Monday, 24 April 2017

A CASE OF THE FINANCE MINISTER BUSY BEING BUSY


Just before Easter, the Minister of Finance and her officials laid out 65 pages of cuts to government expenditures. This was the result of a process known as "zero based budgeting" (ZBB), a process which requires justification for every individual expense. There is nothing inherently wrong with ZBB. Processes like this one have their place as long as their limitations are understood.

Anyone with a basic understanding of how government functions will recognize that it takes a great deal of work to perform ZBB on an $8 billion operation. While periodically necessary, if it is ill-timed it accomplishes little more than giving licence to the folks in the Treasury Board to "be busy being busy".

But it does give the public the appearance that the Minister has her "sleeves rolled up" — another euphemism for action with little purpose — and Bennett wants to create the impression that she is assiduously tackling the deficit.  

Thursday, 20 April 2017

DON'T EXPECT NEW OVERSIGHT MEMBERS TO BE WALLFLOWERS


The Ball Administration recently made four new appointments to the Muskrat Falls Oversight Committee. Two professional engineer Jason Muise and Memorial Economics Professor Dr. Jim Feehan are longstanding anti-Muskrateers, “naysayers” in the idiom of the Wiliams/Dunderdale era.

Now the Committee has three who tried their best to warn successive Tory administrations of Muskrat folly, including Bern Coffey the Clerk of the Executive Council, who is the Chair.

While those appointments seem a step in the right direction, for the present I am inclined to counsel caution that they actually represent a shift in the way oversight is performed.

Two others an accountant and a former bureaucrat were appointed along with Muise and Feehan.

The four joined the Deputy Ministers who have inhabited the Committee from the very beginning. Of course, the latter should only be ex-officio, available solely to give support to the independent members of the Committee.

Monday, 17 April 2017

LANDSLIDE'S AMAZING PICTURES STILL WON'T SPUR NALCOR

How did 2.2 million m³ of sand and clay that lay atop the section of the lower Churchill Valley shown in the photo below disappear? The devastated one-square-kilometre site is located across from Edward's Island a short distance upstream from Muskrat Falls. Read on and you will find out.

Site of  landslide viewed across the Churchill River from Edward's Island
The North Spur stability problem specifically Nalcor’s refusal to submit its "fix" for independent review still rankles those who have followed the sad saga of the Muskrat Falls project. 

The current $11.7 billion price tag is its own testament to, among other issues, Nalcor’s incompetence. But its failure to take every precaution to ensure the dam’s integrity having been warned of the risks, having closed the door to expert analysis is another in its list of indictments.

The North Spur instability problem isn’t about money anymore that ship has sailed. But four years after project sanction, an independent assessment of Nalcor’s remediation plan still eludes. 

Thursday, 13 April 2017

MUSKRAT: WHY A REVIEW BOARD IS ESSENTIAL FOR THE NORTH SPUR

Guest Post by James L. Gordon, P. Eng. (Ret'd)

I have mentioned several times that a review board is essential for the North Spur. 

Perhaps I should summarise the reasons particularly since the Owner’s engineering consultancy - Hatch - has made the same recommendation.

It is acknowledged that the North Spur natural dam is the first time a dam containing marine clay and founded on a deep deposit of marine clay has been used in a hydro dam. All major “firsts” always have a review board to add assurance to the design. I have worked on three dam “firsts” and all had review boards, and all benefited from their advice.

The first was at Duncan in BC, which is founded on a deep deposit of unconsolidated liquefiable silt. It holds the world record for settlement as predicted, at now over 6m. We had a 4-man review board which made significant changes to the project layout, adding to security.

The second was at Bighorn in Alberta, where the deepest (to date) cut-off through gravel and boulders was part of the dam. There we had a 2-man review board, including Dr. A. Casagrande from Harvard. He made a major change in the dam design which, on hindsight, avoided a possible dam failure.

Monday, 10 April 2017

WHAT THE JERRY EARLES OF THE WORLD HAVE FIGURED OUT


The Jerry Earles of the world seem to be applauding their good fortune that the Ball Administration wimped out on the task of resolving our fiscal mess. Such prescience aligns completely with the agenda of the Tories and NDP. It remains a real and present danger to the province's ability to manage ourselves as a society. 

There are three fundamental problems with Cathy Bennett's second Budget. 

The first is that she has failed to tackle what she has described as a "culture of spending" which took root under the Tories.

Second, the Minister has aligned herself with the Great and Exalted Ditherer, the Premier, having used an all too tenuous increase in the price of oil to paper over a serious deficit and fast rising public debt. 

Third, having sidestepped any plan to rectify public sector mismanagement and bloat, the Minister reinforces a public view that the fiscal crisis is really not a problem - that the Tories were bad, but not all that bad. That is a dangerous proposition when the truth is otherwise.

Wednesday, 5 April 2017

EQUILIZATION - DEFINING WHAT IS FAIR AND EQUITABLE

Editor's Note: As the Liberal Government readies for their second budget, I would like to remind regular readers of the eight-part "Budget Colloquy”  posted by JM back in 2015. Although you can argue with some of JM’s recommendations, this series was well-researched and offers a solid analysis of the state of the province’s finances. JM now returns with an introductory post on the equalization issue. 

Guest Post by  "JM"

First, I must disclose that I am not an expert on equalization. It is a complicated federal program, which played a pivotal role in most of the history of the province. During the 90’s, equalization provided nearly 30% of the total revenue to the provincial government. The highest absolute contribution was $1.2 billion which occurred in 2001

In 1999 NL received over 12% of the total federal equalization allocation, for about 2% of the population of the country.  

By comparison, in 2016 we received no equalization and the province's combined revenue from other Federal sources ($702 Million) and from offshore royalties ($485 Million) was less than the 2001 equalization value alone, adjusted for inflation. 

As the second budget from the Ball government will likely attest, NL is in dire financial straits. After nearly a decade of hiatus, equalization is again back in the news. Dwight Ball wants to get back at the negotiating table for the next round of negotiations which occurs every five years. 

Monday, 3 April 2017

HEALTH CARE: WHO WILL FIX WHAT'S BROKEN?


When the Ball government announced a cut of 93 positions in the health care system last week, for savings of $7.6 million, budget watchers expressed sympathy for the 56 employees actually let go but, otherwise, waited for the next shoe to drop.

And with good reason. 

Health care consumes 36% of an $8.5 billion operating account spending on the day-to-day operation of programs and services (source: Budget Update). $1.58B of that sum constitutes deficit the shortfall between cost and the revenues available to pay for them. The difference is financed by government’s borrowing program.

Health care’s proportionate share of the deficit this year alone amounts to $569 million. The sum is in addition to the borrowing done by the health Boards directly (several million) which only shows up on the government’s books in the “Total Debt”. And a full accounting of health care’s cost should include infrastructure the amount applied to the capital account. Putting those sources of health care deficit together you would discover a shortfall well in excess of $600 million per year. 

But, for the sake of clarity, we'll just stick with just the operating deficit.

It would seem sensible to assume that other sectors of government can’t absorb overspending by health care. So what does this mean for the health care system?