The Vibrant Unsustainable Super Energy Debt Warehouse #nlpoli

The Conservatives used to say that Newfoundland and Labrador was eastern North America’s energy warehouse.  Once Danny Williams ran for the hills and left Kathy Dunderdale in charge, she kicked everything up a notch.

Energy warehouse was too plain for Kathy, whose party ran on the slogan “New Energy” in the 2011 general election.

With Kathy running the place, it became a super warehouse.  “We are an energy super warehouse,” said Kathy countless times. 

The New Energy Party even clipped this bit of Kathy from the House of Assembly for its website back in 2011:

Mr. Speaker, this Province is an energy super warehouse. We have what the world wants. We will bring it to market. We will supply our own people, Mr. Speaker, and we will earn from those resources for generations to come.

“We will supply our own people, Mr. Speaker.”

Political Mummers’ Parade on Monday #nlpoli

Finance minister Tom Marshall will present his mid-year financial update on Monday.  It is supposed to be a way of bringing everyone up to date on how the annual budget is going. It’s an accountability thing.

Since the government’s fiscal year starts in April, the middle of the year was September.  So December is well past the mid-year.  As we all know, December is the last month of the calendar year so this mid-year report is a bit late there, too.  The only calendar that puts December in the middle of some year or other seems to be the provincial Conservative one.

The whole idea of a mid-year financial up-date winds up being a bit of a farce, then.  It’s much like having a consultation about what to put in the budget after the cabinet has already decided on the budget in secret beforehand.

Farce is not a word you associate with good government.  It’s more the type of word you’ll find to describe something like the annual  Mummer’s Parade.  For those who don’t know, mummering is a bit of Christmas entertainment when people pretend to be something they are not. Mummering is foolishness in a good sense of the word.  In politics these days, as with the Mummers’ Parade,  it seems that foolish is the new normal.

And that is not good.

Debt, Demand, and Delusions #nlpoli

The Conservatives running the province got together with their staff and key supporters this weekend to reaffirm their conviction that they alone ought to be running the province.

Some people seem to think it’s remarkable that they stand together behind Kathy Dunderdale and her supposed wonderful charm, despite what the polls says.

There’s nothing remarkable in it at all.  People in power have a hard time understanding it when the voters turn on them. They carry on with their schemes, convinced in their own rightness.  It’s a form of self-delusion.  It’s what the mind does to help people cope when what they believe and what is true are two radically different things.

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.

The Public Debt #nlpoli

One of the greatest political frauds committed by the current administration and its supporters is the idea that they have lowered the public debt.

All the politicians say it.

Wade Locke, their tireless economist, talks about the same thing – net debt – in his soon-to-be-infamous memo to Jerome Kennedy.

Talk of the net debt, reducing net debt, and having a net debt reduction strategy is nothing but a monstrous deception of the public. 

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?

If the next two years are bad… #nlpoli

[Stick to your Lane Update:  See bottom]

No surprise that on the day after natural resources minister Jerome Kennedy talked about looming deficits of pre-1934 proportions that the ruling Conservatives did two things.

First, backbencher Paul Lane reinterpreted Kennedy’s comments on VOCM Open Line with Randy Simms.  There will only be big deficits, says Lane, if we don’t do anything about it. 

Second, Jerome Kennedy didn’t tell the people at his first pre-budget “consultation” anything of what he planned to do over the next few years. 

Putting selective “facts” on the splitting table #nlpoli

Premier Kathy Dunderdale wants to have a  “conversation” about the provincial government’s financial mess and the ways we might fix it. That’s what she told CBC’s David Cochrane in her year-end interview. 

One of the things Kathy wants to talk about is taxes, specifically the number of people not paying the bulk of the taxes the provincial government collects.

Kathy doesn’t really want to have a conversation, of course.  Kathy likes jargon.  She uses jargon a lot.  She thinks it makes her sound smart.  It never has.  Kathy uses jargon so much that It just makes her sound like someone trying to sound smart.

The Provincial Public Debt…again #nlpoli

As often as they say it, the facts don’t bear out the claim some politician like to make about the provincial public debt.

The Premier did it again in the House of Assembly Tuesday evening.  We can all give her a bit of a break since she was on her feet and obvious her blood was up. 

But still, this is an old claim that is as false now as it was when the Tories first started using it a few years ago.  And frankly, Kathy Dunderdale should have a better grasp of the facts.  Otherwise what some people think is visionary leadership is just another delusional politician on a rant.  Heaven knows our province has been saddled with enough of those.

Public debt and financial mismanagement #nlpoli

A few days ago, Stephen Taylor posted a table from a 2010 study that showed how big Quebec’s public debt is compared to that of countries around the world.

The results weren’t pretty.

A similar comparison for Newfoundland and Labrador isn’t pretty either.

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.

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 -

The old cabinet documents ploy #nlpoli #cdnpoli

Premier Kathy Dunderdale and her ministers refuse to hand over documents on more than $5.0 billion in public works spending by the Conservatives since 2004.

The documents are cabinet secrets, as their argument goes, and under the access to information law cabinet cannot release that information to him.

like her predecessor, Premier Dunderdale was unavailable to talk to reporters earlier on Thursday but she did have time to call an open line radio show to talk about the Auditor General and other things.  Dunderdale eventually turned up at a 2:00 PM scrum to take reporters questions.  Predictably she rejected any claims that she is withholding information improperly.

Here’s one bit, as relayed by CBC:

Every piece of information that comes in to government is available to the auditor general. It's just the preparation of material used specifically for the preparation of cabinet documents is not available.

Elsewhere in the scrum Dunderdale explained that the Auditor General had others ways to get the information he needed.  When asked to explain that by reporters, she couldn’t.  Dunderdale also admitted that there was actually no infrastructure strategy.  Instead there were documents prepared for cabinet that gave a complete overview of the government’s capital works spending.

But anyway,  by her own account, therefore, that’s the sort of thing that the Auditor General wouldn’t be allowed to see. The AG wanted to look at a strategy and assess the performance.  By Dunderdale’s account there’d be no way he could see what was included in the non-existent strategy and what wasn’t.

Sounds foolish.

And it is foolish.

It’s also familiar.

In 2006, Danny Williams and his cabinet (including Kathy Dunderdale) took exactly the same position when another Auditor General asked for documents on the fibre optic project. 

No way, they said:  cabinet documents. 

Secret, don’t you know, old chap. 

Access to information law and all that, what what.

Now in that instance the government  - through a resolution in the House of Assembly – asked the AG to “investigate all the details and circumstances” of the controversial deal.  That’s really no different than the AG doing the job he got from a law passed by the House of Assembly (the Auditor General Act).

Same situation.

Same effort to hide information.

And ultimately, cabinet’s excuses are still just as flimsy.

Your humble e-scribbler pointed out in 2006 that cabinet can use its own discretion and release any documents it likes. They did it in 2004 and, eventually, Williams and cabinet relented with the fibre optic review and gave the AG what he needed. 

Now it took four months, mind you, for them to do the right thing.  But after lots of public pressure, Williams and his cabinet reversed their stand.  In effect, Williams and his cabinet (including Kathy Dunderdale) admitted the argument they’d used the year before was utter bullshit.

Just to be sure, folks, what we are talking about here is just provincial capital works spending dolled up as something much grander than it ever was. They called it “infrastructure” but essentially it was – and is – the sort of road building, road paving, schools building and all the other capital works that government shave done for decades.

And Auditors General before the current one have had no problem looking at the documents, totalling up the amounts, checking the way things were done and then reporting what they’ve found.

Until now.

For some reason Kathy Dunderdale and her cabinet want to keep a giant chunk of  public works spending over the past eight years away from the Auditor General and his Excel spreadsheet.

The question is why.

Maybe it has something to do with what the AG did get to look at. The Labrador Highway and public publics repairs chapters don’t make for pretty reading. 

Maybe it has something to do with just how much political consideration goes into public works decisions like road paving.

Maybe it has something to do with what SRBP already noted about capital works under the Tories.  So much of the “stimulus” and the infrastructure program was nothing more than regular public works spending announced and re-announced and announced over again.  Through it all, though, it appears that massive cost over-runs and inexplicable delays measured in years are routine for government public works projects. 

Some of the most embarrassing of the administrative messes cost the provincial government a cabinet minister in 2009. Remember the Lewisporte and Fleur de Lys health care centres and Paul Oram? That was about capital works decision-making within one of the departments that refused to turn over documents to the Auditor General.

Whatever the reason, one thing is clear:  early on in his tenure, while Danny Williams could keep up the old cabinet documents ploy for six months, six years later, the public won’t put up with that sort of political tomfoolery any more from any one.

- srbp -

AG Report–Government Liabilities #nlpoli

The latest report by the province’s Auditor General has some information to bear in mind as we talk about Muskrat Falls.

Note that total liabilities went up from the end of March 2010 to the end of March 2011.  It now stands at more than $13 billion.

But…

Financial assets are now slightly below $5.0 billion. That’s the cash you need to keep a eye on when it comes to Muskrat Falls.

Just keep those figures in mind. 

They’ll come up again.

- srbp -

Wading through Locke on Muskrat (Part 3) #nlpoli #cdnpoli

[continued from Part 2]

Debt

One of the issues Wade Locke set out to address was the impact Muskrat Falls would have on public debt. For some other information on Muskrat Falls and public debt, check this earlier post.

Slide 43 is a table of debt servicing amounts based on the amount borrowed and the rate of interest amortized over a 30 year time.  For example, $3.0 billion at 5% would cost $195 million in annual payments to pay the principle and interest. on the opposite end of Locke’s scale, $8.0 billion at 10% would cost $849 million each year.

Earlier in his presentation, Locke asserted that the provincial government can currently borrow money at 5% while Nalcor can borrow money at 7.5%.

The money to meet those payments would come from only one source:  electricity rates.  As noted right at the beginning of the presentation, the entire project is proposed based on having the ratepayers of Newfoundland and Labrador carry 100% of the cost.

This money would be in addition to other Nalcor costs for producing electricity in the province. The public utilities board is responsible for setting electricity rates in the province. The board must allow Nalcor to recover its costs plus provide a rate of return – essentially a profit – on its operations.  The board will also add an amount for Newfoundland Power, the electricity distributor on the island to determine the rate paid by residential and industrial consumers.

One of the important pieces of information needed to determine the impact on the public debt and rates would be the amount of money, if any, that Nalcor would raise or how it would raise the money.  Equity investors,  borrowing or subsidy from the provincial government all carry different implications for public debt.

There are different possibilities. Locke did not discuss them.  Instead he relied on other information as he presented on Slide 44. Locke did not indicate in the slides or his presentation where he got the information.

According to Locke (Slide 44), Nalcor would generate $550 million from its proposed rate (7.5 cents per kilowatt hour).  This would allow Nalcor to cover a loan of $8 billion at 5% with $100 million left for “other expenditures”., according to Locke. 

He also claims that revenue from “residual power” would generate up to $60 million.  This “residual power” is the power other than that designated for use in Newfoundland and Labrador or the portion shipped free to Nova Scotia. 

As a result, Locke concludes, the extra debt won’t be a problem for the provincial government or Nalcor.  Locke has not explained how he reaches this conclusion other than by the circular logic that since Nalcor has provided enough theoretical money in its estimates to cover the payments, the payments will be covered and therefore there is no problem.

Since Locke does not explore other possible financing options, he has no basis to offer any assessment of how those financing options might affect public debt and public spending.

For example, the provincial government might opt to give borrow money at its lower rate of interest and give it to Nalcor as a gift. That may not be the current plan but it is one way of handling unanticipated massive cost over-runs.  That would affect the amount Nalcor could charge in rates and it also changes the amount taxpayers would have to divert from other expenditures to service the larger, direct public.

There are other curious points in Locke’s slides.  He does not explain why the residual power would net slightly more than 10% of the revenue generated within Newfoundland and Labrador for the same amount of electricity.

Most significantly, though, Locke does not explain where this power would be sold.  There are no current sales for it, nor are there any likely sales given the state of markets in nearby states or provinces.  in other words, Locke is just speculating and his amounts for “residual power” are fictitious.

Financing such a large project has significant implications for public finance in the province.  Locke disposes of the issue in two slides.  They appear to be based on a series of unsubstantiated assumptions or claims such as Locke’s assertion that Nalcor’s proposed rates would definitely give money “left over to retire other provincial debt, to fund other public services or to reduce taxes.” 

At best, those are policy decisions not taken, yet Locke pushes them out there as if they were real benefits.  The assumed benefits are based on other apparently untested assumptions, including the one that Nalcor’s calculations are right.

Assuming the can opener

Locke’s last series of slides (45 and 46) cap off a series of unsubstantiated claims with a flourish of more.

For example, on Slide 45, Locke claims that a connection to the ‘North American grid” would allow other energy developments including onshore wind potential on the island and Labrador or “stranded” natural gas. 

The province is already connected to the North American grid from Labrador.  We do not need Muskrat Falls to facilitate the development of wind energy in Labrador. 

An interconnection to Nova Scotia would allow Nalcor and others to develop wind potential on the island.  We don’t need Muskrat falls to do that.

As for exports, Locke failed to examine any potential export markets.  There are none, especially for very expensive power at Muskrat Falls that grows even more expensive when transported the long distances from Labrador or the island to market. 

Locke does not seem to recognise the logical problem in his claim about gas.  If gas is too expensive to produce electricity to beat Muskrat Falls electricity, then it is highly unlikely that natural gas could make electricity in Newfoundland and Labrador that could be cost competitive in markets where even Muskrat Falls is too expensive to penetrate successfully.

Recall that, as Jim Feehan noted, US producers are making electricity from natural gas next to the market that costs no more than four cents per kilowatt hour to produce and very little to transport.  If Muskrat Falls electricity will cost at least 14.3 cents per kilowatt hour in St. John’s, imagine what it would cost to shop the same electricity to Ontario? No wonder Nalcor can’t sell the power outside the province and could only give it away free to Nova Scotia.

Locke’s Conclusion

Locke’s conclusion essentially repeats the untested assumptions/assertions  of his presentation.

He does add a new one:

Without the extra energy made available by Muskrat Falls, there is serious questions whether or not the mining projects expected in Labrador within the next 10 years can proceed. Currently, we do not have sufficient recall power. If all these projects proceed as expected, we may need another 400 to 500 MW of power. This may require the development of additional resources on the island (hydro, wind, etc.)

His claim that “we do not have sufficient recall power” is simply not true.  In the same way that Locke ignored surplus electricity on the island , he also ignores the 5800 megawatts of electricity available in Labrador for future development.

Churchill Falls electricity is available under  the right circumstances, including a use of the Electrical Power Control Act’s provisions on electricity control and availability within the province.

The rest is just grasping. Labrador also offers other hydro-electric and wind resources that could meet an industrial need.  What’s more, Muskrat Falls could supply a Labrador contingency on its own without an interconnection to the island.  After all, if the island and Nova Scotia would need 60% of Muskrat Falls electricity, the remainder would be insufficient to meet an industrial development of the size Locke suggests.  It would be far cheaper and easier to meet Labrador needs with Labrador power rather than develop “additional resources on the island” that Locke and Nalcor have already insisted either don’t exist or are too expensive to develop.

- srbp -

Muskrat Falls and debt: some quick points #nlpoli #cdnpoli

There are some big misconceptions out there as a result of the way people in government talk about debt. That has implications for any discussion of Muskrat Falls.  Here are some quick comments, coming in part as a result of Tory MHA Paul Lane’s call to Open Line Monday morning.

The gross public debt in March 2010 (the most recent year for which we have audited figures) was $12.56 billion. It’s not likely to be significantly below that number today.  That's the sum total of everything owed by the public either directly through the provincial government or indirectly through corporations like Nalcor.

Net debt. People like to toss around the term net debt.  It’s an accounting term and basically represents all the liabilities less any cash or other assets on hand.  If you follow that link from the 2010 auditor general’s report you will see the provincial government had about $4.0 billion in cash laying around.

One way to look at net debt is to think of it as what your debt would be if you had to shut down tomorrow.  You could take the cash on hand and pay down your total liabilities by that amount.  What’s left is what you’d have to deal with.

But here’s something to bear in mind.  When you figure out what you have to pay every year to service the debt (principle and interest), you are working on the basis of what you owe.

What we owe is $12.5 billion or something pretty close to that, not $8.0 billion.

Muskrat Falls:  No matter how you slice it, Muskrat will show up on the public accounts as part of the debt we all collectively owe through government.

To say it is stand alone or separate from everything, as Paul Lane did on Monday, is just misleading.

To say it’s no problem because that there will be money to cover it through electricity rates is also misleading.

The revenue for Muskrat Falls rates won’t be coming from Nova Scotia, Quebec, Ontario or anywhere else.  Under the current plan, It will come entirely from Corner Brook, Quirpon and Carrick Drive.

If government and Nalcor have to borrow $5.0 billion to finance the project, then you can add that to the public debt.  If there’s cash coming in to pay the annual costs, then it won’t be so much of a problem.

But it will still show up on the books as debt.

And the same people are liable for it either way.

Finance minister Tom Marshall told Open Line on Friday that he wants to list the generating plant and lines as assets so the provincial government’s net debt will remain the same.

He can take that up with his accountants.  It doesn’t change what the taxpayers must pay off.  And until the project starts bringing in money, the public debt will climb according to how much gets borrowed.  The money for that annual debt servicing payment will have to come from somewhere, as well.

You can’t escape debt.

- srbp -

Related:

• Locke and Muskrat Falls:  some quick points (January 2012)
• Debt, electricity rates and Muskrat Falls (August 2011)
• Undisclosed risk:  financing the Lower Churchill (January 2011)

The Truth Deficit #nlpoli

Tom Marshall made the rounds on Thursday talking up his latest financial update.

But after a call to Randy Simms on Open Line, Marshall likely felt likely he’d gone a few rounds in the ring.  Simms asked a few sharp questions rather than let Tom ramble on with his usual shite.  And in asking a few simple questions, Simms just had to sit there and listen as Tom tied himself in contradictory knots. Tom’s been in the state before – like on Muskrat Falls and Bay d’Espoir – but this time Randy wasn’t letting up on him.

Things started badly for Tom when he had to explain right off the bat that all his bullshit on Wednesday about applying the surplus to the net debt was, not to put a fine point on it, just bullshit. No surprise for regular readers of these e-scribbles as Tom explained that net debt is just a calculation of assets and liabilities.

When Randy pressed Tom on what the provincial government will actually do with the cash, Marshall said they’d be spending it on capital works rather than borrow, as planned.  Fair enough, but then he noted that the provincial government hasn’t borrowed for capital works in years.  Tom wound up going around and around before it became clear that his talk about using the cash to avoid borrowing was not what Tom was trying to make it out to be.

It was, in fact, far less.

To get a sense of what might have buggered up the finance minister, take a look at the Estimates. That’s the budget document that lays out the proposed spending on day-to-day operations and capital works for 2011.

And just so that everyone is on the same page with this, understand that Tom the Finance Minister reports the Estimates on what is called a cash basis while the budget speech and the financial update use accrual accounting.

One big difference in how the two different methods show the government’s financial performance comes right up in the front of the Estimates. 

In the budget speech, Tom Marshall talked about a $59 million surplus. What you can see in Statement 1 of the Estimates is a deficit of about $769 million.  In other words, when the finance department looked at the actual cash it would receive in 2011 and the bills it would pay, the government planned to spend $769 million more than it would actually take in.

The only way they’d make that up is to borrow cash.  Normally, governments would have to go to the bond markets or the banks and borrow the cash.

Over the past few years, the provincial government here has managed to pile up a couple of billions dollars or more in cash and short-term investments. Rather than borrow from the bank, they’ve covered off cash deficits by taking the money out of that pile of cash.

It’s still borrowing, of course, even though it would never get repaid.

And last spring, that’s what Tom Marshall planned to do:  borrow cash to cover a deficit.  He and his colleagues planned to overspend and they planned to borrow cash from every person in the province to pay for it.

When Marshall announced in May that the surplus would grow to $200 million, that was on the same accrual basis as the $59 million.

But on the cash basis, the deficit would have only dropped from the $769 million Marshall planned for down to a little over $500 million.

But it was still a deficit.

A real deficit.

And Marshall would have had to take a wad of cash from the piles hidden under his mattress to cover it off.

So now that Tom has boosted the accrual surplus to $755 million, some of you might be already leaping ahead.

Yes.

That’s right.

And for the rest of you who resisted jumping ahead, understand that if the new revenue projections hold, Tom Marshall will likely still have to borrow some cash to cover it off.  Another $755 million in cash would leave him short about $14 million on that $769 million deficit in the Estimates.

So that borrowing Tom talked about with Randy Simms likely wasn’t about capital works spending.  It was likely the borrowing in the Estimates.

When it comes to provincial finances since 2003, about the only surplus there’s been has been bullshit flowing from the provincial government’s spin machine.  The latest update is no different.

The provincial government’s financial truth deficit, on the other hand, continues to grow. 

- srbp -

Disconnect in the Brain Housing Group #nlpoli

The provincial Conservatives are a weird bunch.  They want to fight the provincial debt by increasing it.

They are nominally Conservative but their spending of public money is anything but prudent.

Via labradore – who else? – come two posts and with them two pretty charts that show the change in government spending since 2003 (less debt-related spending).

That’s budgeted spending, above. 

The second chart gives the annual spending on programs plus the percentage change from the previous year.

Just keep those in mind whenever you hear a provincial politician talking about the Conservative’s great record on controlling public spending or, as labradore points out, Kathy Dunderdale’s whacked-out claims that the Tories have already reduced.

- srbp -

Ahem

From the e-mail inbox this week came a gentle reminder from Kevin Kelly, editor at the Herald:

Just wanted to point out that in last week's Newfoundland Herald, (the one with Kiss on the cover), I did a story entitled "Headed for Disaster" discussing the province's spending habits, including how much money the government was spending on itself, as well as comparing govt. spending from 2004 to now. I also brought up the Muskrat Falls costs and comments from both sides of the issue.

Kevin didn’t like the reference in another post that only the Telegram was getting the message that provincial government deficits and Muskrat Falls debt weren’t a good mix.

Fair ‘nuff, Kevin. 

Just to make it clear though, your humble e-scribbler divides the local media scene into two piles.  The daily electronic and print gang go in one pile.  These are the gang who make up the press gallery in the House of Assembly and who have reporters covering the provincial political scene. They tend to break or report on hard political and economic news day-in and day-out.

The weeklies, monthlies and bi-weekly print outlets go in another pile, for a bunch of reasons.  This doesn’t mean they are less important, less influential or anything less in any way.  They just have a different focus.  It could be the local community, as in the Transcon weeklies.  It could be the local arts and entertainment scene.

Rather than skimp, here’s an extract from what the Herald ran in a piece titled “Headed for disaster?”

But here’s the thing. The provincial government is showing no signs of cutting its spending, even on itself.

The Tories have come under fire in recent budgets that included enormous revenues from the oil industry, but were matched by increases in spending and less worry on debt reduction.

Even with the looming financial crisis that could happen, the provincial government increased spending this year by 5 per cent, a trend that has continued over the past number of years.

“We have responded since being elected to office with expenditure levels that support a high level of programs and services, and we stimulated the economy during the recession,” stated Finance Minister Tom Marshall during his recent budget.

“Always, however, we were committed to spending within our means. During my consultations with the people of the province prior to this Budget, I was clear that, while strong expenditure growth was necessary during the catch-up and stimulus periods, more moderate expenditures are required in the future. Our net program expenses will grow by less than 5% in 2011-12, with much of this growth relating to wage increases previously negotiated.”

…

But there is still no arguing that it [Muskrat Falls] will cost a lot of money to get the project underway, and does the benefit outweigh the cost?

It’s one of many questions ahead for government as it deals with what could be a looming financial deficit.

Economist Wade Locke says the government has to make some tough decisions in the years ahead to deal with the upcoming debt crisis.

“There are three options you can do: you can borrow, you can raise taxes or you can cut expenditure,” he said. “All three have negative consequences for you, so what you need to think about is which of these options are the most effective way of dealing with your issues.”

It might need to start thinking way ahead, and perhaps cutting where it hurts most, itself.”

- 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 -