All that’s old is news again

Russell
Russell Wangersky
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For the last four years in a row, I’ve written about this province’s growing fiscal problems.

Fiscal problems? What fiscal problems? It sounds out to lunch, doesn’t it?

We’ve been awash with oil-funded surplus budgets for years, financial institutions regularly pick us out as the province to watch for economic growth, and the provincial government isn’t afraid to characterize us as having a “sizzling” economy.

Well, here’s the thing: that sizzle is the sound of oil dollars, and there’s only so much oil in the bottle.

Not alone

I’m not the only one to have been sounding warning bells on this for years: Vic Young wrote about it in his royal commission examination of our place in the Canadian federation.

He pointed out that our producing oilfields are in decline, new fields — such as they are — won’t pick up the slack, and development of any potential future fields has been sluggish at best.

For several years, the province’s auditor general has written about the same thing.

There’s only so much oil, and we’re overdependent on it — when either the price falls or the supply dwindles, we’re in for extremely tough times, and, the auditor general points out, we’ve done little to mitigate that.

Oil prices might not fall — but the supply is a fixed amount.

Unpalatable

It is, apparently, either a hard concept to grasp, or else it’s a concept that no one’s in a big rush to grasp — because recognizing it would actually mean having to tighten our belts.

With non-renewable resources, particularly oil, accounting for as much as one out of every three dollars that come into the provincial treasury in the run of a year, and with our annual expenses as a province growing astoundingly and far outstripping the rate of inflation, we’ve put ourselves in a dangerous position as a province.

Think about it this way: non-renewable oil revenues are this province’s savings, its bank account.

There’s a lot of money in it, but only so much — the dollars, like the oil, are finite.

You can use that money to do a lot of things, but if you’re taking money out of your savings — every day, every month, every year — to pay your basic household expenses, then you’re living above your means.

And we’re living above our means.

Small steps

Our provincial government — to its credit — has managed to reduce the amount of our total provincial debt, so we’re paying less money out in interest than we have in earlier years.

But at the same time, the same government has taken billions of dollars of oil cash and used it to bulk up all kinds of things. It’s raised public sector wages and rapidly increased the size of the public service.

It’s expanded all sorts of spending. Here’s how I described it in an April 20 editorial: “total expenditures by the provincial government this year will top $7.8 billion. Compared to the first year of the Tory administration, overall government costs have been raised by $3.56 billion — an increase of 83 per cent in just eight years.”

During that same eight-year period, inflation has increased costs across this country by only 16.9 per cent.

I raised that same issue in 2007, in 2008, 2009 and 2010. The government’s direction hasn’t changed.

The provincial government

hasn’t moved to protect or retain or invest oilfield revenues in any meaningful way.

It has continued to spend them hand over fist on day-to-day expenses — and every dollar taken out of that bank account is one that we’re not going to get back.

Some argument

Now, you can make the argument that this province has lived with hard times for so long that there was plenty of catching up to do — hospitals and schools that needed to be built, services that needed to be added, paycheques that had to finally be brought up to national standards.

And that’s true.

But it doesn’t matter a bit if, 10 years from now, we have to go in reverse and start drastically cutting back.

Have not will be no more? Well, maybe it isn’t right now, but have not could come back pretty darned fast.

For the past week or so, the issue has suddenly started getting attention.

CBC’s David Cochrane ran a piece explaining the dramatic, and frankly, astounding growth in the province’s civil service.

And, at a public forum Wednesday, economist Wade Locke tossed out numbers that suggest that, on its current course, the provincial government could be running

$1.6-billion-a-year deficits just nine years from now.

Other wealthy provinces are being warned about the same thing. Even in cash-rich Alberta, influential researchers doing work for the provincial government are warning that province has to stop spending oil money as fast as if comes in, and has to keep money aside for when the oil’s gone.

Yep, for the last couple of weeks, it’s been almost a cause celebre.

Changing minds

But there’s no sign that the mindset is changing.

It is fiscally irresponsible to keeping doing this.

We have to lower our expectations and our expenses — and if we don’t do it now, circumstances are going to do it for us.

Truth is, that’s old news. But there’s no sign the provincial government has ever heard it.

Another trip to the bank, another withdrawal.

Good thing money grows on trees.

Russell Wangersky is The Telegram’s editorial page editor. He can be reached by email at rwanger@thetelegram.com.

Organizations: CBC

Geographic location: Alberta

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Comments

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Recent comments

  • stanley
    June 16, 2011 - 16:53

    I cannot believe this column. What utter uninformed, contractictory, and biased comments. Not very long ago people were turned off by the finance minister using a debt clock reminding people how important it is to get our debt out of control. Many people were calling on more spending for roads, increased wages for doctors, increased wages for nurses, tax relief to make our economy more competitive, and new long term care facilities just to name a few. The author says "oh yeah, we need those things", but don't spend any extra money. What an impossible standard. The finance minister has been in the news on numerous occasions, for many years, saying the oil won't last forever, the debt is still too high, the price of oil could drop - but you lecture him now as if all of this is something new. The provincial DIRECT DEBT has been paid down $400 million dollars last year alone. Another $400 million is budgeted this year. There is a financial penalty for paying bonds before they are due and the bonds have been paid each and every year for the past seven years without borrowing new money. The debt has actually increased from last year because of an ACCRUED pension liability, in which actuary's predict was costs will be 10, 20, 30 years down the road based on a market return and what is in the fund currently. The pension "liability" goes up and down based on how markets perform. You could put more money in the reserve, but if makets do poorly, and your "accrued pension debt" can actually go up. The market could rebound the next year and suddenly the accrual can change dramatically. Yes, more money should be put in this reserve, but remember every dollar from the $2bilion atlantic accord payment went directly to this! So over $4billion has been paid towards the debt in the last seven years - a 33% decrease! And you sit there and complain about infrastructure being built and doctors getting raises, when i'm sure you complained about poor roads and underpaid doctors in the past. Shame.

  • Cyril Rogers
    June 11, 2011 - 17:33

    This is my biggest concern. The last budget was a vote-buying one but the government forgot to tell us it was simply spending the money we will not have in future years. We cannot continue to live beyond our means and neglect the traditional base of rural Newfoundland - the fishery. It IS sustainable but the provincial and federal governments are equally guilty of destroying it by givning in to the greed of big corporations and interest groups willing to trade it off for European trade. This government has not undertaken to build our economy through long term planning and needs to go. We simply cannot afford another four years of the PC's. If people honestly think they are the only option, heaven help us. There is a gathering storm, folks! Let's not waste the oportunity to toss out a group that wants to take the easy route.

    • W McLean
      June 12, 2011 - 11:36

      The last five budgets were vote- (and poll-) buying budgets. I find it remarkable that it takes Danny Williams being out of office for months before academic and media personalities start kicking the tires on seven years of his policies. And "remarkable" is not the word I'd really like to use. Where have everyone's eyes, ears, and brains been for the past eight years?

  • They are uttering the words Ottawa wants to hear
    June 11, 2011 - 14:19

    Mr. Wangersky says in this article........ " We’ve been awash with oil-funded surplus budgets for years, financial institutions regularly pick us out as the province to watch for economic growth, and the provincial government isn’t afraid to characterize us as having a “sizzling” economy". Not only do financial institutions say those positive things about our economy but the National News Media do as well, the same ones that aided and abetted in having NL's natural resources developed and then having them toed away for the economic benefit of creating industries, jobs and infrastructure for the other provinces of Canada. The Federal Government, no doubt, is prompting the financial institutions and news media to report this positivity, without any real statistics to back it up, other than the fact that monies are received in a big way as payment for Newfoundland and Labrador Oil development. More than money is needed to make a vibrant sizzling economy, industry with jobs, and infrastructure needs to be created, as well. Of course, the reason they are putting a positive spin on things now is because they want others to think that the province of Newfoundland and Labrador didn't suffer economically over the past 62 years from the giveaway of its natural resource base. They know that Newfoundlanders and Labradorians have woken up from their long 62 year sleep and are demanding answers. They can't pull the wool over our Newfoundland and Labrador eyes on that one any longer, we know that we lost our natural resource base for the benefit of the other provinces and that we have the highest Unemployment rate in the country, with the lowest level of infrastructure of any province in the Canadian Federation. And besides they know that we didn't get any of the Federal goodies like Federal Regional Offices, Military bases, etc. handed to our province on a silver platter. Yes, indeed the words we hear from the financial institutions and the National Media is what the Federal Government wants to hear, and have probably, no doubt, planted in their ears. Somehow they think by uttering those positive statements they are erasing the sins of the past where it, Ottawa, also aided and abetted in the pilfering of the province of Newfoundland and Labrador's natural resource base for the benefit of the other provinces and itself, which saw the province of Newfoundland and Labrador fail to thrive economically.

  • Kick them out
    June 11, 2011 - 09:20

    And this is the exact same government that believes it's wise to invest in Muskrat Falls.