Conflict, schmonflict

In a media scrum today, Premier Danny Williams said that finance minister Loyola Sullivan will no longer be part of any cabinet discussions with respect to Fishery Products International and the proposal by Barry Group to take over FPI's assets in the province.

Sullivan's brother is Karl Sullivan, a senior executive with Barry Group.

Apparently, the Premier suddenly noticed the relationship between his finance minister and the Barry Group. It doesn't appear to have been an issue when the government provided Barry group with loan guarantees, when Barry Group stepped into the Harbour Breton schlamozzle or, for that matter when the Premier and his fisheries minister pushed to get Barry's seal oil capsules back on the shelves at Costco.

No word today though on how the province will deal with any financial implications of the FPI mess since the finance minister has removed himself from the files.

But anyway, since the provincial government appears in the mood to address conflicts of interest when dealing with the Barry Group, what about the relationship between
fisheries minister Tom "Toque" Rideout and the same Karl Sullivan, brother of the finance minister?

Karl was chief of staff to Tom Rideout for the 43 days Rideout was premier. He also served Rideout as deputy minister of fisheries back in the 1980s.

Who gives a turbot's fingernails if Karl and Loyola share the same parents when the cabinet minister in charge of the FPI file - Tom Rideout - has a long-standing relationship with one the Barry Group's senior executives?

Maybe it's time for Danny Williams to find a new job for Tom Rideout too.

Rain Man drippy

I'm a strong believer that every cent of money that was received inappropriately should be paid back. It's taxpayers' money.

That's a quote from finance minister Loyola "Rain Man" Sullivan (left, looking a tad dyspeptic) speaking about overpayments allegedly made to current and former members of the House of Assembly.

But here's the thing: while no sane person would disagree with Sullivan's comments, every sane person in the province wonders about the comment coming from the individual who sat on the House of Assembly's Internal Economy Commission for a good chunk of the overspending period. Sullivan's tenure included the time of some of the worst overspending, if we accept at face value the Auditor General's reports.

As such he knew or should have known what was going on. If he didn't, then we need to know why he didn't.

Sullivan's comments get a little more odd - if that's possible - considering that for two of the years involved he served both on IEC and as finance minister. As such he had financial reports coming to him from both the House of Assembly and from the province's Comptroller General. Some of us would like to know given that situation how Sullivan was blissfully unaware of the alleged financial improprieties.

Let's not even get into having Loyola explain how he could present grossly incorrect figures to the House of Assembly for two budgets in a row. The real figures - eventually released in the official Public Accounts - showed total overspending in members' allowances in the legislature of more than $1.0 million in 2004 and 2005 combined. Loyola's Estimates showed members' allowances as being exactly on budget.

Methinks the Rain Man is all wet.

Aliant Animus

A snippet from the files:

March 10, 2006

Finance Minister Loyola Sullivan says Aliant's decision to become an income trust will mean the loss of corporate tax revenues for the province. Some reports suggest the four Atlantic provinces could lose as much as 49 million dollars. Under an income trust, taxes are paid by shareholders who could live anywhere. Sullivan says he knows how much the province will lose, but he can't disclose the figure publicly. Sullivan says they don't know yet when the income loss will be felt.

A check with some other sources suggests that the GRAP cable deal may have been kicking around the Confederation Building but it didn't get to cabinet before Rain Man Sullivan made these comments.

Nope.

It might have been a few weeks later and it might be sheer coincidence but the correlation is interesting.

Maybe there are some cabinet meeting notes - only to be released decades from now - that document the Premier's endless rantings about the evil Aliant empire and how it must be destroyed.

Maybe, there is a reason some people report seeing sheets and sheets of drywall moved to the 8th Floor after hours and only garbage bags with broken plaster coming out. (Lots of ceilings to replace as The Furor's head goes through them more often than usual these days, methinks.)

Don't underestimate the power of commitment to a petty insult to an old monopolist. Go back over the explanations offered by the provincial cabinet, notice the lack of concrete details being used to support the $15 million in spending, notice the curious timelines and then consider the Sullivan comment.

It all starts to make sense.

Suck it up, buttercup #nlpoli

Ocean Choice international is a local fishing company.  The key players in the company are from the Sullivan family.

You will recall one member of the family -  Loyola  - was a key cabinet minister in the Tory administration that started in office in 2003.  He is now used to be a federal fisheries ambassador.

Another offshoot of the family served as chief of staff to Tom Rideout – right, exactly as illustrated -  for the 43 days the fellow was premier.

Ocean Choice International, as a company, profited hugely while Tom was fisheries minister under Danny Williams.  The provincial government interfered left, right and centre in the fishing industry.  Rideout seemed to have it as a personal mission to torture one company - Fishery Products International  - to death. 

Rideout ranted about the company in every venue he could find .  Danny Williams joined in the assault.  Rideout started a prosecution against the company for supposed illegal export of fish from its Marystown plant for processing overseas. 

Williams and Rideout pushed changes to the law governing FPI through the House of Assembly to make running the company much more difficult than it already was given the unwarranted political attacks Williams, Rideout and the rest of the Tory administration waged against the locally-based international fishing company.

Ultimately, Rideout and Williams succeeded in smashing FPI to bits.

The profitable stuff, like the FPI brands, the marketing arm and an overseas subsidiary wound up going to fishing companies outside the province.

OCI scooped up a bunch of fish plants, some other odds and ends and the FPI headquarters Building in St. John’s with its large, beautiful boardroom.  OCI sold the building very shortly afterward. 

As the Telegram reported at the time:

According to a conveyance filed at the registry, OCI got $3.335 million for the building, located at 70 O'Leary Ave. in St. John's.

The buyer is Deacon Investments Ltd., whose sole director is local businessman Dean MacDonald.

OCI’s Martin Sullivan spoke to a board of trade luncheon on Tuesday.  Sullivan whined and moaned about the state of the province’s fisheries.  He bawled especially big tears over the heavy hand of government interference.

According to the Telegram’s account of the speech, “Sullivan pointed to yellowtail as an example” of the problems with government interference in processing and marketing.

This is an especially rich moment.  processing yellowtail flounder in China was a key part of Rideout’s ongoing persecution of FPI.  Ocean Choice and the Sullivans swooped in to take up the bits of FPI Rideout shook loose. 

A couple of years later Sullivan and OCI found themselves in exactly the same place FPI was. The provincial government is shagging around with the company over the exports yet again. 

No one should shed any tears over OCI’s current predicament.   They who live by the unholy sword of government interference can’t really expect sympathy when they start getting the same shaft right up to the hilt.

People like Sullivan who represent the fishery of the past ought not to have any say in determining the fishery of the future.  That is, not unless Martin and his friends are willing to compensate the public treasury for the occasions when they profited from the interference he now bitches about.

Otherwise, Sullivan and his compatriots and just suck it up and leave the future of the fishery to other people who have an ounce of credibility.

- srbp -

Related:  Liberal fisheries critic Jim Bennett wants equal time at the board of trade to rebut Sullivan largely with a dose of the same thinking that helped create the current mess.

What the crowd at the board of trade – proponents of the Maximum Government Interference school of free enterprise thinking – have already heard it all before.

What the board of trade could use is a dose of some original ideas, even if they wouldn’t like them.  That’s the only way we might build a successful fishery of the future.

Conservative tiff-any candidates

Take a look at the list of Conservative candidates in Newfoundland and Labrador, including a couple who haven’t formally declared yet but whose names are out there:

• Jerry Byrne
• John Ottenheimer
• Peter Penashue
• Fabian Manning
• Loyola Sullivan
• Tom Rideout
• Trevor Taylor

Okay, so drop off the first two and it might be easier.

No, it isn’t that they are all former provincial Conservative cabinet ministers.

That’s too easy.

Try again.

Give up?

They all pissed Danny off and/or left cabinet under strange, strained or unexplained circumstances.

2005: Danny orchestrated Fabian Manning’s political lynching in domestic politics right down to  - reportedly - having one of his staffers sit in on the caucus meeting in which the rest of them showed their loyalty to the Capo by figuratively shooting their friend between the eyes. Kinda hard to hide that rift.

2006:  Loyola Sullivan quit cabinet and politics suddenly in December 2006. A few days after he flipped Danny the finger, Loyola wound up telling CBC that there as no rift between him and Danny.

2008:  Peter Penashue never showed enough “respect” as far as Danny was concerned:

Williams said he doesn't like ultimatums, especially when they are tied to multibillion-dollar developments, and are made on the airwaves instead of at the bargaining table.

"Peter Penashue and his group should treat us with respect, as we treat them with respect," he said.

2008:  Former Premier Tom Rideout bailed on provincial politics in a pretty obvious tiff with Danny Williams.  Supposedly the two fell out over road paving. A few people thought the road paving thing was a pretext for something bigger.

2009:  Trevor Taylor, former federal New Democratic Party candidate, joined Danny Williams’ Conservative crew in 2001.  He left politics suddenly in September 2009, citing “personal reasons.”

Bonus if you can identify two more tiffs related to these candidates and Danny.

- srbp -

Harper's real view of the 2005 offshore deals

From the federal budget document Restoring fiscal balance in Canada: focusing on priorities :

Concerns Over Funding Arrangements
Targeted to Address Specific Regional Needs

The confidence of Canadians in the overall fairness of federal programs has been undermined in recent years as the result of federal actions that were seen to be departing from the principle of comparable treatment of all Canadians and their provincial and territorial governments. In particular:

* The February 2005 agreements to provide Nova Scotia and Newfoundland and Labrador additional fiscal Equalization offset payments sought to address the severe fiscal challenges faced by those two provinces as a result of their high public debt, but were widely criticized as undermining the principles on which the Equalization program is based. ... [p.43]

The current federal administration makes it plain that the 2005 offshore deals were outside the normal pattern of federal transfers to provinces. There is no indication of how the federal government will address the anomaly caused by the deals, but there should be no mistake that it is on their radar screen.

Loyola Sullivan likes to assure us all that the provincial treasury will be protected by the proposed Harper changes to Equalization. Those changes have to happen first and we have to see what they will look like before anyone can make a judgment about whether the 2005 deal was worth $2.0 billion or whether it will be worth more.

The differences between Danny Williams' views and those of Loyola Sullivan were assessed in February 2006 by the Bond Papers.

Danny and Loyola are not on the same page.

Payback is a mother

[Originally posted 06 Dec 06.]

Ok.

So if Auditor General John "Baubles" Noseworthy thinks that everyone he has accused should automatically pay back the amounts he has identified, let's up the ante.

Premier Danny Williams had it right. If due process - something Noseworthy clearly knows nothing about - determines facts and responsibility, then there are legal means to recover any money misappropriated. The Premier correctly said that we should all let the process work.

If Noseworthy turns out to be right, then yeah the people involved should make restitution. All of 'em, including the people on the Internal Economy Commission Noseworthy seems reluctant to discuss for some inexplicable reason.

But only after due process.

On the other hand if it turns out Noseworthy conducted as fundamentally flawed a set of audits as Bond Papers would contend - incompetent might be a better word - then let John dig into his bank account and repay to the people of Newfoundland and Labrador every red cent spent since he made his first accusation.

It's only fair.

________________________

Update [07 Dec 06]: Apparently Loyola "Rain Man" Sullivan, minister of finance and oddly enough a guy who has much to answer for in this scandal himself, hasn't consulted Danny Williams on recovering money. Sullivan told news media he already has an "office" looking into collecting the cash.

Sullivan was a member of the Commission of Internal Economy during much of the period when overspending took place. Sullivan spoke in support of changes to the IEC legislation in 1999 that Auditor general John Noseworthy has criticized. IEC is an executive committee of the legislature responsible for approving budgets, budget over-runs and generally overseeing House operations.

It is odd that Sullivan wasn't aware not only of the overspending Noseworthy found but also the half million dollars overspent by members of the legislature in each year since Sullivan has been finance and a member of the IEC.

Both Sullivan and Noseworthy knew about that overspending and approved it. Incidentally, Noseworthy only accounted for $200K of the total for '04 and '05. Noseworthy still hasn't explained the other $800K in overspending for those years.

Update Update: And then there's the rest of the cash. Not only has Auditor General John Noseworthy cost taxpayers the better part of a million bucks on his "audits" thus far, CBC Radio is now reporting that Chief Justice Derek Green and his retinue of part-time lawyers and researchers has set the public back about $600,000 for their review designed to recommend a new set of rules for pay and allowances for members.

Green is almost finished his report; he has committed to getting the paperwork handed in by the end of January. Noseworthy said this week the rest of his "audit" will take well into 2008. Noseworthy's office alone will wind up costing taxpayers more than he allegedly found in overspending by members. All told, taxpapers will be lucky if the total tab resulting from Noseworthy's allegations doesn't exceed the $4.4 million he alleges was diddlied.

In the meantime, we still don't have current Public Accounts and Noseworthy still hasn't explained the overspending that occured in 2004 and 2005.

Does the AG get paid by the hour?

Mr. Williams Goes to Hell #nlpoli

The story of the 2004 war with Ottawa is the story of disconnects,  mismatches, incongruities, of things that just didn't add up.

October 2004 is a good example.  In the middle of the month,  Loyola Sullivan,   the provincial lead negotiator, went to Ottawa for a meeting with federal finance minister, Ralph Goodale.  he headed the negotiations for the federal government in the effort to find a draft agreement.

Sullivan told reporters the chances of a deal looked good.  The two governments were talking about something that would last eight years and bring the provincial government between $1.4 and $2.0 billion depending on the price of oil.

At exactly the same time, Premier Danny Williams was telling reporters the provincial position had not changed.  "There are no movements from the government of Newfoundland and Labrador,”  Williams told Rob Antle of the Telegram on October 16.  “There's no doubt about.that. We have no intention of moving.”

A bird in the hand

Loyola Sullivan was right.

On the same day Sullivan resigned, he was quoted by vocm.com as saying that Newfoundland and Labrador needed steady economic development.

Turns out Sullivan was the smartest person in the provincial cabinet, a guy with a genuine strategic insight into the province's needs.

Sullivan's comment reflects an understanding that an economic bird in the hand is worth two in the bushes. Economic development - like Hebron and Hibernia South - puts cash, lots of cash in the provincial treasury. It also creates a climate of optimism that encourages other business development and job creation all of which magnifies the economic impact of the development itself.

Beyond that, economic development staunches the flow of young, skilled workers out of the province. Demographic projections for the past decade have shown this province will experience a steady decline in population. At the same time though, the average age of the workforce is increasing and inevitably there will be fewer people producing in the economy than there will be retired people. Those retired people need health care, among other things, and without steady economic growth, it will get harder and harder for the provincial government to pay for the increased costs.

Newfoundland and Labrador is not alone in Canada in facing that prospect. It's just that here, and interestingly in Quebec, as well, the economic consequences of demographic shifts will hit hard.

Really hard.

Unless there is sustained economic development.

Today's announcement on apprenticeship registration and qualification is effectively an admission of the folly of a public policy that repeatedly scorns economic development solely for the short-term political gain. Brian Tobin's "not-on-teaspoon" on Voisey's Bay was bad enough; Danny Williams now applies the same pernicious policy to the entire economy.

The new apprenticeship policy will allow young men and women in skilled trades to gain credit for their work in Alberta toward journeyperson papers in this province, provided they retain a permanent residence in this province.

If there was economic development in Newfoundland and Labrador, those young people would already be here. They'd be building the gravity-base system for Hebron. They'd be working at the Long Harbour smelter, and as those projects wind down, they'd be off to Labrador to build the Lower Churchill. [And at Hibernia, we'd be that much closer to 30% royalties instead of the 5% we now receive and will continue to receive for some time more.]

Instead, they are streaming to Alberta in near-record numbers to find high-paid jobs in an economy that is in danger of melting from the heat of activity.

The new policy announced today has nothing to do with developing the local labour force, despite the claim in the government's news release. Any young person who qualifies for the program will be importing personal income taxes to this province from work done in Alberta. They will also count toward this province's Equalization entitlement, and coupled with any success Danny Williams might possibly have on that front, we will wind up drawing cash from Alberta's economy to prop up our own government.

All of that is obviously in lieu of developing our own economy in a sensible, orderly and strategic way. It is diametrically opposite to the goal of every Premier in this province since Confederation and virtually every prime minister in the country before that to develop a prosperous, diverse local economy.

What Premier - Liberal or Conservative - has wanted to stay on the federal hand-out rolls?

Not a one.

Save Danny Williams.

Any other Premier would have hailed the lowering of Equalization payments as one step away from the ignominy of dependence on Uncle Ottawa. News the provincial government will get less Equalization hand-outs this year, even without a changed system, would be celebrated with a holiday. The decrease is caused by one thing alone: the development of our own economy to the point where we actually don't need to suck the public tit on the Rideau. We would be one step closer to becoming a "have" province.

Imagine if you can, the psychological impact of that success.

Imagine the impact such an achievement would have on the people of Newfoundland and Labrador who, after three years of Danny Williams' supposed successes still think of themselves as poor, abused, downtrodden.

Imagine the genuine pride from having a Newfoundland and Labrador Premier delivering a speech - for the first time in almost 60 years - in which his or her province had joined the ranks of Alberta, Ontario, and latterly British Columbia and Saskatchewan.

All you can do these days is imagine such a goal.

Instead, the premier is travelling across the country trying to drum up some support for increasing his province's dependence on economic success somewhere else. At home, his ministers are announcing policies designed to put a poultice on a self-inflicted economic head wound.

But what young man or women, with a bright future and a highly-paid job in Alberta, would opt to become a glorified migrant labourer?

Likely not many. Far cheaper and far better to go where the work is and stay there. If something turns up at home, then make that decision when it happens.

All Newfoundland and Labrador's government can offer these days are unbelievable claims like the one in the news release:

There are emerging economic opportunities in Newfoundland and Labrador in large-scale development projects such as Lower Churchill, Voisey's Bay and Hebron Ben Nevis, among others. The provincial government is exploring all options to ensure Newfoundland and Labrador is building a qualified and skilled workforce that meets industry demands.

The young people likely to be affected by this policy know full-well that beyond the smelter at Long Harbour, the other projects listed are possibilities - not probabilities - in the unknown future.

They are birds in the bush.

And what they know, being the smart young men and women they are, is that a bird in the hand is infinitely better.

Too bad someone else doesn't understand that as well as they do.

What Danny wants.....

For every person in Newfoundland and Labrador who claims to stand solidly behind Danny Williams in his efforts to change the Atlantic Accord, there is a different version of what the premier wants. For some it is to get "our" share of the offshore, as if the Atlantic Accord doesn't exist. For others it is fixing a problem with the Accord. For still others it is to get "our" revenues plus a bit more besides to help out.

For Loyola Sullivan, it now seems to mean reparations for every possible slight the province has received or every bad deal we negotiated. Compared to the Upper Churchill deal, the Versailles diktat was a minor annoyance.

Odd then that the Premier told the House of Assembly last fall that there was no need to debate the Accord in the House because "we know what we asked for...".

That's an odd comment, because, as you will see below, there are actually three different versions of what the Premier asked for. Just so that his supporters don't suddenly turn blue with rage, rest assured that the three versions are accurate and based on official documents.

The following information comes from four sources:

- the Progressive Conservative policy manual, the so-called Blue print;
- correspondence with the Government of Canada, released by the provincial government through Freedom of Information requests and news releases;
- media interviews by Premier Williams and others; and,
- provincial government news releases

At the outset, it is important to recall two aspects of the Atlantic Accord in particular.

First, the provincial government gained the right under the Accord to set its own revenues from offshore production as if the resources were on land, that is as if they were "own-source" revenues. This includes royalties. The provincial government receives 100% of the revenues it has set without any reduction; in Fiscal Year 2004, the provincial government will receive at least $300 million in direct revenues from offshore oil production [Williams to Martin, May 26, 2004 attachment "Offshore revenue, existing offsets and proposed offset"; mid-year financial statement by Hon. Loyola Sullivan]

Second, the Atlantic Accord provides that Equalization will apply to these revenues. As such, as provincial own-source revenues grow, the amount of Equalization top-up declines. The Accord does provide an Equalization offset that effectively shielded some revenues from the Equalization calculations. It is clear from the Accord itself that this was intended to be a temporary, declining offset. ["The Atlantic Accord: memorandum of understanding between the Government of Canada and the Government of Newfoundland and Labrador on offshore oil and gas management and revenue sharing", 11 February 1985. www.cnopb.nfnet.com/publicat/reg/aa_mou.pdf.]

This interpretation is confirmed by comments made by John Crosbie in a 1990 interview with the Sunday Express. Commenting on the claim that the Accord reduced the province's Equalization entitlement due to growing provincial government revenues, Mr. Crosbie said:

"That's the whole point to the [Equalization] formula... This is nothing to complain about; this is something to be joyous about. So why would they try to pretend that Newfoundland gains nothing from the royalties? I mean this is absolutely bloody nonsense..." [Philip Lee, "Newfoundland, Ottawa clash over Atlantic Accord royalty provisions", The Sunday Express (St. John's), 23 September 2004,]

With that background, let us now turn attention to Premier Williams' proposals.

Danny Williams: Premier in Waiting, October 2003

The Blue Book (www.pcparty.nf.net) contains no reference to changes to the Atlantic Accord.

Rather, it commits a Conservative government to seek changes to the entire Equalization formula so that revenues from non-renewable natural resources are removed from the calculations.

The Blue Print also states that:

"[i]n exchange, we will commit, in a formal federal-provincial agreement if necessary, to spend non-renewable revenues to modernize economic infrastructure in the Province and to bring down the provincial debt, so that future generations of Canadians living in this Province will continue to benefit long after the resources are used up." [Emphasis added]

Danny Williams: January - June 5, 2004

Premier Williams met with Prime Minister Martin in Ottawa on December 18, 2003 and again by telephone on January 6, 2004. The Premier follows up with a letter to the Prime Minister on the same day. He described the province's fiscal position and the government's plans to address the problems. Included in that letter is the following statement:

"Simply put, the ability to invest 100% of our Atlantic Accord oil revenues in economic infrastructure and in paying down our debt would go a long way to helping Newfoundland and Labrador stand on its feet in the long term." [Williams to Martin, Jan 6, 2004]

The Prime Minister replied on January 27, 2004:

"With regard to the Atlantic Accord, as I stated on January 6, 2004, the Government of Canada is open to discussing the issues related to offshore resources. However, it is imperative that these discussions be based on the principle of fair treatment across the country." [Martin to Williams, Jan 27, 2004]

Some details of the provincial position were contained in a slide presentation made to John Efford on February 27, 2004 and titled "Proposal for new Atlantic Accord offset mechanism". This appears to be the only written version of the proposal, except for a similar slide presentation made available to news media and tabled later in the House of Assembly.

The presentation focuses on changes to the Equalization offset provisions contained in the original Atlantic Accord. These were intended as temporary, transitional grants to the provincial government designed to offset losses in Equalization as provincial own-source revenues grew from oil production. The original offset nominally shielded a declining amount of provincial revenue from Equalization calculations.

An assessment of the original offset prepared by Wade Locke in 1991 concluded that the original offset provisions actually shielded only 3% of revenues from Equalization including the offset payments. [Wade Locke, An examination of the equalization protection provided under the Atlantic and Nova Scotia Accords, (St. John’s: Memorial University Institute for Social and Economic Research, 1991) ]

Slide 9 from the February 27 presentation contains the following points:

- Replace the existing offset provisions [Editor's note: due to expire in 2011/2012]
- New offset mechanism
- Provide a payment equal to 100% of the net direct provincial offshore revenue
- Net Direct Revenue
- Royalties and Corporate Income Tax which is generated in the NL offshore area, less the equalization clawback (currently at 70%)

There is no specific reference to a time period for the new offset, although a bullet point on Slide 10 states that the new mechanism would provide "benefits over a longer period". The original Accord offset mechanism shielded 100% of revenues but only for the first four years. As noted above, the original Accord offset provisions expire in 2011/2012 and shielded less revenue from Equalization than indicated in the slides.

The Chretien administration provided a new Equalization offset option to the provincial government in 1993, one that shielded more revenue than the original Accord and did so for the duration of oil production. This is the so-called generic option which shields 30% of oil revenue from Equalization calculations; in other words if oil revenue is $100 million, then only $70 million is used to determine the provincial government's per capita fiscal capacity.

The Premier's commitment on using revenues for debt reduction and infrastructure is repeated in a letter to the Prime Minister on May 21, 2004. Another letter on May 26, 2004 to the Prime Minister contains Slide 9 of the deck presented on February 27, 2004.

The provincial government's position can be summarized as follows:

1. A new offset mechanism that provides the provincial government an amount equal to 100% of direct revenues in addition to direct revenues.

2. Direct revenues are defined as royalties and corporate income tax. [Note that under the Atlantic Accord, provincial government direct revenues comprise six separate types, including royalties and corporate income tax. There is no explanation for this apparent mistake on the part of the provincial government.]

3. The money would be used for debt reduction and infrastructure development.

4. The time frame is unclear. It can be read as meaning seven years (replacing the existing offset) since the time frames match and the doubling up of revenues replaces the Accord's original offset with a concept that "benefits over a longer period" (12 years total versus four years).

Danny Williams: June 10, 2004 to current

The Premier and Prime Minister spoke by telephone in a now infamous conversation on Saturday June 5, 2004. Fully five days later, the Premier wrote to the Prime Minister ostensibly to confirm the agreement. His letter contains the following statement of the provincial proposal:

"The proposal my government made to you and your Minister of Natural Resources provides for 100% of direct provincial revenues generated by petroleum resources in Newfoundland and Labrador Offshore Area [sic], to accrue to the government of Newfoundland and Labrador and be sheltered from the clawback provisions of the Equalization formula, (currently at 70%). Direct provincial revenues include royalties, provincial corporate income tax, and fees forfeitures and bonuses. Our proposal is for the current time limited and declining offset provisions in the Atlantic Accord to be replaced by a new offset provision continuing over the life of the offshore petroleum production which would provide a payment equal to 100% of the amount of the annual direct provincial revenues which are clawed back by the equalization program."

This may be summarized as follows, with the changes being obvious:

1. The offset is in addition to provincial direct revenues, as previously proposed.

2. Direct revenues are defined more accurately.

3. The commitment to direct the added revenues to specific purposes has been removed.

4. The duration of the offset is clearly stated as being for the life of production.

Several points are worthy of note beyond the obvious changes.

First, no provincial government currently enjoys or has ever received this type of transfer from the Government of Canada.

Second, this proposed "offset" would continue irrespective of whether or not the provincial government qualified for Equalization transfers. In other words, under the revised Williams' proposal the provincial government would receive an amount equal to 200% of its direct revenues (direct revenues + new transfer) even after the provincial government's fiscal capacity met or exceeded the national standard used for judging Equalization entitlement.

Newfoundland and Labrador is forecast to be off Equalization, that is to become a "have" province within the next three to five years, based on economic growth, oil prices and development of Voisey's Bay and Hebron. Under the Williams revised proposal, Newfoundland and Labrador would receive federal transfer payments to which no other province is entitled, unless Nova Scotia attains the same "have" status.

The Premier has implicitly acknowledged this interpretation in several media interviews. He no longer refers to an Equalization offset but to a new type of offset designed to "keep us whole". Premier Williams explained it to Carole MacNeil of CBC Sunday in this way during an interview in October 2003:

Williams:...What the issue is, once we get to equalization, the equalization border - the five province standard - once we get equalized, we are not asking for equalization. That's where the misunderstanding is: we are saying that once our revenues get to a point where we no longer need equalization, we don't want it. We'll be the same as every other province that gets equalization - New Brunswick, Prince Edward Island, Nova Scotia. What we want, though, is the right, after we equalize, to keep 100% of our revenues, our provincial royalty revenues. The cap prevents us from doing that. (...)

MACNEIL: Until you're equalized.

WILLIAMS: No, no and beyond, because why should we get less than 100% of our revenues after we're equalized? [The full transcript of this interview may be found at www.cbc.ca/sunday/williams.html]

It must be noted that the Premier's reference to the cap, the use of the Ontario fiscal capacity from the October 2004 federal offer, is completely erroneous.

Under the Atlantic Accord, the provincial government continues to receive its own revenues, including royalties, in their entirety until oil and gas production ceases. There is no mechanism by which those revenues are reduced, nor has one ever been proposed. All that would occur once the provincial government is "equalized" is that the Equalization transfers would cease. Provincial government own-source revenues, including oil and gas revenues, continue unaffected. The cap was merely a mechanism by which the federal government proposed to calculate the added transfers in addition to Equalization and direct revenues and determine a cut-off point for what was originally an offset to Equalization losses. The Premier's convoluted language in the MacNeil interview appears to represent, among other things, an attempt to reconcile his pre- June 5 position with his current one.

Third, the provincial government proposal on June 10 eliminated its own condition on how the added transfer would be spent.

Conclusion

The provincial government proposal on Atlantic Accord changes have gone through at least three substantive alterations. The provincial government's contention that its position has been consistent flies in the face of direct evidence.

The changes are not inconsequential. The Government of Canada must always be mindful of the impact of special arrangements with individual provinces on its relations with the others. It must also be mindful of the financial implications of such arrangements. Quebec, for example has been seeking special treatment of the parental leave program within Quebec all at federal expense. The federal government under Jean Chretien rejected the concept out of hand.

The revenues being transferred, especially under the revised proposal, are not provincial revenues. They are federal revenues collected within Newfoundland and Labrador to sustain federal government programs and services. Historically, in this province, the federal government has provided almost half of the money the provincial government uses to provide services that are exclusively within the provincial government's constitutional jurisdiction. In the current fiscal year, for example, the provincial government will receive an estimated 75% of all provincial and federal tax-type revenues in the province through its own sources plus Equalization and other transfers. The Williams' revised proposal (post-June 10) would see that situation continue, contrary to the basic principles of the Equalization program to which John Crosbie referred.

Irrespective of the position one takes on proposed changes to the Accord, it is clear that the Williams administration has changed its position at least three times. Perhaps most strikingly, in light of continued references to the province's supposedly unprecedented financial situation, the government's own commitment on how the money would be spent has been dismissed

The crux of the current impasse may well be that the federal government is working to meet the original Williams proposal, something that is attainable in the context of the Constitution and historical federal-provincial fiscal relations. In the meantime, the Premier has committed that he "will not say yes to less" than his revised proposition.

An irresistible force may well have met an immovable object.

Jack's Math - revised and revised again

Ok, I may have misheard this clip today, so I will check it out and post a correction if need be. [Yep, I did. So I bought The Telegram today and got a better set of quotes.]

Jack Harris, the province's New Democratic Party leader issued a news release today calling on the government to bring some good news in the upcoming budget. He noted, among other things, that the offshore deal just announced will mean the provinces books will be balanced on a cash basis this year and that over the next eight years provincial government oil revenues will be a total of about $4.6 billion. [He said $4.9 billion, and I gather he was referring to the offsets if we go the full eight years in the first offset phase.]

Excuse me, Jack? I must have misheard you. [Yeah I did, but actually what he actually said doesn't change the rest of this post.]

Even before a deal was signed the provincial government estimated its direct oil revenues would be a total of $4.94 billion. That's the total from October. When Wade Locke added up his numbers based on US$32 per bbl (barrel), he came up with an eight-year figure of $5.2 billion.

Now that was without any new cash from Ottawa.

So, Jack, if we add the $2.0 billion in the new cash, the provincial government is going to have about $7.0 billion over the next eight years. That works out to be around $875 million per year on average. [If we accept Jack's idea that we get the full offset (Dream on, there buddy), then the total oil revenues plus offsets is actually........$1.25 billion per year, on average, over eight years. Of course, regular readers of this blog know the figure is likely closer to $875 million.]

And that is without considering Hebron/Ben Nevis and without the added revenue from Voisey's Bay and without the added revenue from restructured federal provincial financial for health and social programs.

Jack was right to point out that the government's finances are not in crisis, thereby acting like a proper Opposition Leader. (Why exactly was Roger Grimes out defending Fraser "Mario Andretti" March today anyway?) But Jack, b'y, at least get the math right on how much money the provincial government will have to spend.

If you put it in proper context, any idiot can see the Premier can be fiscally responsible and implement some much needed preventative health care projects like the school lunch program.

If it looks like the place is cash poor, and you are working from an equally wrong assumption, then you only fall into the trap carefully laid by that fountain of fiscal fooferah, the Minister of Decimals Loyola Sullivan: he can just dismiss you as another irresponsible leftie ready to spend us into the ground. Then he'll put everyone back to sleep with a recitation of the current budget projections, line by thousands of lines to the nearest fraction of a percentage.

(Revised 09 Feb 05)

Addendum (10 Feb 05)

Jack Harris made a guest appearance on Out of the Fog on Wednesday evening and it was repeated on Thursday. Watch for it again over the weekend. It's worthwhile to see Jack's solid performance despite the shortcomings discussed below. With a bit of work, the NDP could actually start to climb in the polls if Jack can keep it up.

A couple of things stand out. First of all Jack very clearly and concisely laid out his points in a way anyone could understand. He divided the debt into different chunks and explained his point in a way that you couldn't help but see where he was going - in a sensible level headed direction.

Second, the only one who wouldn't buy the logic was Krista Rudofsky who seems increasingly smitten with our Premier. Her tone betrayed a sketpicism seemingly the result of having swallowed Finance department news releases whole.

It's getting to the point where the CRTC should review the local cable access license for Rogers to see if they have crossed over a line on bias. If they try and pass themselves off as a current affairs or news show, then maybe there are some laws about truth in advertising that apply.

Does anyone remember Krista's fawning interview with the Premier back in January when she asked, breathlessly, "What can we do to help you, Premier?" or words to that effect. That was just one of several examples where she has failed utterly either to grasp the subject in front of her or ask the Premier or Loyola Sullivan or any Tory cabinet minister anything other than a question designed to let them slide through their prepared talking points with ease.

Danny has been on the show so often you'd swear he still owned the station. Out of the Fog is starting to sound a bit like the old Conversations with the Premier farce done eons ago with Joe Smallwood. The Premier would pull into the parking lot having been driven in by chauffeur from Roaches Line. While the car idled, a reporter would run out, stick a microphone through the open window and let the tape run as Joe pontificated about whatever was on his mind.

I once asked a reporter who had done the old Smallwood schtick and a later version done by Tobin on what he thought was the difference between the two. "With Tobin, I got to ask questions," came the reply, full of all the dry-wit experience of a seasoned and professional news veteran. There's a lesson there Krista could use because there is a difference between asking a question and feeding one.

Thankfully, Poor old Jack brushed off the light-weight questioning and got back to his point time and again. A seemingly frustrated Krista dropped it.

Any kind of bias in a public program interviewing political figures is unacceptable.

Period.

Family Feud, world of wonder version

Only two short years ago, Provincial Conservatives were lining up to get their picture taken with a Conservative brother running for re-election for what turned out to be the last time.

This ad - paid for by the federal Conservatives - appeared in the Telegram in early December 2005.

The guy seated on the far right of the picture is Loyola Sullivan, the finance minister at the time.  He quit federal politics not long after this picture only to take up a job with the federal Conservatives.

The guy behind him is former speaker Harvey Hodder.  He retired before the 2007 provincial election.

Immediately to Loyola Hearn's right is Sheila Osborne, part of the Osborne-Ridgley political machine.

The guy standing right behind Loyola Hearn - with that great big grin on his face - is Bob Ridgley, brother of Sheila. You will recall him as the Conservative who supported Belinda Stronach for leader even though, by his own words, he thought she was "shallow as a saucer".

Bob is now Danny Williams' parliamentary assistant.

The other two guys are - left to right - Shawn Skinner and Dave Denine. Skinner is the provincial human resources cabinet minister and Denine is looking after municipal affairs.

You'll recall Skinner was taken to the woodshed by Danny Williams for going off the ABC message track.  He was made to apologize publicly for his transgression.

Denine's had a few problems of his own, but never for doing something that went against orders from the top.

Interesting picture that, if only because it makes you wonder when they line up behind a candidate if they really do it out of personal choice or if they have been directed by some authority or other.

Makes you wonder that if they lend you support do they expect a quid pro quo, a back scratch in return.

Makes you wonder what happens if you don't do what they (or the authority doing the directing) wants.

Of course, it makes you wonder too if one of these is Loyola's mole.

-srbp-

Loyola's Oil

Remember the movie about a boy named Lorenzo and the combination of oils that temporarily relieved his medical condition.

Alright, so the tie-in is a bit vague.

Just a bit.

Well, here are a couple of links to oil pricing to help you understand why most people think Loyola Sullivan's projected oil royalties numbers are as useless as they can be.

This one is to a site that quote for Brent light crude (a benchmark for our crude) and includes some futures out to 2007 (!). Brent is currently trading at around US$55 per bbl and the futures market has it running in the same neighbourhood out for another two years.

Here's another one that shows some trending charts for Brent. Note that in the previous 12 months, Brent has spent way more time above US$38 per bbl than it has at or below that price.

I appreciate that economists and accountants are conservative people, but surely there must be some basis for making a reasonable projection that oil revenues will be higher than the number Loyola included in his budget. Even with oil production down 6% last year over 2003, we still raked in $100 million more than forecast due entirely to higher oil prices.

If oil production goes back up to where it ought to be this year we will hardly make less money this year than last. If we look ahead to the next fiscal year, namely 2006, we should expect ever larger amounts of money.

Loyola has a problem with oil revenues; always has and I would venture always will.

The Caine Mutiny, the really off-Broadway version

News junkies in Newfoundland and Labrador have been treated these past couple of weeks to a truly odd series of exchanges between Premier Danny Williams and the federal regional minister, fish minister Loyola Hearn.

The two have traded barbs these past few years, despite the fact that in 1989 then-lawyer Danny Williams backed Loyola for the provincial Tory leadership. However this weeks exchange included references to some form of political espionage, at least according to some reports.

And that's only part of what makes the whole affair so strange.

In a year-end interview with CBC, Hearn said:

There are times I'm sure I know as much as what's going on in cabinet and caucus or on the eighth floor as the premier does.

The eighth floor, incidentally, is local political slang for the Premier's Office.  It occupies the entire suite on the eighth floor of the Confederation Building's east block.

Note the words exactly.  Hearn says that he knows - at times - as much about what is going on inside caucus or cabinet as Williams does.  Not "more than";  not "less than":  "as much as". This will become important later on.

More importantly, note the context in which the comments came. You'll find it in the ram audio file linked off the page quoted above at cbc.ca/nl.  You see, context gives a clue to meaning.  Get the context wrong and the meaning of the words can come out wrong.

Hearn is talking about - is obviously talking about - the federal Conservative prospects in the next election.  Hearn says that he has personal friends within the provincial Tory caucus and that we shouldn't be surprised if some of them opt to run for the federal Conservatives. Then he tosses in the line about knowing as much as Danny about what goes on inside caucus and cabinet.

So there's the start of the whole controversy.  For some reason, the CBC online story juxtaposes the context such that the "knows as much as line" comes before the bit about having candidates from friends in the local Tory caucus.

Take a look at the CBC television story and you get much the same idea as the radio story, though.  Hearn is clearly talking about the overall relationship between the two parties.  He couldn't be any more plain in stating that he has friends inside the local Tory caucus and while - at times - they've been forced to part company as a result of the Danny-Steve spat, overall Hearn has good and old political friends along the local Tories.

No where in any of this is there any hint that Hearn was talking about having spies inside Danny's den.

CBC didn't report it that way at all, and to be perfectly frank if there was the least bit of that kind of implication, CBC would be all over it.  They'd poke at it, dig it and then tell the story they found.

But Hearn never hinted at spies and that isn't what CBC reported.

It is, however, what Danny Williams decided to take issue with almost a week later. You'll find Williams' comments from the CBC Morning Show on January 2. he claims to have received phone calls from people who feel that a "shadow" has been cast over the local Tories.  Williams claims there has been some claim of infringement of cabinet and caucus confidentiality.

Williams goes so far as to say that "Mr. Hearn has made a pretty broad statement when he says he knows virtually everything that is going on inside caucus and cabinet and on the eighth floor."  Now there's a huge difference between saying one knows as much as someone else from time to time. and saying that one knows "virtually everything", presumably all the time.

There's also no suggestion anywhere in Hearn's comments that any confidences have been breached.  Hearn can know what is being discussed generally;  plenty of people do.  It wouldn't be strange at all for a federal cabinet minister to be aware of projects that are going to the provincial cabinet, especially where the project is a joint federal/provincial one.  It also wouldn't be unusual for politicians to chat informally about issues confronting both administrations.  All of that can take place - and does take place legitimately - without any suggestion that anyone is breaching confidences or is behaving improperly.

Now it should be fairly obvious at this point that this whole story took off when Danny Williams reacted with what are some of his vintage, hyperbolic misrepresentations.  Does anyone remember, for example, the pre-election 2003 claim that someone was trying to hack the Tory computers when in fact it was merely a case of someone innocently sending an incorrect printer command? The police got called and found nothing at all.

The thing gets even sillier though.

Kevin O'Brien, recently demoted to be minister of licenses and permits, pulled an oram of absolutely historic proportions on Thursday in a call to one of the VOCM talk shows.

First, there is the blatant misrepresentation, dutifully following his boss' lead:

O'Brien: So, in other words, what he’s saying there is that, you know, at any given time, any given Cabinet, any given caucus in the federation of Canada,and including the federal side, can be broken.

...

He says, [presumably reading from a transcript] Loyola Hearn says he is always fully briefed on what is happening inside the Danny Williams government. "I always do. That’s why we can always be one step ahead of him, Hearn said in a year-end review with CBC News. I have friends throughout Cabinet and caucus."

Second comes the complete invention, the hysterical claim after some further misrepresentation: 

But he is saying clearly here to me that he's going to try to prevent and try to undermine any type of, of a process that Newfoundland and Labrador may enter into to better ourselves and be, and take a rightful place in the federation of, of Canada.

Huh?  Aside from questioning the transcript from which O'Brien was reading, one also has to wonder if the minister's ability to comprehend plain English has been removed.

But it gets worse as O'Brien becomes more fully engaged in his anti-Hearn diatribe.  According to the former business minister, there are apparently few who can grasp what is going on in this province (and cabinet):

Well, I'm going to tell you something now. What's happening in Newfoundland and Labrador in regards to the energy plan and everything else that's been negotiated to the benefit of all the, the residents of the province, I don't think Hearn, and a good many of us, actually has the grey matter to understand it all.

Okay.

It's all good for a laugh, but hopefully, we've been able to demonstrate a couple of things.

First, Hearn didn't say what Williams accused him of saying. Hearn's actually stuck to his wording consistently, including in this Canadian Press story filed on Thursday.

Second, the media  - at least CBC - got the story right the first time and continue to report Hearn accurately. The rest of the pack, CP and the Globe included, actually started riffing off Williams' misrepresentations.  It's a nice job of spinning by the Premier, but frankly the reporters involved should be ashamed of themselves for such a a rudimentary failure of fact checking.

They fell for a stale ploy. After all, it's not the first time Williams has made a claim which is completely, totally, factually incorrect, is it?

Third, Hearn likely knew when he made the comments in the first place that the control-freakish guy on the Eighth would react badly to any suggestion that there might be some alternate source of power in the province than Himself. he said it, in part to provoke a reaction and in getting it demonstrated that he can actually stay one step ahead of the Premier.

Hearn could back off when Danny went ballistic without any real political loss.  After all, what Hearn said was true.  He has friends in Danny's caucus and, more importantly, every federal nickel spent in Newfoundland and Labrador flows across the regional minister's desk.  That truth may cause the Premier to squeal, but it is still the truth even if Hearn appears to some to back off the remarks.

Fourth,  as for O'Brien, well, we can conclude that he was just a casualty in the completely made-up story of spies in the Tory caucus. You see, there are a couple of spots in the O'Brien comments to VOCM where he notes that he used to be good friends with Loyola, that they come from the same part of the shore and so forth.  Williams notes that Loyola used to have friends in caucus, obviously an oblique reference to Fabian Manning and Loyola Sullivan both of whom have the distinctive twang of the boys from the Southern Shore.

Aside from insulting and embarrassing himself simultaneously, the only thing poor Kevin gained was a perpetual could of suspicion.  After all, a paranoid would ask, why would he have needed to profess his loyalty if there was no reason for him to feel guilty in the first place?

That leads us to the fifth point, namely that for all Williams' own paranoia and his apparently manic obsession with control, the nervous nellies who called him to assure The Boss of their loyalty actually are actually not Hearn's agents. 

That is, if the agents ever existed in the first place, of course.

You see, the hallmark of a true double agent is that he or she appears more consistently and genuinely loyal to The Boss, all the while never drawing any attention to himself or herself. 

They blend in.

And the Captain of the local ship of state will never suspect that there is a duplicate key to the wardroom so they can eat the strawberries, either.

-srbp-

The backstory on Flo

In any news story there is the obvious detail about what happened.

In the case of Florence Delaney's resignation, we have the basic elements of what occurred.

The former treasury board secretary was told she was being moved to Environment. Rightly considering the move a demotion, she elected to resign apparently less than two years short of her pension.

That's the frontstory.

Government has dutifully denied this will have any impact on anything and in their version of things, Delaney had differences of opinion with the Premier on budget priorities. They have stuck with this media line - one of their series of statements about an event - as the story now enters day three.

In handling the frontstory, government is trying to kill it off quickly, end any inquiry into the matter and move on to something else. Their whole media line is the equivalent of the English bobby from the movies: "Alright then. Move it along. Nothing to see here."

Problem is the foot of the corpse is sticking out from under the white sheet and people just can't help but peek.

As noted a couple of days ago, differences of opinion don't normally spark this sort of situation - either the demotion or the resignation. So that alone makes the government's media line a little suspicious and largely ineffective as far as those who know government would be concerned. The news media may drop the issue but reporters won't necessarily forget; nor will senior public servants.

More importantly, if you could strip off that white sheet from the medical examiner's office, you'd likely see a lot more than the tragic and unnecessary end of an otherwise exemplary public service career. The real story here isn't even the ease with which the Premier dismisses those who disagree with him, apparently.

The substantive story lurking under the covers is the apparent difference of opinion in the upper reaches of government on government financial plans for the next few years.

In the e.e. cummings tribute speech on January 5 and in the subsequent budget, the Premier made it quite clear that the province's financial state made it necessary to embark on a process to fix it that would take years. Aside from the layoffs and the wage freezes, government embarked on a program review to restructure government and make it more efficient.

From the events this week, it seems that some within government, including some cabinet ministers - Loyola Sullivan maybe? - want to continue with those reform initiatives. They want to hold the line on spending. They want to take the measures recommended by the Gourley report from PriceClubWaterHouseCoopers and by David Norris in his paper to the Vic Young Royal Commission.

Would that mean we are in for a Dark Age lasting until 2012 or so? Not at all. But it does mean that there will be the kind of calls to Open Line shows we haven't heard since last year. The calls are ones that are a lot less enthusiastic in the praise of the Premier than he has seen now for the past six months. Those are the kind of calls that lead the Premier to joke about quitting politics or to tell reporters, as he did last year at the peak of the budget flap, that he regretted entering politics every single day. In a less personal sense, though, that approach is a lot less flashy, a lot less massaged than the one we have seen in recent weeks.

The alternative in this cabinet disagreement is likely something akin to the Tobin pattern from the 1990s. Recall that Tobin entered the Premier's Office, brought in a budget that laid off 1500 people and consequently fell drastically in the polls and popularity. He grabbed an issue that boosted his popularity and thereafter worked to find every nickel he could in one-time payments to make sure that he never again had to say anything that was vaguely unpleasant. Tobin also started living on the Open Line shows all as part of a program aimed at keeping his personal polling numbers up as high as possible. Every issue was tackled as a one-off and slowly the government lost any sense of strategic direction.

The financial circumstances are different this time though. Even without the January Deal, the provincial government was actually in good revenue shape nd will be for some time. As it turned out, high oil prices helped push the province along like an ice boat in a hurricane.

Here's the thing: there are some long-term issues that need to be tackled. The time to do it is now. The Voice of Doom speech may have been as grossly overblown as it was grossly delivered but at its core was a streak of fiscal commonsense that people bought into. Take a look at the reaction to the ad campaign among the Fair Deal crowd to get a glimpse of that commonsense. And not tackling those long-term issues - unfunded pension liability, for example - now while we have the cash would be as unforgivable as a Tobinesque spending spree.

What seems to emerge from the backstory of the Delaney departure is a government that lacks a coherent strategic vision; it seems to lack a Plan. The January Deal simply isn't big enough to cause a fundamental shift in government fiscal strategy in light of the "reality" Loyola Sullivan has been relentlessly pushing since last year. Yet here we have a huge racket on a fundamental strategic issue fully 18 months into this administration.

The government could only now be locked in some fundamental disagreements of the type mentioned in the government's own media line if it was moving from issue to issue without an underlying plan or philosophy.

If the disagreements are deep enough to cause the untimely demise of a top civil servant, then we on the outside must indeed wonder what lies under the sheet.

Budget Spin Control 2: the good, the bad and the ugly

After a couple of days of sifting through the budget and listening to the various comments on it, I thought I'd offer a general opinion on the whole package.

The Good: On the whole, this is a decent budget. There are sensible investments and good programs being funded. The health investments are well placed, especially the long-term care facility in Goose Bay. Whether the new money is all federal or not, the provincial government has spent it on health, despite musing earlier about doing something else with it.

The same can be said of education spending. Government needed to spend some cash on infrastructure especially as crumbling ceilings due to poor maintenance or no maintenance create a potential legal liability. Adding a new culture program is a minor outlay in the greater scheme of things but it looks good and government can claim to be saving a few teaching jobs.

And yes, Danny Williams, the amounts are "small money". A few hundred thou here. Even two or three million are tiny in government terms. The big expenditures like the $26 million in education capital actually gets broken down into small packets. The key thing is that the money is handed out all over the place. Is there anybody out there unhappy enough to go to war with you over anything in this budget? Since the future promises only more cash, anyone who didn't get their school roof redone this year or find a fresh can of paint by their door courtesy of John or Tom can just keep talking it up until next year when you'll even more cash to hand out. At worst they wait 'til election year and find out how much cash you do have to toss around.

Politically, the investments are smart since health care and education consistently poll at the top of people's issues. The government has been doing a lot of polling and I am sure they know what is irking people. This is a budget full of balm.

Politically, the budget also trumps the Opposition. As much as the Liberals have been making some solid comments since Monday - full marks Roger and company - the hard reality is that they really can't get very much mileage out of saying "You didn't spend enough, Danny". Wally Anderson complaining about a lack of a theatre space in Goose Bay doesn't trump the long-term care facility. Besides from what I hear, there could be a workable solution to the theatre problem if people weren't clamouring for a new-build hall.

Politically, Danny Williams has used the word "miraculous" twice today - at least twice - in describing his triumph over the deficit demons. My spin metre redlined badly on that one since Danny Williams didn't do a single thing to generate the bulk of the cash he got this year. Thank George Bush and the invasion of Iraq for driving up oil prices. Thank Paul Martin for shovelling out bags of federal cash.

In the end, though, even after we counteract all the stroke-me spin, this budget is a good document. It delivers the promise of sensible fiscal management coupled with social responsibility. Politically, that lines you up with the majority of the electorate (See my post on "The Independents") and therefore you are safe, Danny. Safe, that is unless the political Opposition attacks you where you are vulnerable.

The Bad: Oddity that I am, this is one public relations guy who hates spin. It makes me physically ill. Whenever I hear it, I itch in places mortals shouldn't have to scratch . This budget is full of spin - like the claims of Saint Daniel in the Deficit Lion's Den for example. Self-massage in public is a crime and political self-massage in public is no less distasteful.

As I said in a post on the budget already, the government would do well to make a really simple set of promises on the budget and deliver them. Paul Martin's secret of restoring confidence in federal budgets was to make consistent predictions and then failing to meet them, but in a good way. He coupled that with a clear commitment to spend every extra nickel on paying down the debt. He hit the target time and time again and people re-elected the government based on nothing more spectacular than accountability and credibility.

In 2003, the Tories promised to balance the current and capital account. Rather than spin out the old "cash" balance hooey, Loyola Sullivan should be sticking to the "Promise made; promise kept" line. Tell us now exactly where the extra oil money will go. When you get it, spend it exactly that way. Don't wait 'til mid-year and then claim yet another demon has been slayed. Don't drop it on The Rooms without telling us when you do it. It is my money I want to know what you are doing with it.

That's the sole basis of accountability.

The Ugly: The ugly part of this budget for me remains the lack of a longer term plan to tackle the deficit and debt. Government has everything at their disposal to map out a three to five year plan and stick to it. We had one plan last year. This year we actually have a different one. What will next year bring?

More importantly though, I do find it a little offputting when Loyola Sullivan - a man not prone to exaggeration - starts opining about a provincial debt running somewhere beyond $14 billion. When he shamelessly tosses out the figure of $17 billion, I shudder.

Let's start seeing the long-range fiscal plan.

Summary: Overall, this is a fine budget for the times. It is smart politically and smart financially. What else can I say?

Every name in for the senator pool

A couple of e-mails in ye olde inbox on Monday and just about every conceivable name cropped up in the great game of trying to figure out who will be the new Conservative senator from Newfoundland and Labrador.

For the record, here’s the list:

• Loyola Hearn

• Loyola Sullivan

• Liam O'Brien

• Beth Marshall

• Rex Barnes

• Tim Powers

• Merv Wiseman

• Graham Letto

• Rick Hillier

• Lynn Verge

• Tom Rideout

• Vic Young

• Leo Power

Most of the spec seems to favour one of the Two Loyolas – that’s Sullivan on the right -  but those fellows already have or had their bit of pork.

That’s former fish minister Loyola Hearn on the left, there, for those who don’t know him.

Put them in the “Definitely Not” pile right next to Rick Hillier.

Liam O’Brien would be a long shot.  He surely won’t take offence at the suggestion.

Ditto Merv Wiseman, although he might take offence. Sucks to be him, then. Rex Barnes looks like he got on the list for the same reason Merv did:  someone listed former Tory candidates. Another “nope”.

Beth Marshall would be too obvious just because all the spec puts her name up right next to the two Loyolas.  She’s at the point now where her name is on everyone’s list of nominees for everything. Watch out if the Pope drops dead tomorrow.  Local spec will have Beth in the running right behind the two Loyolas;  it’s gotten to be that much of a cliche.

Graham Letto or someone else from Labrador would be a shot to replace Bill Rompkey when he retires within the next year or two. 

Leo Power is a suggestion if someone was digging way inside the party and maybe way back into the mists of time to boot.

He’s a former exec to John Crosbie and former principal secretary to Tom Rideout for 43 Days but has Leo got anything else to qualify him for a seat in the Antechamber to the Kingdom of Heaven before Tom Rideout?

And speaking of Tom, there’s just something about that appointment that wouldn’t fit the reformist theme supposedly being set by this round of appointments. Any Tories in the National Capital Region with a room to rent might find Tom a willing tenant.

So who’s left on that list?

Tim Powers  - he of the Globe blog and Ottawa lobbyist fame - is an interesting choice.  The guy has strong ties both provincial and federally so he could act a go-between in the Great Rapprochement between the federal Connies and the provincial cousins.

Lynn Verge is a possibility.  She’s a former provincial Tory leader with a strong background in public life.

 

Then there’s Vic Young. Frankly it’s a bit strange to see him there.  The former public servant and business exec has kept a pretty low profile since retiring.  Well, low with the exception of the Blame Canada Commission in 2002.

He’d be a good choice but that hasn’t stopped prime ministers – including this one – from looking right past a good choice in favour of a complete waste of time. 

Like say Mike Duffy.

Odds are that none of the names on that list will wind up getting the nod whenever the choice is made. The federal Conservatives have shown themselves adept at coming up with some – shall we say – unusual choices when it comes to federal appointments. 

One that stands out in the local legal community is a judge whose appointment prompted tongue-in-cheek concern in some quarters that she might not know where the court house was.  Seems the only time she’d darkened its doors – as the local legal wags put it – was when she’d shown up to see her old man sworn in as a supreme court judge years before.

So with all those names from the current speculation out of the way, maybe someone can come up with a novel idea.

The comments are open.  Toss your suggestions on the table.

-srbp-

Latest worst kept secret; more elec spec

Danny Williams suggests there may be a pre-election cabinet shuffle.

In related news, the number of Tories running to replace Loyola Sullivan is at five and headed to as many as eight according to CBC radio. The words that come to mind are "safe seat".

Spec on Loyola's sudden departure continues to mount. There's the version that he had his office cleaned out either before he told Danny or a handful of hours afterward. That's quick.

Then there's the version that Sullivan brought back a deal on Equalization that would include a phase in period, with transitional grants for provinces like Newfoundland and Labrador that would see a drop in their Equalization payments under the new scheme.

This one sounds plausible since transitional grants were part of the Connie 2004 election platform. Then they were looking at 12 years of transition; the figure bandied around now would be more like four.

The falling out under that scenario came when Premier Danny Williams rejected any loss of revenue.

Then there's the last explanation of Loyola's abrupt departure which holds that the Rain Man from Ferryland was growing increasingly frustrated with how things run - or sometimes don't run - in the Confederation Building these days. That's plausible too.

Speculation is already growing about who won't be running in the next election. Names tossed around so far include deputy ayatollah Tom Rideout, intergovernmental affairs minister John Ottenheimer and municipal affairs minister Jack Byrne for the Tories. On the Liberal side, the names include Kel Parsons, Judy Foote, Percy Barrett and just about half the caucus.

Names vary depending on who you talk to for both Liberals and Tories looking to quit politics. Only time will tell.

There's no speculation on Ross Reid, formerly the deputy minister to the premier, who resigned today to head up the provincial Tory re-election campaign.

Reid is widely respected and capable. If your humble e-scribbler hasn't said so before, let's make it plain now: Reid would be the finest replacement for Danny when he finally packs it in on the planned departure date in 2010. If Reid ever decides to get back into politics either federally or provincially, he can expect wide support. There simply aren't that many people in the province with Ross' talents.

Of course, that appointment is sure to raise the spectre of an early election call in Newfoundland and Labrador. There are no signs of a quickie writ at all, but Reid's appointment might just start tongues wagging. The Premier could use either a new war with Ottawa over Equalization as the premise or he could seek an endorsement of his energy plan and playing hardball with the oil companies. Either way it would be a jihad against foreign infidels which tends to play well in local politics, especially when led - as in 1982 - by our own version of the Mad Mullah.

If Claudia Cattaneo's Financial Post piece turns out to be accurate in its speculation an energy plan mandating an automatic Crown interest in any offshore field would need a public endorsement to withstand the onslaught of criticism. It would also be an unassailable political issue akin to the January 2005 offshore deal where emotion - and a heckuvalot of sheer political bullshit - trumped reason yet again. Liberal candidates would be falling over themselves to endorse the position, just as they did in 1982.

As for political fall-out, Danny Williams might take a few seconds of heat for not waiting until October but even in the worst case scenario, any criticism of an early election would evaporate well before polling day and would have absolutely nil negative impact on Danny Williams' re-election. The full impact - as in 1982 - wouldn't be felt until after Danny is gone.

Oh.

And for those who think there's no way to go early, recall that the so-called fixed elections date bill didn't really set a fixed date for elections. The 2004 amendments to the House of Assembly Act state clearly:

3. (1) Notwithstanding subsection (2), the Lieutenant-Governor may, by proclamation in Her Majesty’s name, prorogue or dissolve the House of Assembly when the Lieutenant-Governor sees fit.

(2) A polling day at a general election shall be held on the second Tuesday in October, 2007 and afterward on the second Tuesday in October in the fourth calendar year following the polling day at the most recently held general election.

Practically, we wouldn't need an election before October but - just as in 1999 - the Premier's agenda may trump all others'. Way back then, Brian Tobin's eagerness to head back to Ottawa with two election victories led him to plan an election for early September 1998. First signs emerged in April of that year but Tobin's plans were bumped back, at the last minute, by a caucus that was uncomfortable with an election only two years after the previous one. Tobin dropped the writ in January 1999 instead.

Equalization for beginners or why Loyola Sullivan gets $400 million from oil this year

Offsets. Clawbacks. Have. Have not.

Equalization is at the heart of the current Atlantic Accord dispute. Yet if you put a gun to the head of the average person at the nearest Tim Horton's, I doubt they could explain it.

Well, here is a simple explanation.

Every province in the country collects revenue (or income, if you prefer) from taxes and fees. We know them all too well - HST, personal income tax, corporate income tax, car licensing fees, park fees.

That money goes to pay for the services the provincial government provides, like health care, education, and provincial parks.

For just about as long as Canada has been a country, different provinces have raised different amounts of taxes on their own. It's pretty obvious that some provinces would be richer than others. In order to even that situation out, the federal government transferred some of its revenue to the provinces. The federal government established the current Equalization program in 1957 after years of debate and discussion with the provinces. The concept of Equalization was enshrined in the constitution in 1982.

Basically, Equalization is like a wage top-up scheme for provinces. The federal government figures out a national average amount of revenue each province should get per person. Fall below the average and the province gets a cheque from Ottawa. Meet or exceed the average and you get nothing. No province pays into the program; the money comes from federal government revenues. As it stands right now, Alberta and Ontario make more than the national average and get no Equalization. Saskatchewan will join them in the "have" category, as some call it, within the next year. All the other provinces get some amount of Equalization. Quebec gets as much as all the others combined because the money is paid out based on population.

In 1957, when the program started provinces were topped-up to the average of the top three provinces. Alberta received Equalization until 1964, but once its income went above the average it didn't get a penny in Equalization. In 1967, the average was based on all 10 provinces and since 1982 it has been based on five selected.

Over the years, some provinces like British Columbia and Saskatchewan have moved back and forth between the so-called "have" (no Equalization) and "have not" (get Equalization) categories.

Like any top-up scheme, as a province's own revenue goes up, the Equalization goes down. That's a pretty simple idea. A province doesn't really lose money; as its own income grows, the top-up is replaced by the growth in revenue.

Under the Atlantic Accord, Newfoundland and Labrador gets an extra payment so that as its oil income grows, Equalization doesn't drop as fast as it otherwise would. It was intended to last for 12 years to give the provincial government a chance to make some headway on its debt and infrastructure after years of hard times. There are current seven years left in the offset under the Accord.

In 1993, the Chretien government also gave Newfoundland and Labrador the chance to hide 30% of its oil income from Equalization each year until oil production ceases once the Accord offsets run out. It's called the generic solution because some other provinces can access it as well for other types of revenue.

The provincial government's proposal since June 10 would work this way. Instead of the offset or the generic solution, the federal government would give the province an amount equal to all of the province's direct oil income in a year, even if the province didn't qualify for Equalization. That's it in a nutshell.

The latest federal offer was to give the province an amount equal to the drop in Equalization from year to year caused by growth in oil revenues, until the province doesn't qualify for Equalization. After that, the province would only get 100% of its oil and gas revenues.

This gets confusing because the provincial government has been explaining the whole arrangement as those something was being taken away when actually it isn't.

Take an example from today with the Atlantic Accord, the generic solution and no new offshore deal. If the provincial government earns $100 million in oil revenues, Equalization would only use $70 million as the provinces oil income when it calculates the province's income.

If the province would have gotten $100 million in Equalization without that new oil revenue, Equalization doesn't drop by $ 100 million. Only $70 million of the oil money is used in the formula, so as far as Equalization is concerned the provincial government is entitled to $30 million.

The result? The province gets $100 in oil revenue PLUS $30 million in Equalization for a total of $130 million.

That's why Brian Peckford can say the Atlantic Accord delivers more money than oil revenues would alone. He's absolutely right.

In 2003, Newfoundland and Labrador earned a little over $123 million in oil royalties (taxes), but that does not include all direct income like corporate income tax. Under the Atlantic Accord the provincial government also received $178 million as an Equalization offset.

Newfoundland and Labrador 2003

Oil Royalties and Offsets

$123 million + $178 million = $301 million

Loyola Sullivan won't explain it to you that way, but those numbers are taken from the provincial government's own budget and the federal Department of Finance website.

This year, the provincial government will receive more than that in direct oil revenues alone. Including the existing offset or generic solution approaches, Newfoundland and Labrador's direct oil revenues in 2004 will likely be close to $400 million.

That's without any new deal.

All good Tories flocking together…again

Some people seem to think that having a bunch of provincial and federal Conservatives all gathered together trading sloppy kisses is news.

How short some memories are.

In 2004, the provincial Conservatives sort of helped their federal cousins out.  They sort of helped them because – while there was no instruction to stay away – the provincial guys were trying to court the Liberals to get a couple of billion in cash.  They weren’t interested in causing waves at a time when federal Conservatives couldn’t form government.

In 2006, things were different.  Every provincial Conservative and their dog worked hard for their federal cousins.

How hard?

Well, some of you may recall a series of print ads showing provincial cabinet and caucus member gathered with some of their buddies.  Apologies for the poor quality scans.

Here’s the way your humble e-scribbler put it in the original post back in 2008:

“The guy seated on the far right of the picture is Loyola Sullivan, the finance minister at the time.  He quit federal politics not long after this picture only to take up a job with the federal Conservatives.

The guy behind him is former speaker Harvey Hodder.  He retired before the 2007 provincial election.

Immediately to Loyola Hearn's right is Sheila Osborne, part of the Osborne-Ridgley political machine.

The guy standing right behind Loyola Hearn - with that great big grin on his face - is Bob Ridgley, brother of Sheila. You will recall him as the Conservative who supported Belinda Stronach for leader even though, by his own words, he thought she was "shallow as a saucer".

Bob is now Danny Williams' parliamentary assistant.

The other two guys are - left to right - Shawn Skinner and Dave Denine. Skinner is the provincial human resources cabinet minister and Denine is looking after municipal affairs.

You'll recall Skinner was taken to the woodshed by Danny Williams for going off the ABC message track.  He was made to apologize publicly for his transgression.

Denine's had a few problems of his own, but never for doing something that went against orders from the top.

Interesting picture that, if only because it makes you wonder when they line up behind a candidate if they really do it out of personal choice or if they have been directed by some authority or other.

Makes you wonder that if they lend you support do they expect a quid pro quo, a back scratch in return.

…”

Prophetic, no?

- srbp -