More to it than oil prices #nlpoli

Politicians spent a few hours this week harrumphing about the impact falling oil prices might have on the provincial budget this year.

The problem for the provincial government is not whether they got the price of oil right in their budget.  They’ve been underestimating for years.  This year might be an over-estimate.  In the short-term, they’ve still got lots of budget smoke and mirrors to cover off most of the likely outcomes. There’s no cause for panic, yet.

The problem for the provincial government is bigger than the current price of oil.  Most of this will be familiar to regular readers, but at times like this it is worth pulling it all together in one spot so that people can see the big picture.

Truth in small things #nlpoli

If the truth may be found in the smallest of things, then the shifts and changes in Kathy Dunderdale’s second cabinet reveal a great deal.

“It is very important to me that our government operates as efficiently as possible, while providing quality programs and services that meet the needs of the people of our province,” said Premier Dunderdale. “Re-aligning departments and adjusting ministries to ensure they are best positioned to take on the challenges and opportunities before us is very important.”

Here’s how the official news release laid out the re-aligning and adjusting:

• Combine the old Human Resources, Labour and Employment department with the post-secondary education section of the Education department to create the  Department of Advanced Education and Skills.  The new department will “focus on supplying highly educated graduates and skilled workers for a fast-growing economy.”
• Merge the aboriginal affairs department with the Intergovernmental Affairs department to create the Department of Intergovernmental and Aboriginal Affairs.
• Put the Business department with Innovation, Trade and Rural Development to create Innovation, Business and Rural Development.

This release puts the big information at the back end.  Eliminating the business department ends an eight year fiasco. In effect, the Conservatives created the “business” department in 2003 by breaking off some sections of the industry, trade and rural development department.  Now they’ve just put it all back the way it was, complete with the Beaton Tulk-era Rural Secretariat

After eight years of accomplishing nothing, the Conservatives have just put the economic development resources of government back to where they were in 2003. Danny Williams created the department to give a vehicle for his personal business acumen to create thousands of jobs and single-handedly produce a economic miracle in the province.  Williams did nothing while he was minister of his own department, often going weeks without meeting his deputy minister. He handed it off to a succession of second and third tier ministers like Fairity O’Brien or Paul Oram.  Even someone like Ross Wiseman couldn’t do anything except make speeches and hand out gobs of free cash to private companies.

The result of those eight years is a very fragile economy is is more heavily dependent than ever on government spending. The new minister – Keith Hutchings – has exactly zilch in the experience department when it comes to economic development:

Mr. Hutchings graduated from Memorial University with a Bachelor of Arts, Majoring in Political Science and obtained a Certificate in Public Administration from Memorial, as well as an Occupational Health and Safety Program from Ryerson University in Toronto.

Mr. Hutchings’ professional career has included 11 years with the Workplace Health, Safety and Compensation Commission. He also served as Chief of Staff and Executive Assistant to then Leader of the Official Opposition in the Provincial House of Assembly (1996 -1998) and successfully ran his own consulting business.

The Intergovernmental and Aboriginal Affairs department basically recreates what used to exist 20 years and more ago as the Intergovernmental Affairs secretariat, and adds Labrador Affairs and the non-profit and voluntary secretariat for good measure. The first two are relatively small, functionally oriented sections that could easily be rolled inside the Executive Council where they once lived.  The latter two sections are meaningless political sops that serve only to increase bureaucracy without enhancing service delivery. Dunderdale could have eliminated them entirely while likely improving the overall efficiency of government.

The ministry went to newbie Keith McGrath in order to make sure there was a cabinet minister from Labrador. This reorganization is a minor administrative change.

The new Advanced Education department actually combines the pre-2003 post-secondary education ministry with the department that handled job training programs.  That’s it. 

The organization makes sense if it was aimed solely at ensuring that the provincial job-training resources lined up to meet – belatedly – the labour crunch in the province. 

Adding Memorial University to the mix could severely hinder the university’s development by burying it inside a department aimed at something other than what it does.  Memorial doesn’t exist in order to be a glorified trade school.

This is Joan Burke’s big reward for backing Dunderdale, nothing more, nothing less.

What’s more interesting about the labour market focus of the department is that it won’t include any of the labour relations elements.  They are all part of the provincial government’s traditional function of regulating industry and ensuring a healthy and productive labour relations climate.

But under the most recent re-organization, the Workplace Health, Safety and Compensation Commission reports to the government services department and the labour relations agency reports to the environment department. Such a re-alignment ensures that the “silos” the new minister claims the re-organization would cure remain in place.

In  every other respect and distinct from these three adjustments, the departmental organization stays the same. 

When it comes to who got a new job and who didn’t, those seemingly small points also tell a larger story.

Besides Joan Burke, Susan Sullivan got a big reward for her political loyalty to the Premier. She takes over the health portfolio.  Sullivan may not feel quite so lucky in a few weeks or months – health is a difficult portfolio – but it is the largest department and the one that typically goes to those the Premier holds in high regard. If she does well, Sullivan could become a contender to replace Dunderdale when the Premier leaves before 2015.

Jerome Kennedy’s new gig at natural resources gives him a well-deserved respite from the health minister’s job. Kennedy took over that job at a hard time and navigated the department though some tough times.  he got out of it with both his health and his reputation intact.  That’s a rare achievement.

At natural resources, Kennedy faces the challenge of mounting problems with the Muskrat Falls project.  Kennedy can be a forceful proponent for an argument like Muskrat Falls.  He can also be a diligent house-cleaner when problems occur. if Dunderdale had to kill off Muskrat, Kennedy could handle that effectively too.

In the next four years, Kennedy will also have to deal with the border issue in the Gulf of St. Lawrence and the future of a string of law suits related to the Lower Churchill. 

Danny Williams appointed Kathy Dunderdale to natural resources safe in the knowledge that he was really looking after things.  He didn’t need a minister who understood much and Dunderdale fit the bill.  With Kennedy, Dunderdale has a minister who will – in all likelihood – lead this crucial department in more than name only and take the heightened public profile along with it.  Kennedy could be well set when Dunderdale leaves.

Kennedy’s appointment as Government House Leader is a clear sign the Conservatives are going to approach the legislature with a strong arm and an iron fist.

Darin King took the poisoned chalice of fisheries in the recent cabinet shuffle.  The provincial Conservatives haven’t been able to find a policy they can all agree on.  As a result, the fishery remains a festering political pustule that breaks from time to time, splattering the minister of the moment. King can kiss his leadership aspirations good-bye.

Derrick Dalley got the Conservatives’ community pork portfolio as minister of  tourism, culture and recreation.  He succeeds Terry French who got a quiet and relatively easy portfolio in what is usually the home of ministers on the way into cabinet or those on the way out.

- srbp -

The Fragile Economy: reversing the entrepreneurial drive

In a province that is so heavily dependent on public sector spending, it’s hard to imagine anyone would think that having the government play such a huge role in  the provincial government in the economy would be a great idea.

Step forward the head of the St. John’s Board of Trade:

Chairman of the Board of Trade, Derek Sullivan said government contracts give a competitive advantage for local businesses and “can be a very powerful and reliable revenue stream.”

Talk about throwing the engine of economic development into complete reverse. 

- srbp -

Strategic Social Plan (1995) - Forward

This Strategic Social Plan Consultation Paper initiates the final phase of an intensive Provincial planning process which began more than six years ago. When this Government took office in 1989, we made a commitment to the people of Newfoundland and Labrador to review all economic and social programs and mandates and to develop strategic plans to carry the Province through the turbulent changes of the 1990s into a stronger future in the 21st century.

In the fall of 1990, Government began the first phase of this planning process through a review of economy's strengths and weaknesses, examination of the activities and policies of economic departments and agencies, and the subsequent development of a public consultation paper to provide an opportunity for the people of the Province to have direct input into the vision, guiding principles, and actions that eventually became the Strategic Economic Plan (SEP).

When the SEP was released in June 1992, however, we stressed that it was only half of the planning cess. Economic issues cannot be examined or addressed in isolation from social issues and realities, and it was imperative to move on to the second phase of our strategic planning: the development of a Strategic Social Plan. A Social Planning Group (SPG) of senior officials was established, and on March 4, 1993, the Throne Speech in the House of Assembly reaffirmed Government's commitment to the development of a Strategic Social Plan as the essential and equal partner to the SEP.

During the past three years, the SPG faced many challenges in their task of researching global trends reviewing programs and policies. Unlike economic planning activity, strategic social planning models were virtually unknown, and the Group were for the most part breaking new ground. In addition, they were caught in a maelstrom of social change and reform at both the Provincial and Federal levels, and were obliged to constantly revise data and projections to keep pace with national social reforms and in funding.

Nevertheless, the work of the SPG progressed to the point where relatively stable data could be provided to Cabinet and a consultation paper could be developed. This document is not a final Strategic Social Plan but it is a clear statement of the direction in which Government intends to proceed in terms of providing essential services for the social well-being of our citizens in as effective and efficient as possible. We now invite comment and suggestions from the people of Newfoundland and through the extensive public consultation process which will precede the development of the Strategic Social Plan.

I encourage all citizens, and especially organizations concerned with various social issues, to examine this paper thoroughly and to give serious consideration to the social challenges that are outlined and to the strategies and actions that are proposed. I look forward to receiving the thoughtful views of people throughout the Province as we continue the process of planning our social order for generations to come.

[original signed by]

Clyde K. Wells

-srbp-

To come:  “Introduction and Background”

• Introduction
• Social profile
• Demographic Change and Challenge
• Living in a Different World
• Realities
• Principles
• Vision

Explanatory Note:  The 159 page Strategic Social Plan [SSP] consultation paper is being presented in a series of instalments.  A companion to the 1992 Strategic Economic Plan, it lays out both a clear statement of where the province was in 1995,  the challenges to be faced in the future and policies to deal with those challenges successfully.

Approved by cabinet for release in December 1995, the 1,000 copies of the consultation document were ordered destroyed by the Tobin administration in 1996.  Only a handful of copies survived.

The planned consultation never took place.  Instead, and while something subsequently emerged which was labelled a Strategic Social Plan, the new Tobin administration went down an entirely different road from the one envisaged in the 1995 consultation paper.

Some specific initiatives from the 1995 document did make it into action.  Others did not. Unfortunately, the fundamental approach – the integrated concept – that underpinned the strategy went out the window with the change of administration in January 1996. 

It never returned.

The current state of the provincial government – unsustainable levels of public spending in an increasingly fragile economy – are a direct result. 

In a province facing an uncertain future, where political leaders are devoid of ideas, let alone sustainable or new ones, the 1995 Strategic Social Plan remains relevant.

Traffic Drivers, July 19-23

1. There is a green hill (not so far away)
2. Telly web design sucks, kills RSS feed to popular content
3. Drill baby drill:  Dunderdale rebuffs Quebec concerns about border, offshore oil spills
4. Government website still POS
5. Scientists find new sea creatures near deep water oil exploration sites
6. New 500 MW intertie for NS and NB
7. The Irish Miracle
8. Forever blowing bubbles
9. Fragile economy – the Public Sector
10. Semrau guilty on one count, not guilty on others

- srbp -

"Reality Check" reality check on Equalization and the Family Feud

The crew that put together's CBC's usually fine "Reality Check" can be forgiven if they missed a few points by a country mile in a summary of the Family Feud.

Forgiveness is easy since the issues involved are complex and  - at least on the provincial side since 2003 - there has never been a clear statement of what was going on.  Regular Bond Papers readers will be familiar with that.  For others, just flip back to the archives for 2005 and the story is laid out there.

Let's see if we can sort through some of the high points here.

With its fragile economy, Newfoundland and Labrador has always depended on money from the federal government. When they struck oil off the coast, the federal government concluded it would not have to continue shelling out as much money to the provincial treasury. N.L.'s oil would save Ottawa money.

Not really.

Newfoundland and Labrador is no different from most provinces in the country, at least as far as Equalization goes.  Since 1957 - when the current Equalization program started - the provincial government has received that particular form of federal transfer.  So have all the others, at various times, except Ontario.  Quebec remains one of the biggest recipients of Equalization cash, if not on a per capita basis than on a total basis. Economic "fragility" has nothing to do with receiving Equalization.

In the dispute over jurisdiction over the offshore, there was never much of a dispute as far as Equalization fundamentally works.

Had Brian Peckford's view prevailed in 1983/1984, Equalization would have worked just as it always has.  As soon as the province's own source revenues went beyond the national average, the Equalization transfers would have stopped.

Period.

That didn't work out.  Both the Supreme Court of Newfoundland (as it then was called) and in the Supreme Court of Canada, both courts found that jurisdiction over the offshore rested solely with the Government of Canada.  All the royalties went with it.

In the 1985 Atlantic Accord, the Brian Mulroney and Brian Peckford governments worked out a joint management deal.  Under that agreement - the one that is most important for Newfoundland and Labrador - the provincial government sets and collects royalties as if the oil and gas were on land.

And here's the big thing:  the provincial government keeps every single penny.  It always has and always will, as long as the 1985 Accord is in force.

As far as Equalization is concerned, both governments agreed that Equalization would work as it always had.  When a provincial government makes more money on its own than the national average, the Equalization cash stops.

But...they agreed that for a limited period of time, the provincial government would get a special transfer, based on Equalization that would offset the drop in Equalization that came as oil revenues grew.  Not only was the extra cash limited in time, it would also decline such that 12 years after the first oil, there'd be no extra payment.

If the province didn't qualify for Equalization at that point, then that's all there was.  If it still fell under the average, then it would get whatever Equalization it was entitled to under the program at the time.

The CBC reality check leaves a huge gap as far as that goes, making it seem as though the whole thing came down to an argument between Danny Williams and Paul Martin and then Danny and Stephen Harper.

Nothing could be further from the truth, to use an overworked phrase.

During negotiations on the Hibernia project, the provincial government realized the formula wouldn't work out as intended. Rather than leave the provincial government with some extra cash, the 1985 deal would actually function just like there was no offset clause. For every dollar of new cash in from oil, the Equalization system would drop Newfoundland's entitlement by 97 cents, net.

The first efforts to raise this issue - by Clyde Wells and energy minister Rex Gibbons in 1990 - were rebuffed by the Mulroney Conservatives.  They didn't pussy foot around. John Crosbie accused the provincial government of biting the hand that fed it and of wanting to eat its cake and "vomit it up" as well.

It wasn't until the Liberal victory in 1993 that the first efforts were made to address the problem.  Prime Jean Chretien and finance minister Paul Martin amended the Equalization formula to give the provincial government an option of shielding up to 30% of its oil revenue from Equalization calculations.  That option wasn't time limited and for the 12 years in which the 1985 deal allowed for offsets the provincial government could always have the chance to pick the option that gave the most cash.  It only picked the wrong option once.

The Equalization issue remained a cause celebre, especially for those who had been involved in the original negotiations.  It resurfaced in the a 2003 provincial government royal commission study which introduced the idea of a clawback into the vocabulary.  The presentation in the commission reported grossly distorted the reality and the history involved. Some charts that purported to show the financial issues bordered on fraud.

Danny Williams took up the issue in 2004 with the Martin administration and fought a pitched battle - largely in public - over the issue.  He gave a taste of his anti-Ottawa rhetoric in a 2001 speech to Nova Scotia Tories. Little in the way of formal correspondence appears to have been exchanged throughout the early part of 2004.  Up to the fall of 2004 - when detailed discussions started -  the provincial government offered three different versions of what it was looking for.  None matched the final agreement.

The CBC "Reality Check" describes the 2005 agreement this way:

The agreement was that the calculation of equalization payments to Newfoundland and Labrador would not include oil revenue. As the saying goes, oil revenues would not be clawed back. Martin agreed and then-opposition leader Harper also agreed.

Simply put, that's dead wrong.

The 2005 deal provided for another type of transfer to Newfoundland and Labrador from Ottawa on top of the 1985 offset payment.  The Equalization program was not changed in any way. Until the substantive changes to Equalization under Stephen Harper 100% of oil revenues was included to calculate Equalization entitlements.  That's exactly what Danny Williams stated as provincial government policy in January 2006, incidentally.  The Harper changes hid 50% of all non-renewable resource revenues from Equalization (oil and mining) and imposed a cap on total transfers.

As for the revenues being "clawed back", one of the key terms of the 2005 deal is that the whole thing operates based on the Equalization formula that is in place at any given time. Oil revenues are treated like gas taxes, income tax, sales tax, motor vehicle registration and any other type of provincial own-source revenue, just like they have been as long as Equalization has been around.

What the federal Conservatives proposed in 2004 and 2006 as a part of their campaign platform - not just in a letter to Danny Williams - was to let all provinces hide their revenues from oil, gas and other non-renewable resources from the Equalization calculations.  The offer didn't apply just to one province.  Had it been implemented, it would have applied to all. 

That was clear enough until the Harper government produced its budget 18 months ago. What was clear on budget day became a bit murky a few days later when Wade Locke of Memorial University of Newfoundland began to take a hard look at the numbers.

Again, that's pretty much dead wrong.

It became clear shortly after Harper took office in 2006 that the 100% exclusion idea from the 2004 and 2006 campaigns would be abandoned in favour of something else.  There was nothing murky about it at all. So plain was the problem that at least one local newspaper reported on a fracas at the Provincial Conservative convention in October 2006 supposedly involving the Premier's brother and the Conservative party's national president. That's when the Family Feud started.

As for the 2007 budget bills which amended both the 1985 and 2005 agreements between Ottawa and St. John's, there's a serious question as to whether the provincial government actually consented to the amendments as required under the 1985 Atlantic Accord.

The story about Equalization is a long one and the Family Feud - a.k.a the ABC campaign - has a complex history.  There's no shame in missing some points.  It's just so unusual that CBC's "Reality Check" was so widely off base.

-srbp-

Economic recovery – not exactly as illustrated, part two

cbc.ca/nl is reporting an economic miracle in Grand Falls-Windsor.

That’s the town where the major private sector employer closed its doors and where the provincial government expropriated the mill and hydroelectric assets.

When AbitibiBowater stopped production at the mill in early 2009 there were concerns the town's economy would tank, but that hasn't happened.

This time last year, construction was started on 16 houses in Grand Falls-Windsor, but by this June, work had begun on 60 new homes in the town.

There’s even a comment in the electronic version of the story, the one that aired on the supper hour news, to the effect that uncertainty about the mill kept a lid on development.  Now that things are resolved, as it were, then people are now spending freely.

Well, that’s exactly the same sort of story the Telegram carried back in February;  but then, as now, the story looks more like a contrived bit of nonsense rather than a factual appraisal.

Take for example, the thing about housing and a supposed dampening effect before the mill close din early 2009.

As the Telly reported in February,  there were 118 housing starts in Grand Falls-Windsor in 2008, but only 50 in all of 2009.  You can get links to the Telly story and other details in the Bond Papers post from February.

Based on that, the current number of housing starts in 2010 is only 20% above the 2009 level. And even if the housing starts continued at the same pace and there were another 60 houses built in the second half of the year, that would only match the last year the mill operated.

That wouldn’t be too bad, if it turns out to be correct.  But it sure as heck is a far cry from the idea that people are thinking differently now that the fate of the mill is known.

The potential cause for the resurgence  - such as it is -  can be found in the sources of cash identified in the CBC story:

The town's hospital — the Central Newfoundland Regional Health Centre — is the community's largest employer. It serves people from dozens of communities in central Newfoundland who spend money in Grand Falls-Windsor when they come for health care.

You can add to that a bunch of other government offices moved into to the town under Brian Tobin’s administration and more recently by the Williams’ one.  In other words, the town is now dependent on government spending for its major economic activity. 

And what isn’t coming from government is coming from migrant labour.  That would be former mill workers who are commuting to places like Alberta.

And lastly there’s another source of growth:  retirees flocking home after a lifetime spent working on the mainland.  Nice as that is, those retirees only add to the burden of an economy where there are fewer and fewer people earning a wage compared to those in the so-called dependent portion of the population.

If you look at it, what you see in Grand Falls-Windsor is not the picture of some sort of miracle but rather of the increasingly fragile nature of the Newfoundland and Labrador economy. No amount of spin from a local car salesman can cover over the very real problems that fragility brings for a beautiful community and for the province as a whole.

- srbp -

Audio Update:  CBC Central Morning Show.  Look at around 6:54 for the start.  The intro to one section repeats the “housing boom” – complete with the 16 to 59 numbers -  evidently because someone forgot to do a simple check of the facts.

Just imagine…

For some reason, the Conservative government of Danny Williams wanted to smash Fishery Products International and sell off the bits and pieces.

FPI used to be a large and successful fish processing company based in Newfoundland and Labrador.
Now it doesn’t exist any more and the most lucrative bits and pieces wound up in the hands of people who don’t do much business in Newfoundland and Labrador.

Just imagine if certain powerful interests in the province hadn’t destroyed the company.  FPI might be doing what one of its former competitors is now doing:  trying to buy into the Iceland fish business.

High Liner announced late Tuesday that it made an unsolicited offer worth ¤340-million ($445.4-million) to acquire Icelandic, one of the three biggest value-added seafood processors to the U.S. food service market. It wants the company simply to bulk up its own business.

That wouldn’t normally be front-page news. But in this case, it was the main story in at least two major media outlets. Why? Because Icelandic is owned by a public pension consortium run by the Framtakssjódur Íslands fund. And the owners have excluded the Canadians so far from the takeover process. High Liner piping up publicly was akin to a foreign company telling Iceland’s politicians to smarten up and open up the sales process to more bidders.

There’s a fascinating story in the Financial Post on the whole thing.

The world is only as small as people imagine themselves to be and, for the past seven years, this province has been dominated by people whose vision is incredibly myopic.

The consequences of such limited thinking are all around us, from the fragile economy that worries the cabinet minister who helped create it to this sort of lost opportunity in the fishery.

- srbp -

The Fragile Economy: hard numbers

As labradore has been putting it in a series of posts, the provincial public service in the first half of 2010 comprises 53,780 people working directly for the provincial government, the university and public colleges, health care authorities and public school boards.

That works out to 26.2% of the working people of the province.  That’s double the comparable percentage for all 10 provinces.

And here’s the truly unsettling bit:

In the thirty years in which Statistics Canada has measured public sector employment, the percentage of employed people in Newfoundland and Labrador labour force who are employed in the provincial public sector has never been this high.

Those 53,780 comprise 21% of the entire labour force and, once again, that’s the highest this percentage has been in the three decades that Statistics Canada has been measuring public sector employment.

And they make up about 10% of the entire population of the province.

That’s a pretty sharp contrast to the talk in 2004.  As CBC reported, Danny Williams’ first budget forecast a cut of 4,000 public service positions.  By 2005, that planned cut disappeared. The planned cuts have evidently been replaced with a pretty hefty hiring plan.

Now if the private sector had grown at a similar or greater pace, there wouldn’t be so cause for concern.  As the job numbers show, though, the proportion of the labour force employed in the public sector has grown to an amazing level. in some regions of the province – like, say, Grand Falls-Windsor -  the provincial public service is the major employer.

- srbp -

Traffic Drivers: July 12-16

1. General and master corporal face charges over relationship
2. When will she get the flick?
3. HQ and NALCOR on same side in US transmission play
4. The Fragile Economy:  hard numbers
5. Five years of secret talks…
6. If you could get him for what he knew…
7. The energy hub and the loose wheel
8. September contrasts
9. And it only took a year…
10. Labour Force Comparison – a first look

- srbp -

Brand Failure #nlpoli

In another great service to Newfoundland and Labrador, the country’s leading shit-disturber has translated poll results by Abacus Data into a nice table.

It shows the results for each province across a range of topics.

“Get fiscal house in order” first: analyst

An analyst with the Atlantic Provinces Economic Council told a conference in St. John’s that the provincial government  “has to get its fiscal house in order” before it makes an investment in any version of the Lower Churchill energy megaproject.

Fred Bergman said the province’s net debt to gross domestic product ratio remains among the highest in Canada at 41%.

Bergman is quoted by the Telegram [page four story, Wednesday November 3, not on line] as saying:

“Get your fiscal house in order, get your debt-to-GDP ratio down, get your budget balanced and then you can afford to tackle something like that.”

The Williams administration ran a half billion cash deficit in 2009 and budgeted for a $900 million cash shortfall in 2010.  Budget projections released in spring 2010 do not include any forecast for balanced budgets.

Finance minister Tom Marshall has previously consistently rejected balanced budget legislation.

In its various configurations, the Lower Churchill project could cost anywhere from $6.0 billion to $14 billion.

The following charts show the provincial government’s liabilities and net debt.  The vertical axis is in millions of Canadian dollars.

- srbp -

Related:  “The Fragile Economy: staying the course”

Stat Porn: April’s Hits

The top 10 Bond posts for April [with links fixed]  as determined by the statporn machines at  feedburner.com:

1. Colbert doesn’t RATE (Municipal politics)
2. Rosy with a chance of goofballs (Economic forecasting)
3. Epic Fail of the Week:  prov gov loses to Abitibi…again (The Fubar File)
4. Crisis at Tammany (Municipal Politics)
5. Western Star raises issue of Danny Williams resignation (Provincial Politics)
6. The Abitibi Expropriation:  TARFU (The Fubar File)
7. Dunderdale on Abitibi/Fortis/ENEL Expropriation:  Oops! (The Fubar File) 
8. The Fragile Economy…two steps back (Economic policy)
9. Just shoot me (humour)
10. Labour Force and Employment, March 2007-March 2010  (Economic analysis)

-srbp-

Traffic for 5K and 50 “members”

1. Connie Leadership rigged?
2. Undisclosed risk:  financing the Lower Churchill
3. Connie Leadership 2011:  democratic deficit
4. Connie Leadership 2011:  editorial kick-back
5. Leadership by fiat
6. Connie Leadership 2011:  Persistent Rumour Department
7. Fragile Economy:  finance minister complains about his own policies
8. Pater knows best
9. Is Gerry Byrne completely nuts or what?
10. Connie Leadership 2011:  for the sake of five large and a gang of kids

- srbp -

Political Will and Public Policy #nlpoli

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

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

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

The SIDI simulation included:

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

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

2010: The year in review

For the year-end post, you’ll have to wait until Friday to find out what the readers picked as their favourite stories of 2010.

For today, here’s another view.  Your humble e-scribbler has picked one Bond Papers post or topic from each month as a reminder of the year’s events.  I f you take the time to wander back through the archives, you’ll find all sorts of things from the UFO story that ran among last winter to a couple of posts on education.  There are also posts on the fishery that got some public attention – h/t to CBC’s Fisheries Broadcast.

So much more happened in the province than people seem to remember and the stuff they do remember is often not the most important things.

In any event, here’s the Year in Review:

January:  Spending scandal:  when “facts” aren’t true

February:  Three on one topic:  Deep Throat, Deep T’roat and Deep Throats

March:  The Fragile Economy:  staying the course

April:  Jon Lien:  mensch

May: The search for meaning challenge – yet more unfounded news media claims. 

June:  Roger Fitzgerald’s bias – the House of Assembly is at the point where partisan bias openly displayed by the Speaker is now commonplace.

July:  Calamity Kathy’s story doesn’t add up.  The local media are already praising her political genius.  Here’s another example of how short their memories are or how low are their standards.

August:  Good to the last fish

September:  The politicisation of public emergencies

October:  Breasts:  they’re not just for gawking at

November:  Reversing the entrepreneurial drive

December:  How to win without news media – Part 2

- srbp -

Fragile Economy: now three steps back …and loving it

Not only did the provincial government explicitly refuse to participate in talks that would diversify the provincial economic trade base, its members are proud of it:

PREMIER WILLIAMS: Mr. Speaker, what this government is very, very proud of is we are the only jurisdiction of thirteen jurisdictions in all of Canada who has not gone along with the European Free Trade Agreement which Canada is trying to enter into. We are the only ones who have stood our ground and said we are not prepared to agree unless there are certain conditions. The seal industry, of course, is obviously one; the shrimp tariff is another one. …

But if that wasn’t bad enough, the Premier justified the position by claiming that it had worked in one important respect:

We have been very successful in having the shrimp tariff reduced and, in fact, removed over time. It has made a huge difference to the shrimp industry. [Emphasis added]

The first problem is that “we” – the Premier and his ministers – didn’t have very much to do with lowering the shrimp tariff in the first place.

And the second problem is that “we” did not accomplish this by boycotting important trade talks.

Sure the Premier and his fisheries minister took a much publicised junket to Europe, but there isn’t much sign they did much else except try to take credit for lowering the shrimp tariff back in 2007 before the trade talks were on. Someone else did the work.

By the way, if you take a look at that last link you’ll see this line:

Fishery Products International said about half of its shrimp is exported to the United Kingdom alone.

That would be the same Fishery Products International that had a European trade division “we” helped sell off in the break-up of FPI.

But anyway, not only are “we” no longer one step back, “we” are now not even a mere two steps back.

Provincial trade policy is effectively three steps backward:  headed in the wrong direction, proud of it and then justifying the gross strategic mistake by claiming credit for things the backward-assed policy didn’t do in the first place.

If the first step toward any solution is admitting there’s a problem, “we” are a long way from solving very much when it comes to provincial trade policy.

-srbp-

$8 million government loan to Kodiak under review

The provincial government is reviewing an $8.0 million interest-free loan made two years ago to Kodiak, according to the Telegram.

The cash was supposed to cover the cost of consolidating the company’s Canadian operations at Harbour Grace. As a result, and according to the official government news release, the work force of 170 at the boot plant in Newfoundland was supposed to increase by another 75.

Last week, the company slashed the Harbour Grace operation to 100, blaming a depressed marketplace.

In the government hand-out photo, from left to right, Harbour Grace MHA Jerome Kennedy, Premier Danny Williams, then-business minister Paul Oram and then-innovation minister Trevor Taylor try on some Terra boots at the cash hand-out ceremony in September 2008.

The loan to Kodiak represents more than half the cash the Williams administration has managed to hand out to business since it announced its cash give-away programs in 2007.

Out of $75 million in total budgeted for the business attraction fund since 2007, only $14 million has actually been announced. In the first year, the government spent not so much as a penny of the $30 million initially budgeted. As the Telegram’s Rob Antle noted:

Other pots of cash set aside by the department to generate economic activity in the province have had similarly little take-up.

A "special initiatives" fund has doled out just $4 million of a budgeted $19.5 million over the past three years.

The department has budgeted an additional $7.75 million for special initiatives this year.

-srbp-

Related – The Fragile Economy series:

• Staying the course
• Reductio ad argentum
• …and two steps back

When the quota of good news meets a failure to perform

The provincial government’s business department issued a news release today crowing about an estimated increase of the province’s population by a mere 96 people.

To see the business department’s stunning record of success to date, check out the list of news releases for 2010 or read about the fragile economy.

What will they say when the recovery sets in and outmigration resumes once more?

-srbp-

Fin minister Tom Marshall talks debt reduction - audience pees in pants with stifled giggles

According to voice of the cabinet minister, provincial finance minister Tom Marshall is interested  - again – in talking about the provincial debt.

Here’s a excerpt from the VOCM online story, quoted here since it may have been disappeared by the time this gets posted:

Marshall proposes several measures in doing so. First, the government needs to balance sustainable and prudent spending with the implementation of steps to lower taxes and net debt. He says the province has to maximize the benefits from its non-renewable resources now so that it is prepared for when they are depleted. Finally, he argues that it is important to diversify the economy, such as focusing on the Lower Churchill Project.

Marshall’s talked about sustainable spending before but only to the extent of making clear he wasn’t the teensiest bit interested in actually doing it. In fact, Marshall’s record is of a profligate spender who never met a deficit he didn’t like.

And just to get the point across, note that current provincial gross debt is about $12 billion.  That’s roughly where it’s been for the past four years and it higher than it was in 2003 when Marshall and his crowd took office. 

Tom mentioned lowering the net debt.  Well in order to do that he’d have to stop overspending as he’s done the past two years.  According to the most recent financial statements, the province’s net debt went up in 2009 and it is set to go up again in 2010 (the current fiscal year) if current trends hold.

So while that whole “sustainable and prudent spending” thing is a great objective, Tom and his friends haven’t done it yet.  After seven years, Tom’s got to have cajones the size of watermelons to talk about debt reduction and fiscal responsibility with a straight face, expecting the people in the province to take him seriously.

Ditto the part where he talks about maximising benefits from oil and minerals.  Tom and his former boss specifically rejected any suggestions to set aside sovereign wealth funds, real debt reduction and any other ways to accomplish the goal of putting the money from oil and minerals to work for the future.

And double ditto for the bit about diversifying the economy.  The current fragile state of the provincial economy is a direct result of provincial government policy since 2003. 

That leaves the Lower Churchill.

Reducing net debt, right?

Okay, Tom Marshall’s current plan is to force taxpayers to borrow at least $3.0 billion and put a total of about $6.0 on the provincial government’s gross debt load.

Tom also wants ratepayers in the province to accept electricity rates roughly double what they are currently to pay for electricity.  Can you say “uncompetitive” boys and girls? 

And he’d like to ship power free to Nova Scotia for 35 years.

Surplus power would enter the market at uncompetitive rates so the chances of export are pretty much slim and none as it now appears.

Given all that’s going on in the province and what Tom Marshall and his pals have actually done since 2003, the finance minister’s audience on Thursday must have peed in their pants with stifled laughter as he rambled on.

Surely no one would take Tom seriously, not with all the evidence against him.

- srbp -