Monday, 11 March 2013

PLEASE INCLUDE CHANGE. A BUDGET PRIMER (Part II)

In "What The Premier Must Do. A Budget Primer (Part I)", I suggested a process in which the Premier should become engaged, in order to put her Administration on a sound policy track and give focus to one of the most important jobs of any Administration; the task of crafting  a Budget.  I proposed that the Premier go outside Government and assemble a group of trusted advisors.  While, on the surface, the advice may seem contrary, her Cabinet Ministers are not up to the job of helping her, and, the most senior bureaucrats do not have the Premier’s ear.
A Budget should not be merely a collection of line items detailing revenues and expenditures.   It should reflect a philosophy of governance; of political management.  A thoughtful Budget ought to be accompanied by a statement of fundamental principles that guide the limits to be imposed on any deficit, debt, pension plan shortfall and other critical financial decisions with long term implications.  Other Governments do not follow this practice either, though they ought to begin. 
Except for the current and completely unnecessary Budget crunch, if you relied on statements from Government, you would know little about the issues of social and economic change challenging our Province.  Must Governments only discuss these matters when the fiscal pot has gone dry?  It did propose to study the population issue, recently. That is a singular, albeit important, matter deserving of separate comment.

A Budget will note current opportunities as well as risks and a plan to mitigate them. 

For example, it might note the challenges to Government posed by population decimated communities, like St. Brendan’s, Little Bay Islands and others, where the cost of maintenance have outstripped any semblance of either economics or common sense.
The social sector, especially education and health, represents 57.7% of budgeted expenditures and the annual rate of increase has outstripped inflation, for the past several years.  This is unsustainable. Does the Administration have a wiser strategy for dealing with escalating costs than merely one based upon offering up more and more money, if people will stop complaining?

The Budget should not contain a ‘plug’, this time, as the Minister of Finance insisted, one year ago.  That decision allowed the price of oil and thus forecast revenues to be set far above what was realistic.  I noted that some, in the media, were sympathetic to the Government because the oil forecast had been generated from an independent source.  This was an incorrect response.
Just because a corporate forecaster, however qualified or experienced, has estimated the average price of barrel of oil at $124, is not a sufficient basis upon which to compose the fiscal estimates of an entire Province.  The words ‘forecast’ and ‘guarantee’ are not interchangeable.  A forecast is just that: a prediction, an estimate, an educated guess.  Therefore, the Government, using the most basic of budgeting skills, ought to have properly discounted the forecast.    

In addition, the process of government is not so rigid that adjustments cannot be made mid-year, as befits changed circumstances.  The Government had ample warning, early in this fiscal year, that its revenues were in trouble.  It did nothing to deal with the problem, except offer the laziest of responses: announce the larger deficit!    
Likely, the Minister of Finance has no intention of eviscerating a bloated public service; nor should he; though he must set a target that reflects, not just the Government’s ability to pay, but also the size of our population.  He might note that we have experienced no growth in years.  The new benchmark, for the size of the public service, can be met over, say a five year period, first, through attrition, then by scrapping the least important programs and, of course, by assessing need and performance based upon its Plan.    

The Public Service Pension Plan must be dealt with, in several ways.  Change is needed because the Pension Plan has a huge and growing deficit.  Employees’ contributions do not reflect its ‘defined benefit’ status.  Virtually all Corporations have abandoned them as unaffordable, as have, at least in part, many governments.  Fixing the Pension Plan will cause sacrifice, but not nearly so much if the matter if deferred, endlessly. It needs to be fully funded and independently managed, (the CPP Investment Board might welcome such an opportunity to enhance its own management efficiencies; possibly, public sector unions would not object).
Having acceded to Nalcor’s artificial deadline for Muskrat Falls and Jerome Kennedy’s threat of blackouts, the Government can now allow the capital works program to be slowed.

The Government has resisted dealing with the spiraling costs of health care. The public has not a clue that the perception of health care as ”FREE” will destroy a noble, but impossibly inefficient system.  That NL is distinguished as spending the highest amount per capita, on health care, in Canada, is noteworthy but not to our credit. 
Absolutely no one will endorse health care cuts but, three things are clear:

First, the current head of Eastern Health has to be given a mandate to find efficiencies in that system and Government has to be prepared to support her, and her Board, or risk unpleasant decisions, later. 
The current model of health services is, thankfully, not the only option; one that gets more patients cared for by professionals, using the logistical talents employed by the construction industry, would be a good place to start. 

The myth that every health care provider is overworked needs to be busted. (I knew a woman, with eleven kids, widowed and ran a small business outside the home…now, she was overworked!).
A health care model is needed in which health care providers are compensated, based upon productivity; it might contain, for example, an incentive that gets richer with the well-being of the patients under their care.  In addition, it ought to contain a component of individual patient responsibility. Perhaps, the new Corner Brook Hospital can be a place in which to better define and test such a new model; one that accommodates public input. So far, we know only how to spend more and more money as results continue to elude. Applying this strategy to obtain a different result from your computer would be termed madness; likely, the affliction has a more general application.

Secondly, Corner Brook may as well gird for a lot less than a $¾ billion facility (it needs an industry worse than it needs a hospital and that is not to diminish such a facility’s importance as much as to suggest that Corner Brook should not get hung up on “big”; it should insist on efficient and affordable health care).
Thirdly, streamlining of health care services must come to central and rural NL, too; though politics will continue to get in the way; and

Fourthly, as much as the new buzz is about full-day kindergarten, Government needs to answer whether the education system also suffers from bureaucratic bloat. Lots of things make sense; the idea of affordability pesters. Oh!  If only we could be a nation of administrators!     
All that said, the Minister of Finance can take all the advice he pleases.  But, defining the parameters as well as the foundations of its decisions will outstrip any individual or group of them.  When the public understands Government’s mind, its policies, and the financial parameters that will guide those policies, Budget Day will become exciting for its innovations, its commitment to fiscal discipline and to a vision that sees beyond the next election.  The hyperbole of the spender doth wear thin.

The real fun, though, will be determining whether those parameters are matched by a political leadership that gives them definition.

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