"I can't wait to see the day when we don't get a dollar."

One of the latest documents to emerge from the Halifax-based Atlantic Institute for Market Studies challenges many of the assumptions about Equalization and about the relative positions of the provinces across the country.

For example, consider the provision of basic services like healthcare and education:

• Ontario had 2.8 hospital beds per thousand and Alberta 3.30. Manitoba had 3.82 and Newfoundland and Labrador had 4.35;
• Newfoundland and Manitoba had 10.7 and 9.6 nurses per thousand respectively. Alberta had 8 and Ontario 7.1.
• The student-teacher ratio in elementary and secondary schools are 13.6 for Newfoundland and 14.5 in Manitoba. For Ontario and Alberta, the figures are 16.6 and 16.9.
• Ontario has only half the number of judges, in relation to population, as Newfoundland and has by far the fewest of all provinces;
• Total public sector employment per 1000 population in Ontario is 81, Alberta, 83. Quebec, 92, Newfoundland is 105, and Manitoba, 117.

Not exactly what you are used to hearing.

On the issue of provincial leadership, David MacKinnon's speech to the Empire Club of Toronto in February might sound a bit more familiar, but it is worth taking this commentary more seriously than some might at first blush:

Demands from other provinces are also made in wildly inappropriate ways that are little more than political blackmail – a game more easily played in the last few years of federal minority governments. A few years ago Premier Williams came to this club and noted that Newfoundland came into Confederation with a government surplus and now faces major deficits, with the clear implication that the relationship with Canada was the problem.

Conveniently, he did not mention that when Newfoundland entered Confederation it was under the supervision of the British Government due to disarray in its finances and that the only reason it had surpluses is because Canada, then a foreign country, and the U.S. had spent the war years building large military bases on the Island. The omission of those two facts was simply disingenuous.

For the past five years or more, provincial governments in this province - irrespective of political stripe - have emphasised the supposed poverty, backwardness and generally hard-done-by nature of Newfoundland and Labrador.

Simply put, the stories aren't true, especially when measured by standards across the country. The Government of Newfoundland and Labrador outspends ever provincial government in the country on a per capita basis save one:  Alberta. One of the things that the Premier's $10 billion settlement claim misses is that sort of fact.

Successive provincial governments in this province have looked forward to the day when Newfoundland and Labrador no longer qualified for Equalization.  Even in raising the issue of Equalization offsets with the federal government in 1990, then Premier Clyde Wells told the Sunday Express:

By doing this, and by having equalization cut this way, we are coming closer to looking after our own needs and we are coming closer to recovering some of the dignity and self-respect you lose when you depend on the federal government for 47 percent of the revenue [in the provincial budget].

I can't wait to see the day when we don't get a dollar.

The Auditor General recently noted that the provincial government's dramatic increase in public sector spending is built on the volatile foundation of commodity prices that have risen to almost unprecedented heights in recent years.  By the same token as they have risen, they will drop, likely sooner rather than later.

The need for responsible government fiscal policy has been an enduring theme in the three years of Bond Papers and in this anniversary year of the democratic vote to restore responsible government in Newfoundland and Labrador, the need for a fundamental shift in public thinking about public money could not be more appropriate.

Dignity and self-respect are lost when a provincial government depends on substantive amounts of cash from another government to pay its bills. It is beyond irony - if such a thing is even possible - for a government that talks about self-reliance to have, as the centrepiece of its federal policy,  a demand for further billions in Equalization and Equalization-type transfers at the same time that the long dreamt of day of going off the federal dole is around the corner.

It's worth noting in that context that the current provincial administration began its plea for federal cash, in 2003, with a demand that the federal government transfer a sum equal to annual oil and gas revenues for as long as oil and gas revenues flowed.  Even if the provincial coffers would be stuffed to overflowing, the initial demand was for ever more federal hand-outs like Equalization.

While it ultimately settled for a simple cash payment of $2.0 billion, the government's subsequent drive for $10 billion is little more than an effort to keep the federal dependence alive. The tortured logic of the so-called claw backs was never more plain than in premier Danny Williams' October 2004 interview with CBC television. It is no better with the  demand Stephen Harper honour a promise which Premier Williams himself rejected in 2004 and which was the polar opposite of the policy he himself proposed as provincial government policy in the 2005/06 letters to federal party leaders.

The $10 billion demand and its associated Anybody But Conservative campaign is really little more than a political distraction, though.  That point is surely not lost on anyone not living in Newfoundland and Labrador and it is likely being realized by more and more people within the province.

An objective assessment will confirm that Newfoundland and Labrador is on the verge of a truly remarkable change in its economic status.  That change, however, has been built in largest measure on factors beyond the control of any government in the province.

To ensure that status of being a "have" province endures, well, that depends on factors very much under the control of the people who live in Newfoundland and Labrador.  It requires a shift to responsible government and responsible politics and away from the democratic poverty we've borne for too long.

It remains to be seen if the descendents of the people who voted in the 1948 referenda can fulfill their ancestors' dreams.

-srbp-

Yep, it's on the Internet.

Too bad Joan Dawe thinks otherwise.

Crisis response isn't rocket science.

That doesn't mean it's easy but half the battle is won if one merely looks around for possible assistance or advice.  Imagining that your situation is unique, or worse, trying to excuse events after that fact with the "uniqueness" canard is to set your organization up for a fall now and in the future.

Four missteps leaders make when dealing with a crisis, courtesy of Fred Garcia, a well-known crisis response expert, who, it should be noted just conducted a workshop for the Public Relation's Society of America's healthcare specialty subgroup on leadership in a crisis:

1. Ignore the problem: management seems unaware and is surprised by a crisis that others
saw coming, or that they themselves were warned about but chose not to take seriously.
We saw such behavior in the early days of the New Orleans flooding; the Catholic Church
sex abuse scandal; the Ford Explorer/Firestone Tires recall; and when accounting firm
Arthur Andersen ignored numerous internal warnings that it was compromising auditor
independence in its dealings with Enron.

2. Tell misleading half-truths: management tries to misdirect attention by speaking literally
true statements with the intention of misleading, which challenges adversaries or
whistleblowers to uncover the full story. On the first day the Monica Lewinsky story broke
in the Washington Post, President Bill Clinton told MacNeil/Lehrer NewsHour host Jim
Lehrer a literally true but misleading statement: ‘‘There is no sexual relationship.’’ The
media and the President’s critics noticed the use of the present tense, and turned up the
pressure to get the president to address past behavior.

3. Lie: management tells a deliberate untruth with the intention of deceiving. Four days after
telling Jim Lehrer that ‘‘there is no sexual relationship,’’ President Clinton hosted a White
House ceremony during which he told the media the lie that has become the defining
soundbite of his administration: ‘‘I did not have sexual relations with that woman, Miss
Lewinsky.’’ The lie challenged his critics and special prosecutor Kenneth Starr to seek
evidence to prove the relationship. When the evidence surfaced, President Clinton went
on television and admitted both the relationship and the lie.

Martha Stewart was indicted, tried, convicted, and imprisoned not for violation of
securities laws, but for lying to federal authorities investigating whether securities laws
had even been violated.

4. Assign blame to others: rather than taking meaningful steps to solve the problem,
management tries to redirect attention away from itself and to someone else. When the
Ford Explorer/Firestone tires crisis first became public, Firestone tried to shift blame to
Ford, saying that Ford instructed customers to inflate tires to the wrong pressure. Ford
blamed Firestone for making defective tires. Consumers were left to wonder what would
become of them.

 

-srbp-

Revisiting the Gorge of Eternal Peril

An e-mail from a seasoned political observer prompted a second look at a post original made at Persuasion Business in the summer of 2007.

The e-mail exchange centred on the political implications of sudden discoveries of e-mails previously not thought to exist or of the question of what the Premier knew of the Eastern Health crisis and when he knew it. The notion of credibility came quickly to mind since it is a core concept in public relations and it is certainly a core concept in the entire Eastern Health debacle.

The whole idea is the focus of a post titled "The Gorge of Eternal Peril."

One of the examples cited is a pair of comments made on George Tilley's resignation.  In hindsight, it is remarkable to see how consist Eastern Health and the health ministry have been in trying puffery and palaver when simple straightforward statements would do.  Tilley's replacement taxed the ears of her audience on Thursday with her endless talk of stories being told at the end of the day.

At the end of the day

...it is very concerning that we do not understand the story, and that people are starting to talk to us, but at the end of the day...

Louise Jones needs some serious interview coaching.

Quickly.

One of the ways Eastern Health can help to restore public confidence in its operations is by speaking in plain English about things that are usually masked behind the cold impersonal language of health care bureaucrats.

Or, as in the examples used above, in the meaningless phrases people rely on when they really don't have anything of substance to say.

With some help, Jones could likely find those words that show she gets it.

But she needs help.

One of the other ways in which Eastern Health will restore public confidence is by demonstrating confidence and an understanding of the issues involved in breast cancer screening and what was done about it.

That didn't come out of Louise Jones' interview on Thursday with Jeff Gilhooley.

Rather, we heard a chief executive officer who had plenty of pat phrases on which to reply - at the end of the day - but nothing of substance to say.

The public will likely find it "concerning" that even two years after this issue first came to light, Eastern Health's senior management doesn't understand the simple maxim of disclosure when 300 to 500 patients are involved versus just one. 

It's the same maxim one that applies for the one:  "maximum disclosure with minimum delay".  It really doesn't matter that you don't have exact answers. It matters that you say something and keep talking as you learn new information.

And surprisingly, once there is some disclosure of what is known, people get remarkably good at understanding.  One of the things they can understand - as in the infamous Tylenol case from the early 1980s - is how to distinguish people genuinely affected by the incident from the people who aren't. Reporters learn how to do it and therefore other people do.

The examples of effective crisis management in situations with similar issues pop to mind:

Tylenol.

Toxic shock.

There are  - undoubtedly - a raft of others from the healthcare sector that come close enough to the breast cancer screening problem to serve as a guide to action.

Maximum disclosure with minimum delay.

Keep updating information as it comes in.

No one expects anyone to know everything, perfectly, right at the start.

But they do expect to see action and they do expect to know what's going on.

And "at the end of the day", "it is very concerning" that this aspect of "the story"is "till not understood"by the people who deliver "service" to "clients."

That's okay, though.  The Cameron Inquiry is a lengthy process that may help to drive some rather simple messages home with people who clearly still need to do some thinking about all this.

That's okay, because fundamentally the medium is the message, in this case.

The Cameron Inquiry is a process.

Treatment is a process.

Communication is a process, too.

-srbp-

A pattern of behaviour

Ross Wiseman.

Ross gets an angry phone call or calls from Florida.

He's not alone, most likely. Plenty of people are getting calls. It may be "personal time" but since everything is personal, all the time, to some people, that means you are never really off the job.

See Ross Wiseman turn up at a hastily called news conference to "correct" comments made by someone else which actually didn't need correction since they were accurate in the first place.

In the first instance, see Ross blurt out something about facilities reports, then deny the reports existed and then realize he can't keep up the charade.

In the second instance, there were no leaks but there was the dubious business of characterizing evidence about to come before the Cameron Inquiry before it was actually presented.

In both cases, the Wiseman scrum was a bit of political "spin" management on a story that can't be spun using the ham0fisted approaches of the recent past.

A pattern is starting to develop.

-srbp-

Healthcare Crisis Public Relations - what makes a crisis?

While the specific details of a crisis may be unique, the fact that crises occur and need to be properly managed is a well accepted notion.

Many organizations have some sort of emergency or crisis plan for certain types of events and the literature on the public relations aspects of crisis management is wide. These tend to focus on natural disasters like fires or floods and in more recent times, organizations have become aware of the potential for manmade disasters like terrorist attack.

Oddly enough, there are more than a few organizations  - especially government ones - that seem to miss the examples of policy-related or similar crises and realize they fall in the same general category.

But if one considers the typical definition of a crisis from the crisis management literature, it gets pretty clear the problems at Eastern Health in 2005 fit the bill.  Take for example, the definition of "crisis" contained in Crisis communications in healthcare: managing difficult times effectively, a 2002 publication of the American Hospital Association's Society for Healthcare Strategy and Market Development.

A healthcare crisis is anything that suddenly or unexpectedly has adverse effects on a healthcare organization or its patients, staff or community. (p.7)

The book also contains a useful tool for assessing the type of crisis.  It's not an absolute system but it gives some idea of what the problem is and, as the book subsequently lays out, the sort of responses that experience shows work more effectively to:

• respond to the crisis;
• maintain or restore public confidence; and,
• restore normal operations.

The following table is adapted from the assessment tool with some wording changes to save space.

Assessing the severity of a crisis

	Level 1	Level 2	Level 3
Geographic scope/duration	Single facility or location	Affects more than one location but for short period	Affects org. or region for indefinite period
Impact on operations	Temporary. Confined to one dept. Normal operations restored within 24 hrs	Significant. Routine operations may shut down temporarily.	Extremely serious. Affected organization may be closed or operate indefinitely at fraction of normal capacity
Employee Involvement	Handled without many problems.  May divert from normal routine	Employees require support from senior management and may require external resources.	Level 2 + Total workforce involved. May need support of healthcare professionals from other organizations.
Regulatory, accreditation,law enforcement impact	Minimal concern.  Phone call or written report may be required.	Appropriate agencies will investigate and may sanction/fine. Sanctions are minimal to moderate.	Sanctions are serious: closure of unit etc.
Public Concern	Limited to parties directly involved in situation	Some public anxiety. Relatives of patients, community residents and others may contact hospital for information on an urgent basis.	Substantial public anxiety. Volume of calls strains normal capacity of organization.
Likely media coverage	Maximum publicity limited to one day of local news coverage.	Regional press plus trade publication.	National and/or international media interest. major newspapers, television, radio, magazines cover issue.

This table is by no means exhaustive nor is it complete.  There is some possibility for overlap from one crisis level to another, however, it is intended purely as a rough guide.  It doesn't have to be perfect.

For our purposes, though, it's interesting to take the evidence from the Cameron Inquiry to date and apply what was known in July 2005 by government officials to this matrix.

There's no question that what occurred at Eastern Health was a crisis.

Geographic scope and duration:  Level 3.  The laboratory problems themselves were confined to one site but their impacts involved patients from the whole province. While the start date for problems was identified as possibly being 1997, there was no indication of how long the problems might last into the future.

Impact on Operations:  Level 2.  The whole hospital wasn't shut but that section of the laboratory was.  Several departments were affected by the situation.

Employee Involvement:   Level 2.  External resources were required - outside labs - and there is no question that senior management assistance was needed in several ways to cope with the incident.

Regulatory, Accreditation, Law Enforcement:  Level 2/3.  There's not enough information to judge the potential impact of these problems on Eastern health's accreditation.  if we add to this section the potential for litigation from affected parties, this one becomes a Level 3 crisis.  A minimum of 100 people seriously affected, all of whom may become party to a lawsuit raises the potential of legal costs stretching into the hundreds of millions of dollars.

Public Concern: Level 2 - Eastern Health clearly anticipated some anxiety and a volume of telephone calls from patients and relatives that may affect operations.  In practice, Level 3 - the incident caused significant public anxiety over a prolonged period.

Likely media coverage:  Level 3.  A story involving breast cancer, testing problems and hundreds of people couldn't be kept local if money changed hands.  It's big and everyone knew it was big from the outset.

Now that we've established that fairly obvious point, in our next posting in this series, let's look at a typical set of crisis responses and compare them to what senior officials at Eastern Health and the provincial government decided to do.

-srbp/tpb-

Implausible deniability

Briefing notes.

Briefing books.

The Cameron Inquiry on Hormone Receptor testing is hearing about briefing notes for ministers.

There are several different types but all have the same basic function:  they concisely convey information to a minister on a major issue or an aspect of his or her department.

Here are two types:

1.  The Hand-Over Book.  This is the set of notes covering the department, its legal authorities, responsibilities, organization, budget and everything else a minister needs to know.  They are given to ministers when they take over.  This type of briefing, often accompanied by one or a series of meetings are intended to orient a new minister to his or her responsibilities. This "book" is updated whenever there is a ministerial change.  The biggest version is done for a new administration but every time there's a new minister, the book is brought up to date. It is handed over from one minister to the next.

The notes are prepared by a senior departmental official, based on information collected from whatever sources are relevant. 

2.  House of Assembly Minister's Book.  This binder contains short notes on major issues likely to come up in the House.  Each issue-specific note includes likely questions along with suggested answers, major talking points.  There may be detailed background but most of the notes in this book give the basis for the rapid exchange in the House of Assembly and with reporters.

The Distribution List:  House notes aren't limited to just the minister.  They get wider circulation to ensure everyone is on the same wavelength.

Typically, the House Book notes would be distributed as follows:

• Minister
• Alternate Minister (a cabinet minister who may be required to fill in should the lead minister be absent)
• The Premier's Office (Distribution within this office varies by administration)
• Minister's Office (a copy for the permanent office file and the minister's personal records)
• Departmental Communications Director
• Cabinet Secretariat (Both for record-keeping and to ensure the Clerk and other key appointments are on the same wavelength as ministers.)
• Departmental Deputy Minister

It's highly unlikely that the breast screening issue didn't get a fairly large amount of discussion at the top floors of the East Block (8, 9 and 10) very early on and that the overall response wasn't discussed at those same levels early on, as well. The issue crosses over a number of departmental lines, including Justice (litigation liability) and Finance (cost of shipping test work out of province and possible costs to fix problems, plus liability costs).

-srbp-

One person, two different versions of Tilley's departure

Eastern Health board chair Joan Dawe has given two different accounts of the circumstances surrounding George Tilley's resignation in 2007.

At the time, she told news media Tilley's resignation came as a surprise to the board.

Here are relevant bits of the CBC story from July 10, 2007:

George Tilley's resignation as president and chief executive officer of Eastern Health was announced Monday. No explanation was given in a statement announcing his departure.

Joan Dawe, who chairs the Eastern Health board, said Tilley's resignation was unexpected.

...

"Mr. Tilley has been dealing with a number of issues, and you are also aware the organization committed to providing an update on the Burin Peninsula radiology review and new information came to light late last week which indicated there are some issues around the outcome of that review," Dawe told CBC News.

Dawe, however, denied there is a link between the radiology review and Tilley's resignation.

 

But then last week, she said this under oath at the Cameron Inquiry:

Bernard Coffey, Q.C., commission co-counsel: Sure. Now , ma'am , with respect to ... just some questions generally. Before we leave the chronology, though, I'll ask , you've referred to the fact Mr. Tilley is not with the organization any more. Could you tell us, please, what you know about his leaving and did it have anything to do with the ER/PR issue?

Joan Dawe: No. The circumstances surrounding Mr. Tilley's leaving the organization, I think I had made public, that it was related to the Burin radiology review and circumstances all surrounding that. That was the trigger.

Coffey: And was it the Board's - - who instigated his leaving the organization, whose idea was it that he leave?

Dawe: Well , I've indicated earlier the contract between the chief executive officer is with he or she, the Chair of the Board, the Board and the Minister of Health, so it's the three parties. So there was the Minister of Health was certainly involved in discussions regarding dissatisfaction of the leadership of Eastern Health and the Board was engaged in the discussion , as well.

-srbp-

When did they know - Part 2

When did the Premier know?

As Bond Papers noted on Sunday, the premier knew in July 2005, shortly after the health minister learned of problems with cancer testing at Eastern Health.

“I am aware of the fact the communications director on or about the same time when this issue was brought to my attention did in fact notify the premier’s office,” [former health minister John] Ottenheimer testified. Ottenheimer’s communications director at the time was Carolyn Chaplin.

-srbp-

The power of apology, part the second

Lawyers don't like apologies.

Perhaps they need to read more widely.

From The Intangibles, a public relations blog, a brief note with a link to an article from 2003 on the legal implications of apologies.

-srbp/tpb-

When did they know?

Then-health minister John Ottenheimer knew in July 2005.

Ottenheimer had a briefing note in his legislature briefing books for the fall sitting of 2005.

His successor claims he only got a full briefing six months after he took over the job.

That's a full briefing.

He knew about the problem the day he took over as health minister and inherited all Ottenheimer's briefing books.

The opposition leaders are wondering when the Premier knew about the problems with breast cancer screening at Eastern Health.

July 2005.

That's the most likely time, maybe even five minutes - give or take - after John Ottenheimer knew.

It's a big issue and you wouldn't want to keep The Big Guy out of the loop for any reason. 

Imagine if he was asked a question by a reporter sometime before the story leaked to The Independent in September 2005 and had to shrug saying he didn't know a thing about it.

That would not be good.

[Incidentally, people are talking about the story breaking in the media as if this is some sort of magical process.  The Indy got wind of the problem somewhere.  One question people should be asking is how did they get wind of the story.  That would be the question right after "where is the communications plan for this issue"? That would not be the thing Joan Dawe referred to in her testimony.  That sounds like a revamped policy on communications.  We are talking about the detailed communications plan for this specific issue, detailing who is responsible for what and who says what to whom. It doesn't look like there was one.]

We'll know soon enough who knew what and when, though since next week the parade of current and former cabinet ministers starts at the Cameron Inquiry.

-srbp-

Two positions are better than one

Danny Williams, on the impact of tight financial markets on major development projects in Newfoundland and Labrador:

"There are some great projects, there is a possible oil refinery, these projects will be slowed down a little bit based on of course just the financial situation now that's going on worldwide and indeed in North America,'' he said in yesterday's [Tuesday, March 25, 2008] interview.

Danny Williams in his own statement disputing that, issued 26 March 2008:

"Despite credit market conditions, I am confident that our projects have a bright future,'' Williams said today in an e- mailed statement. "With the exception of the recent announcement by Newfoundland and Labrador Refining Corporation concerning its proposed refinery for Placentia Bay, we are not aware of any pending delays or slowdowns as a result of tightening global credit market conditions.''

Observations:

1. Note that the Premier referred to the credit crunch affecting projects - plural - not a single project in his  interview.
2. The problem with the Lower Churchill is a lack of power purchase agreements, said agreements being the crucial element in making the financing possible.  Hence his comment on Wednesday is accurate at least in so far as it relates to that project.
3. There is obviously a lesson here that, as flattering as it is to be interviewed by a leading financial news outlet, one must be careful about ones words, especially when they would be picked up by someone back home. The yokels have access to the Internet.
4. The full implication of Williams' Tuesday comments is simple:  things are going to slow down in Newfoundland and Labrador for an unspecified period of time.  That's essentially the same comment he's been making about the Lower Churchill, for example, for months now.
5. The full implication of the new comment:  Same as the first comment.  Saying that the projects have a bright future does not contradict the original statement.  The future is a long time. The projects may come to fruition at some point in the future, just not when previously announced.

-srbp-

Two apologies are better than none

The chair of Eastern Health's governing board has apologized to breast cancer patients who were given inaccurate test results.

This is the second apology from Eastern Health.  On 18 May 2007, then-chief executive officer George Tilley apologized for not disclosing all the details held by the authority about the matter.

That apology came two days after an internal memo- released on Tuesday at the Cameron Inquiry - stressed the need for the embattled authority to speak publicly about the scandal and the class action lawsuit resulting from it.

-srbp-

Equal Voice: Electing more women in Canada

Do you believe that more women need to be elected in Newfoundland and Labrador?

Women represent 52 percent of Canada's population yet only make up an average of 21 percent of Canada's municipal councils, provincial legislatures and the House of Commons.

Equal Voice, a multi-partisan, not-for-profit organization, volunteer-based organization of women and men dedicated to promoting the election of women in Canada. We achieve this by hosting events, providing networking and mentoring opportunities, and organizing campaign training schools. More women equals a healthier democratic political system.

National Chair Raylene Lang-Dion, originally from St. John’s and now living in Ottawa, is pleased to invite you an augural meeting of Equal Voice's Newfoundland and Labrador Chapter.

Learn about Equal Voice –who we are & what we do– ask questions, offer your input and find ways for you to get involved in our dynamic and dedicated organization.

Date: Wednesday, March 26, 2008
Time: 5:30 p.m. – 7:00 p.m.
Location: Spirit of Newfoundland, Masonic Temple, Upper Room
6 Cathedral St. (wheelchair accessibility temporary unavailable)
Contact: 579-3023, parking on street, spiritofnewfoundland.com

RSVP to: Raylene Lang-Dion, National Chair, Equal Voice rlang-dion@equalvoice.ca or 613.355.3428

Rip-off Ron's Campaign for Deputy Mayor

Deputy mayor wannabe Ron Ellsworth - he being the guy who apparently believes he has been blessed by Danny Hisself to go not just to the mayor's chair in the fall but to the 8th floor ultimately as well - is running what amounts to be a campaign of rip-offs.

1. His campaign slogan - Back to basics - is the slogan Simon Lono used in his unsuccessful bid for an At Large seat in 2005. Imitation is the sincerest form of flattery; in this case it's a blatant rip-off.
2. The Idea is also a rip-off since Ellsworth record on council isn't about basics at all. Remember when he defended dumping millions more down the Mile One money pit than when he was first elected to council? Yeah, that's Ron's idea of basics. Of course, he admitted he wouldn't sink his own money in the thing as a private business venture since it would never make money, but apparently your money and mine was fine to waste on a venture that can't turn a profit. And then the guy heralds his supposed stance for "real and practical fiscal issues". Talk about a rip-off.
3. Then there's this great line: a "no-nonsense" approach. Well, where most people come from, no-nonsense doesn't include lies. If you do a poll and a reporter asks you if you know anything about it, a no-nonsense approach would be to fess up. Ellsworth no-nonsense approach was to tell CBC he had no connection to it. And then to admit he did know all about it. That sounds pretty much like nonsense, which makes the whole claim to "no-nonsense" to be ... wait, for it... a rip-off.

If presenting rip-off after rip-off is Ron's idea of a campaign of getting back to basics, we can only wait once Ron starts filling in his blog.

-srbp-

Toward a future that works: Hebron and old people

The comments made by the Auditor General in relation to prudent fiscal management are in many ways consistent with the views of our government. It has been and will continue to be a part of our mandate to manage and build a solid financial position to achieve a self-reliant Newfoundland and Labrador.

The volatility experienced in the non-renewable resource sector has provided significant revenues for the province. However, with this volatility comes vulnerability and the responsibility to manage these resources to maximize long-term benefits for all Newfoundlanders and Labradorians.

Finance minister Tom Marshall, news release, 25 March 2008

While the Public Accounts for Fiscal Year 2006 (year ended 31 March 2007) have been available for some time, the provincial auditor general only released his commentary [Link to report in pdf format]on the accounts on Monday. [Link to Volume 1 and Volume 2.]

Not surprisingly, his comments have garnered considerable media attention.

What he said is neither new nor surprising in most respects and in general, the Auditor General's report reinforces the basic theme of this series of posts:

1. Spending increases are based almost entirely on highly volatile oil prices and are therefore not a reliable basis for high spending."The $280 million (40%) decrease in budgeted oil revenues for 2007 [actually FY 2006], along with the $562 million (54%) increase in budgeted oil revenues for 2008 [FY 2007], demonstrate the significant impact that volatility in the oil and gas sector can have on the Province."
2. Spending in some areas has increased dramatically. Funding for the Department of Health and Community Services increased from $1,260,697 (30.7% of total expenses) in 1999 to $1,990,479 (37.1%) in 2007, while funding for the Department of Education increased from $761,010 (18.5% of total expenses) in 1999 to $1,106,596 (20.6%) in 2007. Funding for health and education made up 57.7% of the total expenses in 2007. Debt expenses for 2007 totalled $777 million (14.5% of total expenses), down from $947 million (17.7%) for 2006.
3. Debt expenses consume a significant portion of annual spending. "While debt expenses have decreased, the Province still has the highest interest costs as a percentage of total revenues of any province in Canada at 14.1 per cent, resulting in fewer resources to allocate to programs and services."

The AG added some new details.  For example, while Bond Papers has already noted that the aging population will cause increased pressure on health care spending generally in the decades immediately in front of us, retirement benefits for government employees will add about $300 million in public liabilities by 2011 unless action is taken to fund them properly.

That's an interesting time period.

In that same time, the provincial government will commit at least that sum to fund the equity stake in Hebron, including acquisition costs and the energy corporation's share of expenses in getting the project to production.  It's at least that sum, since we have no idea what other costs are associated with the project for environmental and other liabilities.  We also don't know the value of the reduced royalty concessions the provincial government made for Hebron and we won't know them until the project is done.  At the same time, the provincial government will spend an additional $220 million and more for its stake in White Rose.

It doesn't take much imagination to see the scenario.  Provincial program spending has grown at pace with revenues, even though those revenues come chiefly from commodities the provincial government cannot rely on to hold up over time.  In addition to the unprecedented spending increases of the last four years, unfunded liabilities and the pressures resulting from demographic change will produce their own demands for increased spending in areas such as health care.

Now, at this point, it is worth bearing in mind that the demographic pressures are not new.  In the mid 1990s, the provincial government's analysis showed that demographic changes had three distinct facets which would have economic impact on the provincial government.

First, the population would drop in overall numbers due to outmigration, reduced fertility and death. 

Second, and related to that and to the baby boomer age cohort, there'd be a point in time where the active labour force is smaller than the dependent portion of the population.  We are at the leading edge of that period.

Third, within the province, migration was changing where people lived.

A smaller population, made up of a larger and larger group of seniors would increase demands from both acute and long-term health care.  At the same time, the provincial economy would not produce consistent revenues to pay for those added services unless there were some dramatic improvements in such things as productivity.  At the same time, government had to change the way it delivered services such as health care to avoid getting into a situation where it spent ever larger sums on one service and couldn't afford many other necessary things.  There were both challenges and opportunities, but they could be met successfully if tackled.

Undoubtedly at this point, some are pointing out that the cost of buying the equity position will outweigh the short term costs. That isn't necessarily accurate for at least three reasons.

First, the costs noted above are only the costs the provincial government has acknowledged publicly.  Other costs, such as environmental clean costs haven't even been acknowledged, let alone quantified.  The Auditor General notes that the Public Accounts already don't take full account of the environmental liabilities that already exist. 

Second, the equity stakes change the provincial governments cash flows, adding mandatory spending at a time when the provincial government may not have the cash to meet the existing, unsustainable spending commitments. White Rose and Hebron have fixed timelines and firm production targets.  They aren't hospitals where government can defer capital spending. If oil revenues drop as dramatically next year or the year after to the extent they did in 2006, the provincial government will have only three options:  cut programs, borrow or both. 

The provincial government won't be able to opt out of the capital commitments for the oil projects without, essentially, deferring the costs to the future.  If there isn't enough cash to fund the costs, then the provincial government will have to incur debt at whatever rates prevail at the time.

Third, the equity stakes actually produce relatively small net cash returns to the province, once oil starts flowing. Hebron equity will produce a gross revenue of about $1.5 billion over 20 years, bearing in mind of course that there are still unknown liabilities in the project.  Recall as well that this is an estimate, assuming an average price per barrel of oil (US$50) over the 20 years after the field comes into production.  The figure could be higher, but given past trends, the actual price  - and with it the province's revenue  - might be considerably lower.

Even if all that weren't true, the equity stake doesn't produce cash until after oil starts pumping and then only after initial costs are recovered.  cash will not start flowing, in other words until more than a decade from now, long after the added costs from the aging population have hit.  While the cash flow starts with the first barrel of oil, the initial production revenues simply go to replace the money spent already and if the provincial government actually funds the costs with bank debt, there really won't be any cash to direct to program spending or anywhere else.

All of which goes to show that the finance minister's comments in response to the Auditor General are somewhat at odds with the fiscal reality. Even a cursory reading of the AG's comments show that the province has grown increasingly vulnerable to commodity prices under the current administration due to the unprecedented spending growth.  At the same time, the debt burden continues virtually unchanged.

What the AG did not account for, nor should he, is the short- and medium-term financial impact of policies such as equity.  The current administration's election commitments called for increased spending and the introduction of new programs, like the pro-natalist policy, none of which were costed during the election. If that were not troublesome enough, the AG's observations released today merely continue the dangerous trend toward providing information to the public long after crucial budget decisions are made.

In the next post in this series, we'll take a look at an idea that may actually help to create a solid fiscal future for the province.

-srbp-

Related:

1. Toward a future that works: we live in a fiscal house of cards
2. Toward a future that works: what goes up, must come down

Next:  Toward a future that works:  a fiscal policy for responsible government

Old whine. New skins.

No small irony that on a weekend where the editor of the local daily took issue with people who make arguments without facts, two professors at Memorial University release a new paper on the Churchill Falls contract.

Signed in 1969 between Hydro Quebec and private sector BRINCO, Churchill Falls was the largest construction project in North America up to that time - if memory serves.  The projected started pumping electricity in the mid 1970s on a 65 year contract that will expire in 2041.

The contract is also the source of the largest combination of grievance and conspiracy myths based on the appallingly low price Hydro Quebec pays for power. The 40 year term of the first contract expires in 2016 and at that point, there's an automatic renewal which actually drops the price per kilowatt hour to 2 mills.  That two tenths of one cent. That's also a lot of money in comparison to what the power would cost today if Hydro Quebec bought it on the market or, as the conspiracy theorists contend a lot more money flowing to HQ which - supposedly sells the power across the border to the US.

Economist Jim Feehan and historian Mel Baker have just published "The Origins of a Coming Crisis: Renewal of the Churchill Falls Contract,"  in the spring edition of the Dalhousie Law Journal (vol. 30, no. 1).

The article deals with, apparently, the renewal clause and how it was negotiated. it's apparent because the description of the article in the official Memorial University news release is just a bit different from the story in the local myth mongers' weekly.

While it may not be subject of a great deal of general interest, it's a pretty easy affair to get someone connected to or familiar with the 1969 deal to give you a short summary of the issue.  In 1969, BRINCO was on its uppers.  The financiers who were putting up the cash for the deal wanted a performance guarantee;  that is, since BRINCO hadn't built anything this large, the people putting up the cash wanted to make sure the thing would get finished and they get their money back.

Now here's the thing, right off: Hydro Quebec stepped in and gave not only the performance guarantee for completion but a pledge of cash to cover cost over-runs.  In exchange, came the renewal clause provisions and the low rates of power, lower than those in the original term of the contract.

The issue hasn't been studied in detail, as Feehan and Baker note, but then again the entire contract and the circumstances surrounding it haven't been studied in detail.  Philip Smith's BRINCO: the story of Churchill Falls is an invaluable source to anyone seeking factual information on the entire affair but there's precious little else out there.

What we have here will be a detailed discussion of one issue in which the context and details remain largely unknown to people other than the handful who have dug into to any degree.  Perhaps 90% of the popular commentary comes from those sources.

Nonetheless, people should go out and pick up the Dal journal and give it a read.  It will be interesting to see if the economist and historian take the route of grounding their work in the context of the time or if they succumb to the temptation to reframe the issue in the current context.

Certainly Feehan's comments in the Indy, linked above, don't bode well.  For example, Feehan constantly refers to CFLCo [Churchill Falls Labrador Corporation] when he should be referring to BRINCO. Take this comment for example:

"It’s not that they were naïve on either side of the negotiating table; they knew that this price for renewal was incredibly low, yet it was pushed to the point where CFLCo had to take it or leave it."

Not only does Feehan make the mistake of identifying the wrong company (BRINCO was the majority shareholder in CFLCo with HQ having the minority), he also fixates on price  - the current issue - in a comment that suggest the overall context of the deal is being pushed to the side since the facts do not conform with the pre-conceived goal.  

There was more to the renewal than the low price and those terms aren't all as sweet for HQ as the price one. Those issues were raised again in the early 1990s and rejected by the Newfoundland and Labrador negotiators. It remains a question as to whether or not the renewal agreement was altered in the late 1990s when the complete redevelopment was laid out as a pre-election goody.

They also aren't as sweet, either, if one wants to hook onto a theoretical political controversy as a way of attracting attention rather than to examine an issue in detail and let the chips fall where they may.

-srbp-

The power of apology

"Sorry from me, what does it absolutely mean?"

Louise Jones, interim Chief Executive Officer, Eastern Health

Some public relations practitioners specialize in reputation management.  We all do to one extent or another, but in some mystical parts of the world, there is enough business to sustain an entire practice on it.

Tiger Two is a public relations firm in the United Kingdom that, among other things, has a blog devoted to online reputation management.

Follow that link and you'll find a post summarising a recent article in the Wall Street Journal on the five typical approaches corporations take to online comments that may have an effect on the corporation reputation:

1. The Do-Nothing Approach
2. Putting Lawyers on it
3. Throw Money at the Problem
4. Invite and Engage the Critics
5. Stop it before it Starts

Those five describe what most companies and individuals in Newfoundland and Labrador do when something out there is said which can adversely affect reputation. The Premier accuses you publicly of unfair trade practices without a shred of evidence?  Well, publicly traded Aliant opted to do nothing.

That pretty much is the anatomy of Eastern Health's ongoing breast cancer scandal. They opted to stay quiet - a form of doing nothing - and then when things got dicey, the lawyers wound up on the job.  The result of their approach is playing out on the Internet and in newsrooms right now as a result of a public inquiry into the mess. Before it is done, there'll be quite a lot of money thrown at the problem in various ways, including one suspects a settlement to the members of a class action lawsuit.

The list above was compiled in order of popularity.  If you check with a public relations practitioner, especially one who specializes in reputation management, the first one they'd suggest if the fifth one on the list.

That's why we've observed both here and at Persuasion Business that the entire breast cancer scandal would have turned out much differently if Eastern Health nd the provincial department to which it reports handled things differently at the outset.

Truth be told, if Louise Jones had offered a simple apology on behalf of the organization she leads, she might have started the long journey out of what must surely be a very dark place for a great many people.  One of the reasons her organization is in the mess it is in at the moment stems from the largely impersonal, bureaucratic way which the organization as a whole relates to the people who come to them for care.

That's what they are:  people who come to a hospital for care. They are weak, emotional, confused and often fragile and vulnerable, none moreso than a woman facing breast cancer.

The old word for them is patient and while it is an old word, it carries with it the old attitude of care and of a strong personal relationship between the healer and the person seeking healing.  Doesn't matter if the healer is a doctor, nurse, or pharmacist or one of a raft of other health professionals. Old isn't a bad thing, in this case.

But to Eastern Health, as an organization, they were and are clients. Jones referred to them in her scrum as clients, as cold and impersonal a term as anyone ever imagined to describe sick people. It's not Jones' fault.  Her training and her professional and work environment adopted that term some time ago,  Some people in the health care business use it instinctively and often without much consideration. 

The fact that so impersonal a word came to her so effortlessly tells a lot about where her head is, that is, as the person who singularly speaks for the entire regional care system.  It sets the tone at the top, or, in this instance, perpetuates it.  A leader sets the standard for the behaviour of those below in the organization. Even in the bits we've seen thus far, the tone at the top was often wrong.

It still is.

Impersonal and bureaucratic pretty much sums up the response thus far to the scandal. You see, to some, an apology might be seen by some as an admission of liability.  The lawyers (and the government) would scream at the prospect of what, to their way of thinking, increases the payout. Saying nothing and doing nothing is the traditional strategy designed to minimize legal risk and with it, the assumption goes that financial risk is limited as well.

Sounds logical and obvious enough, but in this instance, an apology is all many of the witnesses called to testify at the inquiry so far were looking for. They sought any indication that someone actually cared.  Cared enough to tell them up front that mistakes had been made.  Cared enough to tell them in a timely way, let alone at all what was going on.

That sounds even more logical and obvious: a patient looking for some sign of caring from a health organization.

An apology is also a sign of responsibility.  Someone apologizes and takes responsibility even if if he or she personally did not make the mistake.  Taking responsibility for other people's cock-ups comes with a leader's job.  The tone at the top of the top doesn't encourage that behaviour these days - taking responsibility -  but that's another story. 

Suffice it to say that in her poorly considered comments last week, Louise Jones set entirely the wrong tone in relation to this inquiry and the breast cancer issue. She set the wrong tone for many of the people who work under Louise Jones, diligently labouring every day to deliver care despite working environment both physical, and one suspects mental.

Again, she's not alone in setting the wrong tone. Ross Wiseman's easy condemnation of a doctor who, we learned this week threw a sheet of paper at a patient, screams Ross Wiseman's complete lack of appreciation - former health care, human resources bureaucrat that he is - for the stresses and strains physicians and others have been working under as a direct consequence of the laboratory cock-ups.

Imagine for a moment, the doctor, who is foremost in delivering care for extremely sick patients, who trusts that labs are working properly and makes a treatment recommendation based on those lab results only to find that the whole thing was wrong. He made a mistake  - not his fault - and his patient suffered, in some cases suffered grievously, as a consequence.

And if that weren't enough, because of management decisions made way above his head in the organization, a patient who ought to have been contacted by someone else is now sitting in front of him demanding answers he cannot give. 

Wiseman is lucky that all doctors, nurses and lab staff have done  - let alone patients in this case - is toss the odd piece of paper.  Wiseman is lucky too, to be so far out of touch, so distant and removed from the human issues in the breast cancer scandal that he can willingly, almost cavalierly condemn another but hold himself as somehow a model of virtue in the process.

Ask Fred Kasirye about Wiseman's virtue.

Does he forget the facilities report scandal?  A guy who all but lied about hospital facilities reports to the media and the public has nothing to be the least bit proud of. Hypocrisy just isn't a strong enough word for it and goodness knows, Wiseman and his colleagues have made "hypocrisy" a cliche these days in many cases on many issues.

A simple apology could have done so much:  changed tone, showed an acceptance of responsibility, given a sign, no matter how small, of humanity instead of cold bureaucracy.

Unfortunately, Louise Jones was right in some of her other remarks to reporters outside the inquiry hearings.  She said  "the story [of what occurred] is not going to be told for some time."  It isn't.  That's largely because the organizational culture led to a do-nothing strategy at the front end and that same impersonal management culture still pushes for doing the least at every step. 

Take Jones' comments on the value of an apology that the bureaucratic culture is firmly entrenched, despite the revelations so far. If at the end of this inquiry, the patients involved in this scandal receive an apology only after the legal bills have been tallied, then nothing will have changed at all.

At that point, "I'm sorry" will truly have no meaning.

Here's hoping that in the time it takes for the story to unfold, someone somewhere in the health ministry or Eastern Health learns the simple human value of simple human words:  "I'm sorry."

-srbp-

Saturday night quickie: Depressing economic forecast

The Toronto Star financial columnist David Olive is giving five reasons to start worrying about the economic circumstances over the next while. 

In his maiden speech last week as governor of the Bank of Canada, Mark Carney was the bearer of bad news. The high commodity prices for everything from oil to wheat that have largely insulated Canada from the early phases of the U.S. economic slowdown are due for a fall, pulling down Canada's economic growth rate in 2008.

It's not like no one saw it coming.  It's just that it took a few people a while to notice. 

Around these parts, we've been covering the economic forecasts for months now, all of which pointed to a major slowdown in the economy.

For the record, here's the most recent outlook from TD Economics.  There are some inconsistencies in the report that aren't readily explained from the text.  For example, while there is a fairly understandable statement that Quebec and Ontario are the most vulnerable to slip into a recession, there's the odd grouping of Newfoundland and Labrador with provinces  likely to weather the economic slowdown in the United States. 

Still, TD is predicting an anaemic 1.0% real growth in provincial gross domestic product this year, tied with Quebec and only a half a percentage point above that of Ontario. Notice, by the way, that 70% of provincial exports go to the United States in the form of crude oil and refined crude products.  So much for the theory that "our" resources go to enrich central Canada.

-srbp-

Hey cultists: Kush mir im tokhes

Russell Wangersky will be getting e-mails. Definitely, e-mails.

Russell's bosses will be getting e-mails.

There may even be editorial comments made at another newspaper.

There will probably be a letter from Tom Hedderson - at least Tom - for publication that will claim, without a single shred of evidence, that Wangersky is in fact wrong.

The subject under discussion?  That would be the local claim that the province is being screwed out of its "fair share" of federal jobs and the overwhelming evidence that the claim is complete drek.

Yes, it's factored in a couple of elections and yes you'll hear federal candidates from all parties pledging to right the supposed wrong.

But it's still drek.

Oh yes, Hedderson will make copious references to Jim Feehan's work for the Harris Centre on this whole federal jobs thing but frankly, Feehan's work has so many conceptual holes in it, one would be surprised he still signed his name to the bottom of it. It's a pretty clear case of framing the data to support the conclusions, rather than the other way around, and it's a bit surprising to see Feehan doing it.

By the way, you'll find one post from Bond Papers with a link to the first part of the Feehan study.  Don't use that link as the folks at mun.ca decided to change it without providing a re-direct.  Here's the link to the first Feehan piece. Incidentally, the second one didn't do what they said it would do.  It came in late and merely rehashed the same stuff from the first one using the same back-formus methodology.

Take a gander at labradore and you'll see evidence - plain and simple evidence - that the claim is drek.

And that would be Wangersky's second heresy, the first being denial of a fundamental tenet of the local cultists' religion.  Russell quotes a fellow the local cultists regard as a high priest of evil, if not the federal divil hisself.

Wangersky is right:  people should present facts to back their arguments and to refute facts with other facts.  The tendency of the local cultists is to simply claim a conspiracy and proceed from there. Public policy discussion with way too many people in this province - including elected politicians, current cabinet ministers, former cabinet ministers and candidates from all parties alike - is akin to speaking with Sasquatch Hunters or the dupes at a Uri Geller spoonbending demonstration.  They spout complete nonsense as if it were real and cannot be argued off the silliness by any means. In fact, with many of the hard core cultists, the debunking efforts only reinforce their delusions:  there must be a conspiracy, otherwise you wouldn't be an agent of the satan trying to trick me into believing lies.

So here's a tip of the Easter bonnet to Russell for stating the matter plainly and to a local Jim Randi who, it should be said, does not offer a million dollar reward to people like Agnes or Myles or Sue or Danny or Tom or Tom or Bill or Siobhan or Walter or Loyola or Loyola for proof of their federal presence argument, let alone any of their other points.

He wouldn't need to actually have a million in the bank.

You see, there is no evidence.

-srbp-

Toward a future that works: What goes up, must come down

The current increases in provincial government spending on built almost entirely on the phenomenal crude oil prices of the past few years.

Inflation is running at an average of 2% annually.  Provincial government spending will jump about 12 to 14% from this year to next (effective 01 April 2008), if the interim supply bill is any real indication and that is on top of similar increases in each of the past three years.

To illustrate this, look at the simple chart of revenues and expenses from the 2007 provincial budget speech.
Bear in mind that each of these columns represent projections only.  The experience in 2007 - the first column - has shown revenues significantly above forecast.  We'll know the actual expenditures in a couple of weeks when the budget for 2008 is tabled in the legislature.

The chart does indicate a general policy of government to keep its spending only slightly below anticipated revenues.

Before you click to another page because this is all old hat, consider that in 2003, oil was around US$25 per barrel.  The only people who predicted that within five years oil would hit US$100 a barrel within five years were either in an insane asylum, considered candidates for a straightjacket or part of a very small group of oil pundits who had been faithfully predicting predicting hundred dollar a barrel since the 1970s.  Eventually they had to be right, just like a psychic.

Ask around today and you'd have a hard time finding anyone who will tell you that we will see oil below US$50 a barrel in the near future either.

Odds are better, though, that oil will drop to US$50 and lower within the next decade.

Look around and you'll find plenty of oil experts who will tell you that the current price of crude oil is inflated by a number of factors, each or all of which will adjust  to usual trends.  There's a security premium in the price of as much as 20%.  There's a percentage attributable to the relatively weak American dollar. 

No one expects the American dollar to remain at its current value for too much longer.  Once the Americans come out of their recession, the dollar is likely to rebound, Alongside that will be a drop in oil prices.

As for the security premium, we are likely to see some changes there after the November presidential elections. No matter which of the current candidates wins, the change in administration will affect the markets.  If the new administration moves on security issues or looks like it will move to defuse some of the Middle East tensions, the price of oil will settle down to a price much lower than today.

Already, we've got oil heading towards US$70 a barrel and that didn't take much effort.

And already someone is nodding that $70 is bigger than $25 and so everything is fine.

Well, it might be fine, if the local oil supply was infinite.  The provincial government could take a boost and even a substantive hit if there were Saudi-type or even Alberta-type oil supplies offshore.

There aren't.

The chart at left is taken from a Wade Locke presentation on Equalization changes in the 2007 federal budget.  There are other versions of the slide but this one is readily available.

Notice that for the three working offshore projects, oil production hits a couple of peaks within a few years of each other and then gradually declines. Find 2008 on the timeline along the bottom.

This chart assumes no Hebron, but that really isn't important.  Even if White Rose cranks up in the fall of 2008, oil production won't start until some time after 2015.  It may even be closer than not to 2020.
Hebron won't add to production that is already booming;  it will simply fill in some of the white space - representing no production - that grows larger on the right hand side of the table.

At the same time, additional White Rose and Hibernia production fattens up and lengthens out the right hand side of he chart a bit, but it certainly doesn't keep production up at the peak levels.

The impact of those peaks on provincial revenues can be seen more readily in another Locke slide, right, from the same presentation. 

Again, Wade Locke has produced several similar versions of this chart but it all comes down to the same basic point. There's another set of slides in a 2006 presentation at Memorial University's Harris Centre.

Again, we have a sharp increase in revenues, a couple of peaks and then a drop off the back end.

Changing the assumed price of oil changes the height of the peaks but it doesn't change the overall picture. Even if we assumed some floating price at any given point in time - which doesn't change the perspective of using an assumed average oil price over time, as Locke does - the only way provincial revenue would continue at current levels, hit the anticipated peaks or actually grow would be if oil prices didn't fluctuate but grew steadily out beyond current levels.

It's a pretty simple idea.  If you make a given amount of money from a given  amount of oil, as the amount of oil drops, the only way to keep revenue up is to see prices increase for oil at the same pace as the oil quantities drop.

Sure, we could find lots more oil and gas and exploration may yield more large discoveries, but let's take a more conservative approach.  Let's work within the framework of what is commercially viable and either in production or coming into production within the next decade.

To get a sense of why current oil prices are out of the ordinary, take a look at this chart, left.  It compares prices, historically both in current dollar terms and in terms of constant December 2007 dollars.

In the first part of 2008, crude prices have already exceeded the historic peak oil prices from the 1970s. However, that doesn't mean that the historic trending must now go out the window.  Rather we should anticipate a drop in oil prices both in constant and current terms.

And just to really drive it home, bear in mind that Locke and others typically talk in terms of average pricing over time.  That's a reasonable, conservative approach.  Bear in mind though that if one assumes an average price of US$70 per barrel and oil hits US$100, then at some period, oil would have to drop below $70 by a proportionate amount - i.e. to something around US$40  - to make the average work. Averaging assumes price fluctuation and it is an historically sound approach.

The new provincial budget will be tabled in the House of Assembly within the next few weeks. That document will tell us the actual government performance in 2007 and it will forecast for the next year or three years.  If the past three years hold, the provincial government will likely boost program spending and other spending based on current oil windfalls.

That's a shaky foundation of course.

NAPE and other public sector unions may be looking for significant wage increases, along the lines of growth in overall government spending. The problem will come, as it likely will, since the wage increases are not one-off expenditures.  Adding another $100 million or more to the wage costs will come every year after.  That doesn't sound like much against a surplus of a billion dollars, but drop that billion dollars by 30% and add other increased costs and pretty soon, the annual spending could exceed revenues.

Increasing spending by something approximating the steep increase in revenues coming from one source and one can reasonably expect that the revenue and spending tumble down the other side will be just as sharp. 
The difficulty facing the current administration is that they have heralded their successes to such an extent that public expectation is for increased spending.  Public sector unions have been promised significant wage increases. Even prospective parents have been promised cash for producing children. 

Politically, they have painted themselves into a very tight spot.  How tight a spot depends entirely on the price of oil.

After all, what has gone up will, almost inevitably, come down.

-srbp-

[Techie note:  There are several charts mentioned in the text.  The links work, but for some reason the pictures cannot be uploaded (21 Mar 08).  We'll work to fix those as quickly as possible.]

Related:  Toward a future that works: we live in a fiscal house of cards

Next: Toward a future that works:  Hebron and old people (coming).  The equity positions in two offshore oil projects significantly alter government's cash flows over a time when unavoidable spending pressures hit.

Soon:  Toward a future that works:  a fiscal policy for responsible government.

The Power of Bureaucracy

One of the first initiatives of the new Williams administration, back in 2004, was to turn the Newfoundland and Labrador Centre for Health Information (NLCHI) into a Crown corporation.  Not surprisingly, it was a hold-over from the previous administration.

That capped a decade of evolution for the organization in fine bureaucratic fashion.

Now people who know might think NLCHI started in 1996 under the Tobin administration and they'd be partly right.  Tobin's cabinet put a new name on an offshoot of an earlier task force established originally to look at developing a way of sharing and consolidating health information among health care providers across the province. 

Before that - if memory serves - there had also been a technical committee of the computer guys that looked at computerizing records and creating a common set of records for the hospitals in the St. John's area.  Some may recall that in the early 1990s, hospitals in the province were run as individual sites.  Records from one weren't readily available at another and there was no common way of sharing records simply and easily using the marvels of what was then a new technology - the Internet.

If you take a look at the recommendations of NLCHI's immediate predecessor (follow the Tobin link above) and the ideas will sound very familiar. Aside from making fuzzy recommendations on how everyone needed to work together happily, the Health System Information Task Force recommended a raft of ideas from the creation of a new "unique identifier", or health card number, for residents of the province to development a provincial information technology plan.

It's that last one that's particularly interesting in light of revelations on Thursday about Eastern Health's woefully inadequate information management system. CBC's Here and Now obtained a copy of a briefing note prepared for the current health minister last November.  The briefing note detailed, among other things, the inadequate computer systems at Eastern Health that forced officials to review patient files one by one, by hand, to try and determine  how many patients had been affected by the breast cancer scandal.  They couldn't even use an electronic search function, apparently.

Look at the NLCHI site and you'll see a pile of buzzwords, chief among them the stuff that comes in the "vision" paragraph.  Heaven knows that in the "strategic" planning craze of the late 1990s  - it is still with us today - every organization had to have a vision statement and a mission statement:

The Centre's vision is the improved health and well-being of the people of Newfoundland and Labrador by making quality health information available to the public, health professionals, government, regional integrated health authorities, and other people and organizations. Working closely with these stakeholders, the Centre is responsible for the development and management of a province-wide Health Information Network (HIN). This is a tool to help achieve the best possible health for every person in the province. The HIN will help improve health by allowing health professionals to electronically share information with other health professionals. The Centre will support decision-making, planning, and research with reliable statistics and applied health research.

There have been plenty of studies and conferences but, as one may infer from the Eastern Health briefing note, there has been plenty of planning and visioning but not a heck of a lot of concrete action. There's a hefty-sized board overseeing CHI and there is a staff which now comprises about 60 people. There are a bunch of projects that are in various stages of development but aside from the diagnostic imaging project for radiology, most seem to be conceptual or otherwise not focused on the most straightforward and pragmatic approach to delivering service needed at the front-end of acute health care.

In short, the original technical committee looking to figuring out how to wire together computers and find common software standards has morphed into a bureaucracy that continues to grow apace. Participants in the ongoing CHI project will no doubt disagree strongly, but the evidence speaks pretty clearly for itself.

After discussing a unique health identifier to replace the medical care commission number, that idea was scrapped in favour of keeping the MCP number in place.  If memory serves, that study alone took three years before winding up back where it started.

The other major project which is well underway is a $15 million program to replace the existing computer systems in private sector pharmacies with a single, publicly owned one.  Doctors  - the people who actually write prescriptions and the people with primary responsibility for co-ordinating patient care - will only get access to the system in the third phase:

Phase I of the project will include the integration of the province's approximately 180 retail pharmacies and provide a viewer into the emergency departments of acute care facilities; Phase II will include integration with hospital pharmacy systems; and Phase III will provide electronic prescribing capabilities to physicians and other prescribers.

One of the issues identified in the 1995 Strategic Social Plan (approved for release in December 1995 but killed by the Tobin administration in 1996) centred on the implications of growing health care spending driven by, among other things the demographic changes taking place in the province.  Initiatives like health care re-organization in the early 1990s were intended to deliver needed health care as efficiently and effectively as possible.  It was about doing the most possible with a given amount of money, recognizing that the inertia of bureaucracy the doing the same things over and over simply couldn't be sustained.

Look at it this way:  within a decade, the change identified as necessary in 1995 hadn't taken place. In fact, the goal had been abandoned, by degrees.  In 1994 health care consumed about 25% of the provincial budget annually. Even allowing for the re-organization of health and community services, health still consumed 25% of the annual budget five years later. By 2003, that figure was up to 30% and in 2007, health care consumed 32% of the budget. 

One of the reasons for that growth has been the steady retreat from simple, pragmatic approaches toward ones that are demonstrably bureaucratic in nature.  The empire built in CHI is one example.  The 2004/2005 re-organization of health care administration is another. 

Sure the treasury has grown fat over the past five years compared to the leaner times of the 1990s and so some will justify the increased spending on that basis.  People with a vested interest in the system as it has grown will be the first to tell you of all the wonders they've achieved for all the extra money. They'll also tell you that there isn't enough money to meet all the needs, but more must be added, perhaps for more officials to plan and co-ordinate and produce vision statements.

But ask the people flipping through files - electronic or paper - by hand and you might get a different response.

We don't need to ask patients if "the system" works. 

We've been hearing from some of them this week.

Such is the power of bureaucracy.

-srbp-

Breast cancer inquiry opens

The Cameron Inquiry into breast cancer testing at Eastern Health started public hearings today, after a weather delay on Tuesday.

Hearings are being webcast (check the link above, under "Schedule and Witnesses").

The commission is interpreting its terms of reference to focus almost exclusively on the medical aspects of the issue. That's particularly interesting when it comes to Term (f):

Term (f) directs that recommendations be made as to how matters of this nature should be handled.  Though not exclusively, Part II will be largely directed to providing information to the Commission which would assist in making such recommendations.  To that end, six experts have been engaged to prepare papers. The papers, which are directed to aspects of the obligation to disclose, will be posted on the website in March, 2008.

That term relates to making recommendations for policy on any implications flowing from the other terms.

There isn't anything obvious from the schedule of witnesses released thus far or from the experts engaged for the second phase of the inquiry that would deal with Term (d):

(d) inquire into whether, once detected, the responsible authorities communicated in an appropriate and timely manner with the general public and internally within the health system about the issues and circumstances surrounding the change in test results and the new testing procedures;

That's the term which appeared, on first reading, to include Eastern Health's public relations operations. Apparently it doesn't. Most of the disclosure discussion planned for phase two examines only the legal and medical aspects of the question.

No paper appears to have been commissioned from him but the commission will hear from a journalism professor at the University of British Columbia on the role of the media in disclosure. That's interesting since the public relations function - identified in Term (d) - only becomes an issue of media ethics once a management decision has been taken on whether to disclose, how to disclose and what to disclose.

It will be hard to determine if the responsible authorities communicated in an appropriate and timely manner if no one providing evidence or opinion to the commission has experience in the the management of communications.

-srbp-

Irving and BP to partner on Saint John refinery

While the second refinery proposed for Newfoundland has hit a cash snag, the proposed refinery expansion at Saint John New Brunswick gained a new partner on Monday.

BP will contribute US$40 million under a memorandum of understanding with Irving Oil to look at the design, feasibility and engineering for the new refinery.

Irving Oil conducted initial feasibility work and informal public consultation in 2006, and has been engaged since January 2007 in permitting, public consultation, and engineering design for the proposed 300,000 barrel per day refinery. The refinery would be situated close to Irving Oil's existing 300,000 barrel per day refinery and the existing Irving Canaport deepwater crude oil terminal which receives VLCC cargoes of crude oil and is located 65 miles (105 km) from the US border.

This next phase of engineering, design and feasibility work, combined with ongoing permitting and community engagement activities represents over US$100 million of investment over the next 12-15 months.

-srbp-

Of gas prices, tourists and ptomaine

Ed Ring is right.  Having inspection reports on restaurants and other food service places accessible to the public is good.  It's a step in the right direction.

But while some people are busily patting themselves on the back, they might consider the aspects of the auditor general's report on health inspections a bit more closely.

There are a few issues that remain unresolved:

1.  The problem was with restaurants failing health inspections repeatedly and still being allowed to say open.  That hasn't changed. Some of them were serious failures, but apparently they weren't quite serious enough.

2. How many other restaurants are out there?  The six restaurants were only a sample.  CBC and the Telegram might be all over the six but, the auditors only took a sample of the thousands of inspection reports on thousands of food service establishments.

3.  Why do an inspection when the place is closed?  This whole issue is about how the inspectors conduct the inspections and enforce - or don't enforce - the rules. 

Now you have to wonder about the ministry of permits and licenses if its inspectors try to inspect a place at a time of the year when they know the seasonal establishment is closed.

In St. Lewis, Labrador in May 2006, at the Fisherman's Landing, inspectors found unsatisfactory hand-washing facilities and improper thermostats. Inspectors were unable to complete a January 2008 inspection because the restaurant was closed for [the] season.

Think about that.

Problems identified in May 2006.

Inspectors go back to the seasonal restaurant - on the coast of Labrador - almost two years later to see if the problems are still around.  It's not like these were insignificant issues.  And they can't get in because the restaurant isn't in operation at that time. 

Of course, we start to understand the depth of the problem when we consider the words of the minister responsible for health licensing. We've been operating under the assumption Kevin O'Brien and his inspectors are there to protect the public and keep it safe.

Turns out the task here is not so much the enforcement of standards  - to prevent the spread of deadly infections - but rather the education of people running food service establishments. 

In that little scenario, the people of the province O'Brien is supposed to be protecting are nothing more than the final exam in this little education process.

Call me funny, but I have a problem with being used as a test subject in O'Brien's little exercise in learning.

You see, when one of these restaurant people fail their exam in O'Brienology, my children and I wind up in hospital.

Or dead.

And if people who live here have a problem with Kevin O'Brien's bizarre view of his responsibilities, imagine how those thousands of potential visitors  - tourists - feel about being used in Kevin's lab as guinea pigs.

Gives new meaning to experiencing the local culture.

"Was that ptomaine or salmonella, dear?  Hmm, not sure.  Let's try the next place and see what develops."

Kinda makes concerns about gasoline prices and the impact on tourism just a bit trivial.

-srbp-

Living in a lost episode of Star Trek: TOS

One of the basic ideas we've been pushing around these parts is that Danny Williams is merely continuing the general policy approach of his predecessor.

Yes, it infuriates the D o' D's  (Disciples of Danny), but then again they wouldn't be disciples if they didn't fervently believe beyond all reason and evidence that theirs is the true secular messiah sent down from Heaven to deliver things like 'Pride" which have been so long denied His Chosen, but sadly Long Neglected People.

Take a look at the string of Throne Speeches from 2001 to the present.

Notice the continuation of policies and even the similar language from year to year.

The only new words:  the sudden appearance of "My First Minister", usually in he context of heaping praise on MFM, a.k.a. ODP, for his spendiferously marvellous smiting of the evil giants in the Battle of Accord.

So for your consideration, on a snowy Sunday morning, here's a news release from no less a personage than Tom Hedderson.  At the time, Hedderson was education critic.  He was taking a strip off government for knowing about mould in schools and not doing anything about it.

Sounds more than bit familiar, doesn't it?

Government knowing about a problem and doing nothing about it, or delaying doing something about for one reason or another.

Like knowing about the hospitals and yet doing nothing year after year for some completely unfathomable reason. And not just hospitals  - mind you  - in St. John's but in seven or eight facilities at least in Eastern Health region and likely more beyond that elsewhere in the province.

And then when asked about when he knew of the problems, the Premier first gives a story which turns out to be completely false.

As in not true.

Like in the middle of the scandal in the media and polling period he was suddenly struck with a memory lapse about what he knew, and when he knew it.

Oh no, he says, I only learned about it this week. 

Turns out he knew about it at least last fall, by his own admission. 

Now, given that we know he has made one false statement on the subject already, what are the odds he has known about the state of the hospitals for some time before that and just isn't telling us an accurate version of it?  And open accountable and transparent version?

And it makes ya wonder what else has he said about other subjects which isn't accurate, correct or in keeping with established facts.

Anyway, for the record, here's Tom Hedderson when he wasn't a cabinet minister accusing those that were of knowing something and not doing anything about it.

Major difference though:  Hedderson was only accused of ignoring a problem for - get this - less than a year.  The reports on Eastern Health are three years old and even now that the Premier is directly involved, he's still not promising to actually deal with the issue thoroughly.

The New Approach evidently means the old approach but longer. If Grimes took five months,  the New Improved ODP Approach will take five years. 

The New Approach:  it's like living in a province run by  Mr. Scott from some backwards Star Trek universe.  Scottie tells you something will take hours to complete.  It really takes years, if it ever gets done.

Oh yeah and  - whenever he gets caught screwing up - he promises the screw ups will never happen again.

Over and

over and

over.

 

NEWS RELEASE

--------------------------------------------------------------------


Education department knew last spring of air problems at St. Thomas of Villanova


ST. JOHN'S, November 1, 2000 — Opposition Education critic Tom
Hedderson says the Department of Education knew last spring of air
quality problems threatening students and teachers at St. Thomas of
Villanova in Manuels, yet has left the decision to begin addressing the
problem until two months into the 2000-01 school year.

The school has now been closed due to mould problems, and arrangements
are now being made to relocate students to other schools, at great
disruption to them and their teachers two months into their school
year. Reconstruction will probably not be completed until some time
during or at the end of the next school year (2001-02).

Hedderson says, "Everything that is known to the Avalon East School
Board and the Department of Education now was known to government and
the board last spring. Despite a 1998 environmental study recommending
a schedule of constant air quality monitoring in this particular
building, obviously no further monitoring was done. In other words,
despite knowing there was an air quality problem at the school that
needed attention, they neglected to do anything about it."

"The Avalon East School Board has to take some of the blame for not
confronting the Department of Education more aggressively on this issue
and forcing a showdown so proper plans could be made to start fixing
the problem and firming up alternate arrangements over the summer to
ensure minimal impact on students," said Hedderson.

"The real blame, however, rests on the shoulders of the Department of
Education for second-guessing school boards, cherry-picking on a
political basis which schools get replaced or renovated, and ignoring
not only the priority list for renovations but also the glaring
evidence of problems needing remediation," said Hedderson.

"The government has been making decisions on capital expenditures in
schools on a purely political basis. St. Thomas of Villanova is just
the most obvious and dramatic example of many situations around the
province where Liberal political patronage takes precedence over
educational interests and the health and safety of students," he said.


- 30 -
For more information:
Tom Hedderson, MHA Harbour Main-Whitbourne
(709) 729-6924