do good work, what the impact of any cuts would be or anything else related to it. 

This is just to establish so everyone can plainly see that what the Premier said everywhere last week on several occasions and what is actually going on are two completely different things.

To her credit, the Premier acknowledged in one interview that she had frigged up her explanations of things last week.

But that was before she told David Cochrane that temporary employees could be getting the heave-ho in order to meet her  targets.

That likely isn’t correct either, by the way.

So as we start the week, expect that the most common noise you will hear will be the gigantic garbage truck of government communications beep-beep-beeping as it backs up  - yet again - and tries to move forward  - yet again - again without turning the same information into road kill for the third or fourth time in the past seven days.

– srbp -

Spend ‘em if ya got ‘em: the Alberta version

In light of the suggestion the provincial government needs a blue ribbon panel of experts to decide how to safeguard the provincial economic future, take a look at what is going on in Alberta.

Conservative premier Ed Stelmach appointed just such a panel headed up by former federal cabinet minister David Emerson.

And, not surprisingly, the Stelmach government is likely to reject all of the panel’s suggestions. You can find an excellent discussion of it in a Jeff Simpson column from the end of May.

The Stelmach government’s decision is hardly surprising given the history of Conservative governments in Alberta since Peter Lougheed left office.  But it is also hardly surprising since the current Conservative administration in this province is basically following the same policy of spending that Alberta Conservatives have been following. 

What the locals haven’t adopted is the low tax, small government mantra of their western cousins.  They also don’t have the enormous oil and gas resources.

What they share with their Alberta relatives is the same fundamental attitudes that the panel identifies as being serious risks:  complacency and insularity.  As you can read on page 16 of the panel’s report:

Alberta has resources the world needs, but we cannot assume the world will beat a path to our door. Boom times can breed complacency. We can forget we are facing stiff global competition, and that our productivity lags that of competitor countries…

The report criticises the fixation with “selling stuff” to people.  There’s a parallel in this province, incidentally, in the drive to build expensive electricity projects at huge cost.  The current provincial government talks about it as a strategic investment but, in reality, it is nothing more than “selling stuff” to people.

What the Emerson panel described as a strategic approach is decidedly different:

We must take steps now to ensure we realize the full benefit of our energy resources and broaden our economic base in the new global context. As we look outward, we must expand our thinking beyond simply “selling stuff” to those who want it.

Now is the time to think more broadly about investing strategically in businesses in other parts of the world, attracting investment to Alberta, becoming part of the international networks that are creating exciting new knowledge and technology, and finding specialized niches we might fill in global supply networks. We must invest in helping Albertans engage with the world and prosper in a global economy, carefully considering how we use our current public wealth to build a legacy for future generations.

Interesting ideas; ideas worthy of further discussion, especially since they harken back to strategic ideas developed in this province almost two decades ago as the way we could move forward successfully in a highly competitive world.

- srbp -

The Four Horsemen and government finances

Don’t be surprised if the provincial government issues a statement in the near future trumpeting an accrual surplus of several hundred millions.

Sure Tom Marshall isn’t ready to acknowledge what is going on, but it’s pretty hard to avoid making tons of money when those pre-Danny Williams oil royalty regimes meet Brent crude prices that are soaring to more than US$105 million based on Muammar Khaddafi’s willingness to slaughter thousands of Libyans in order to stay in power.

Oil prices and production levels are actually at the level where the Conservatives in Newfoundland and Labrador might produce a cash account surplus as well for the first time in a couple of years. That’s a good thing if only because it means the public debt won’t increase to record levels as it has under the Conservatives since 2003.

The question one must ask as we get closer to a provincial budget for the new fiscal year is how much longer the provincial Conservatives will continue to base public spending on windfalls due to war, famine, pestilence and death?

The Conservative banshees will likely start their usual screeching in the comments section at this point but the facts are plain in anyone’s face.  The Conservatives’ financial “miracle” has resulted not one teensy bit from anything they have done.  The enormous cash flow over the past five years resulted to one extent or another from political instability, economic crisis and all manner of calamities around the globe that drove oil prices to unprecedented heights.  Run those oil prices through the royalty regimes delivered before the Conservatives took power in 2003 and you have more money than the spendthrift Conservatives could actually spend.

Since 2003, the provincial Conservatives, led by first Danny Williams and now Kathy Dunderdale, have deliberately avoided sound fiscal policies.  Finance minister Tom Marshall and his colleagues have refused to create a sovereign wealth fund or to restrain public spending.  They have, in fact, willingly boosted spending to levels even they’ve acknowledged are unsustainable. 

Gross public debt remains at historic levels and, if Marshall is to be believed, there is little willingness around the cabinet table to take the sort of measures any prudent government would be doing in the face of dwindling oil production.  In other words, there’ll be no investment fund of the type found in other, responsibly run places, at least, not until Tom takes a hike to enjoy his fat pension on a Bermuda beach somewhere.

Now none of this actually comes as a surprise to the Conservatives.  Premier Kathy Dunderdale is aware enough of declining oil production – and hence revenue – but that seems to be only when she is faced with a reporter’s question about spending public on something  - like municipal bus services – that she obviously isn’t keen on.

But on things she wants, like Muskrat Falls, there is evidently no limit to Dunderdale’s willingness to spend other people’s money by increasing public debt and doubling electricity rates in the province.

In a few weeks’ time, Newfoundlanders and Labradorians will find out what Kathy Dunderdale and her colleagues plan to do with public money for the foreseeable future. Let’s see if Kathy Dunderdale defines her premiership by changing the pattern of financial imprudence she and her colleagues have maintained until now.

Odds are against any change to fiscal responsibility by the provincial government.  For starters we are in a pre-election period. And when that is done, we will still have the unresolved Conservative leadership.  No one will be willing to take any steps to turn off the money spigots when votes are at stake.

Just think of political expediency in a patronage-riddled political culture as the fifth horseman.

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The ferry tale of New Ferrole

Not exactly destined to be a Christmas classic but a tale that is nonetheless as misshapen as the dental work of any Pogue’s front man.

The Telegram reported on Saturday that the provincial government’s ferry building program is behind schedule with more delays expected. One new ship is expected later this year with another to follow next year.  More will come along after that.

Transportation minister Tom Hedderson didn’t have any explanations to offer for the delay:

"It's a catch-up game, and we understand that," Hedderson said in an interview.

"But the significant dollars that we've put in are making significant differences. We plan - and not always can we stick to the timeline - but we have made the commitment, and the money. It is going as fast as (it) can, given the circumstances."

He never said what the circumstances were just that they were there. Hedderson was, however, fulsome in his self-praise:

"Obviously, very simply, we've taken the bull by the horns," Hedderson said.

"It's not an easy task, especially when the shipbuilding industry had not been developed over the years as well."

These sorts of delays are now par for the course in the Williams administration.  capital works projects and legislation routinely take years from the date they are announced. Cost over-runs mount at the same time for many of the capital projects.

The Telegram doesn’t really give a full accounting of the delays in the ferry work.  Nonetheless, it is worthwhile to take a look at just exactly how long this construction work has been in the works.  After all, Hedderson told the Telegram the vessel replacements might not be finished for another decade.

September 30, 2005: transportation and works minister Tom Rideout said that government was thoroughly examining options for building vessels in this province. Minister Rideout said, “My department is analyzing opportunities to build vessels in this province in terms of net economic benefits to the province, including job creation and economic development.”

February 16, 2007:   Transportation and works minister John Hickey,  said "Our plan to build these two new ferries is the first stage of our Vessel Replacement Strategy," At the time, Government anticipates the total cost of the two ferries will be approximately $25 million 

November 15, 2007:  The provincial government announced that Clarenville and Marystown Shipyards were to bid on ferry construction. Transportation and works minister Diane Whelan said that Clarenville Drydock Limited and Peter Kiewit and Sons of Marystown had been invited to submit bids on construction of two new provincial ferry vessels. 

June 10, 2008:  The provincial government awarded a $50.5 million contract to for the ferries.  Peter Kiewit got the contract with a guarantee that 25% of the sub-contract work would go to Clarenville.  The release refers to design work for a possible fourth ferry of the same size in addition to the three contemplated.

The Southern Gazette reported that work on the ferries was expected to begin immediately, with the first ferry due to be delivered by the end of next year (2009) and the second in the spring of 2010, notwithstanding any unforeseen delays.

December 17, 2008: Transportation and works minister Trevor Taylor told the House of Assembly:

Mr. Speaker, the member is correct, we did make an announcement back earlier this year on construction of two new ferries in – basically led in Marystown but part in Clarenville.

Mr. Speaker, discussions with Peter Kiewit and Sons have been proceeding. As the member may know, the construction of these two ferries is basically a design-build approach, where approximately 70 per cent of design has been done. The testing on the hull and what have you was done at the Centre for Ocean Dynamics, or the Centre for Marine Dynamics over at back of MUN.

Basically, where we are right now – actually, just earlier this morning there was a meeting between officials of the department and representatives from the Marystown Dockyard. Mr. Speaker, it is moving along. I hope that in the very near future we will be able to begin construction. There are some relatively minor, I would hope, matters around the design of the vessel and the performance of the vessel that Peter Kiewit and Sons have to commit to. When we sign off on the vessel, we want them to guarantee us that the ship is going to float and that the ship is going to perform and have the appropriate sea keeping as was required and that is what we are –

…

I can tell the member and the House that the propulsion systems for both ships have already been bought. They are here in a warehouse in St. John’s right now. As for cost overruns, Mr. Speaker, given the current state of the world economy and the declining demand for steel and cooper and everything else that you would be required to put into a ship, we would not expect any cost overruns. If anything, Mr. Speaker, our indication to Peter Kiewit & Sons is that we would probably see a decline in some of this stuff.

February 26, 2009: The Packet reported the Clarenville shipyard had pulled out of the ferry construction project for unexplained reasons.

June 10, 2010:  With two ferries delayed, the third not begun and fourth in the design stages, the provincial government announces calls for expressions of interest in designing six new ferries.  Note that, as part of the Summer of Love 2007 election campaign, the Williams administration made a large number of capital works announcements that didn’t happen for two to three years.

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