Hardly a record to brag about

Russell
Russell Wangersky
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It should be the single-most thought-about three sentences in the province this year. Why?

Not only because it quite simply trashes all the pablum we’ve been told about what great financial stewards the current government is, but because it also heralds a financial reckoning in this province that may be nothing short of alarming when it arrives.

We’ve heard a lot about net debt and budget surpluses (driven almost exclusively by non-renewable oil royalties), but anyone in business knows that, when it comes to actually managing finances, the devil isn’t in the revenues, it’s in the expenses. Because revenues in business — as our provincial government has discovered, time after time, when its budget numbers are wildly out of whack — aren’t in your control.

Expenses are. In fact, expenses are the only thing you can really control. Or, more to the point, that you can control if you want to.

But back to those three sentences, which came late last week from the province’s auditor general, Terry Paddon: “Since 2004, the province’s expenses have grown from $5.1 billion to $7.7 billion in 2013, an increase of $2.6 billion, or 51 per cent. Per capita expenses in Newfoundland and Labrador are the highest in Canada. In fact, per capita expenses are approximately 40 per cent higher than the average of all other provinces.”

It doesn’t really sound that scary at the outset. But it should be pretty darned terrifying.

Stop and think about what that means.

First, that government services in this province cost more than in any other province in the nation. Second, that for what costs $1 (on average) in every other part of Canada, taxpayers in this province are paying $1.40.

Now stop and think about what it means about the province being able to hold the line on anything — wages, budgets on major projects, you name it. You don’t sound like a good financial steward — in fact, you sound downright fiscally sloppy.

It’s not the first time numbers like these have come up. In fact, numbers pretty much like this came up almost exactly a year ago when the Fraser Institute did a review of health-care costs for provinces across Canada, (which is hardly surprising, given that health makes up such a large percentage of the provincial budget).

At the time, the response from government was a quick one: “They haven’t considered, at all, that we have the oldest and the fastest aging population anywhere in the country. That’s a reality for us,”  Health Minister Susan Sullivan said.

“We have 33 hospitals and clinics, health centres, for that population of 500,000. I suspect if you go down to downtown Toronto, you’re only going to find two or three hospitals to serve that population.” (The Telegram story on Sullivan’s comments pointed out that “there are at least 15 hospitals in the city of Toronto.” It’s also worth keeping in mind the Fraser Institute has its own mandate.)

The argument that we have an aging population is certainly true — there have also been arguments that our geography contributes to costs, with a sparse population well spread out around the edges. But Northern Manitoba is no picnic for supplying government services, nor is Northern Ontario. And British Columbia? Well, if you’ve been there recently, you know many parts of the place are stuffed to the gills with old people. Driving in Victoria means spending a lot of time being very, very careful that you don’t drive into Miss Daisy. Or have Miss Daisy drive into you. There are plenty of aged people driving up B.C.’s health-care costs, too.

There’s nothing wrong with a government choosing to spend more than neighbouring provinces on your population — but there’s no sign that our government has actually made that choice.

The problem, of course, is that if you’re spending $1.40 for what everyone else is spending $1 for, there should be some pretty remarkable returns on that spending; we should have significantly better health care and education and social welfare than pretty much anyone else in the country. Because, after all, this is a big, spread-out country with equally big and spread-out expenses. And we don’t.

Stop and think about it this way: if you were in the office supply business, would you think you were doing a good job if, on average, everything you bought wholesale cost 40 per cent more than the average wholesale price for your competitors?

Would you go to your boss with those numbers and boast about what a good job you were doing? And would you think that such spending — and your job, for that matter — was in any way sustainable?

 

Russell Wangersky is The Telegram’s

editorial page editor. He can be reached by email at rwanger@thetelegram.com.

Organizations: Fraser Institute

Geographic location: Canada, Newfoundland and Labrador, Toronto Northern Manitoba Northern Ontario British Columbia Victoria

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Recent comments

  • Angus
    January 26, 2014 - 06:33

    In a related development The Telegram reported that Tech Duck Pond mine is closing in 2015. Why is this related you ask? Well it shows that nonrenewable resources such as oil and ores are not infinite and the jobs (300 well paying, tax producing jobs) disappear with the ore(or oil-pick your choice) and this is just the type of development we have signed on for. Unless we can innovate and bring in new industries here and diversify our economy we could well be in trouble when the oil and ores run out. it is highly unlikely that health care costs are going to decrease unless like education, a segment of the population disappears making it redundant. As a note, the initial work was begun on the Duck Pond ore deposit in 1972 but size estimates, financing, world prices and an aggressive company all had to be assembled before that ore deposit was mined and now it is depleted. Such is the perils of resource development.

  • Frank
    January 25, 2014 - 17:35

    "Stop and think about it this way: if you were in the office supply business, would you think you were doing a good job if, on average, everything you bought wholesale cost 40 per cent more than the average wholesale price for your competitors" Russell, you would be the first to whine if the government cut health care spending which of course they haven't or cut a miniscule number of public servants, of which there are far to many. Health care spending at its current rate is unsustainable. So are Government pensions and a myriad of other things. All governments have to pick their spots. Given that reality I think the current administration has done quite well given the culture that exists in Newfoundland. Any long surviving Newfoundlander will know what culture I am referring to.

  • Nichol
    January 25, 2014 - 17:04

    We do need to look at one number on the revenue side. The AG report says that NL received $14.5 billion in Provincial oil royalties since Williams' election in 2003. (p.199) This is an enormous gift to a population of some 520,000. It was a bounty unique to NL, which Williams had no part in bringing to us. Ten years later, we are in our second successive deficit budget, and again borrowing money to make ends meet. There was absolutely no prudent management of this bonus, and the gluttony of spending it took over any rational thinking which may have existed in Government. I suggest the costs of providing services to the far flung populations in NL are no different than northern Que., ON and Man., which all have vast northen areas with little population...spread along the rugged coastlines of James Bay, and Hudson Bay. The drivel pumped out by this Government guised as excuses is simply embarrassing. They had the chance and failed us all miserably. This, and the illogical, inefficient and unnecessary execution of Muskrat Falls development to satisfy some ego driven perception of pay back to Que., will be the legacy of Dunderdale and Williams. Sadly, it is all the citizens of NL who are the real losers.

    • david
      January 27, 2014 - 14:55

      $14.5 billion of oil royalties for a population of 520,000...that's $29,000 for every man woman and child in a period of just 10 years. And what do we have to show for that? A public service system that is as ineffective, poorly run and in decay as it ever was, and $18,000 of provincial debt for every man woman and child.....and growing. If you haven't broken out into a cold sweat after reading that, you are deserving of more of the same over the next decade.

    • david
      January 27, 2014 - 15:38

      And just to be even more clear, for the truly slow and dimwitted : That "29,000 each" isn't sitting somewhere. It's gone. All gone. That portion of the oil was produced, never to return. And the $18,000 of debt? That's all still there, and growing, Every day. Forever.

  • Yes by
    January 25, 2014 - 15:10

    @brett You obviously have no assets or family in a rural community. Typical of an egocentric person from the well to do area of the province

    • Christopher Chafe
      January 25, 2014 - 20:02

      Just how do you know that @brett never moved from "rural" Newfoundland to ensure he has a better life?

    • Yes by
      January 27, 2014 - 09:16

      The issues he has risen are valid, but he needs to get a lot more of his facts straight. There are only two school boards here now! Schools in rural areas have been amalgamating for years, and classes are already overcrowded and students are already suffering because of it. We have some of the worst grades in Canada. His "stop subsidizing" non viable (however he would define this) communities May as well say burn them out. Why not have people on social services do government labor work? Why not return to prison work camps? Imagine what we could save on brush cutting contracts alone. Sure while we're at it lets return to a draconian society.

    • Yes by
      January 27, 2014 - 09:17

      The issues he has risen are valid, but he needs to get a lot more of his facts straight. There are only two school boards here now! Schools in rural areas have been amalgamating for years, and classes are already overcrowded and students are already suffering because of it. We have some of the worst grades in Canada. His "stop subsidizing" non viable (however he would define this) communities May as well say burn them out. Why not have people on social services do government labor work? Why not return to prison work camps? Imagine what we could save on brush cutting contracts alone. Sure while we're at it lets return to a draconian society.

  • Maurice E. Adams
    January 25, 2014 - 11:05

    It is not just the 10 billion or more to build Muskrat that we should be concerned about---- we have put ourselves at an even greater risk by legally obligating ourselves to providing the equivalent of up to 57% of the 'rated' (nameplate) output capacity of Muskrat Falls to Nova Scotia (for 10% of the cost of production). AND IF WE CAN"T, we provide damages. What an unbelievable 25-35 year, multi-billion dollar added risk.... As to needing the power, we have only a wintertime peak demand issue. Even if the recent "peak" (momentary) demand did hit 1,720 MW, our Nalcor much touted "FIRM"/NET capacity has long been reported to be 1,958 MW, with the MAXIMUM nearer 2,500 MW..... So, in early January, we should still have had more that a 200 MW reserve above our NET capacity and 700 above our existing installed maximum capacity. .... Time to take stock, to lay blame where it belongs, to put a hold on Muskrat Falls --- to come to our collective senses.

  • david
    January 25, 2014 - 10:58

    There are several jurisdictions in the world that are synonymous with a legacy of oil-derived wealth and benefits for their citizens....Norway, Alaska, Qatar, UAE, Venezuela, Saudi Arabia and Alberta are all on this list. But Newfoundland, by completely ignoring the need for any internal accountability systems, or even proper bookkeeping, will go down as the place where generations of societal wealth was turned into nothing but political waste and BS.

  • Cyril Rogers
    January 25, 2014 - 10:09

    Mr. Wangersky, thank you for highlighting once again some of the foibles and follies of the current administration. They love to tout their "so-called" achievements but foolishly ignore their total ineptitude when it comes to managing the resource revenues that were handed to their through fortunate circumstances. They were the ultimate lottery winners of decades of wrangling with Ottawa over things like the Atlantic Accord, the success of the Hibernia oil field, the revenues from Voisey's Bay….the Mack truck kept them afloat until revenues from oil spiked…..and a generally high demand for natural resources. Their failure to plan for a gradual increase in services, for a "heritage fund", an aging electrical infrastructure, their grandiose ventures into resource development…..all of these contributed significantly to the problems that are evident today and getting worse. They continue to blind themselves to economic realities in the oil and energy sector, foolishly clinging to outdated concepts and mega-dreams that result in mega-expenditures for nebulous benefits. Thus, they will spend TEN billion and much more in the end to build Muskrat Falls, a project that will provide THE most expensive power anywhere in North America. Then, to compound that idiocy even more, they commit to give away, or sell, well below cost, the majority of that power to Nova Scotia. All the while, they neglect our electrical infrastructure, fail to look at conservation as a viable option to deal with our electrical shortfall…a questionable one at that..and fail to utilize existing power because of their obsession with their mega-dream.

  • Curious
    January 25, 2014 - 09:59

    I wonder how the cost per consumer of the Telegram compares to the Canadian average. I wouldn't be surprised if we saw similar rates to government spending.

  • Corporate Psycho
    January 25, 2014 - 08:01

    Does this mean Steve Kent and Kevin O'Brien are telling us a load of......? You betcha.

    • Mooncoin
      January 25, 2014 - 16:13

      Please! Steve Kent would never tell us BS. He would never pad polls!He would never mislead us into believing that he was at the centre of the crisis while lying on a beach in Florida! Not our Boy Scout.

  • brett
    January 25, 2014 - 07:55

    Good point, but a little simplistic. I think the takeaway is that yes, we are going to pay more in NL, but maybe it shouldn't be as much as we are currently paying. The question you have to ask is - what is our target? What additional cost can be attributed to location, lack of population, rural communities? What is the additional cost for maintaining the geographic area (larger than say northern BC - when you consider what you maintain/ road wise, etc). A more concerted effort to eliminate or stop supporting communities that are nonviable may be necessary. ie. Province more carefully looks at providing only services the rural areas can support through their tax dollars, refusing to subsidize them. Also - things like looking at education in the province is necessary too. Why are there so many school boards? Why are the schools so small? Does that not create additional duplication of services/positions? ie. 2-3 principals where 1 could do? Would the student population and community not be better served by larger schools with more facilities instead of aging buildings with small poorly kept play areas? Should there not be adequate parking for students/teachers etc? Proper areas for dropping off and picking up students? (I didn't mean to get on the education rant, but the article picked at medical care, there are issues there, but I don't even know if that's the low hanging fruit). I think the province needs to send more people to good communities in Canada and help NL emulate them. Build from their successes and scrap the cling to the past mentality that keeps the kids in mold filled buildings, and the rest of us not getting proper value for services because the conservative Newfoundlanders don't want to move forward.

    • W McLean
      January 25, 2014 - 15:56

      Didn't they just reduce the number of school boards to two?

    • John
      January 27, 2014 - 07:38

      The problem is we have too many people spread out over too large a geographical area, and too many people who believe that no matter how small their particular community is (and shrinking), they still feel entitled to all the amenities.

    • John
      January 27, 2014 - 07:39

      The problem is we have too many people spread out over too large a geographical area, and too many people who believe that no matter how small their particular community is (and shrinking), they still feel entitled to all the amenities.