Guest Post Written by "JM"
The
first 100 days is a time when a new leader will implement their vision and
strategy for the organization they are about lead. It has become part of “leadership culture”
with countless books and articles written on the subject. But the concept originates from Franklin
Roosevelt’s first term as president when, after taking a resounding victory
over Hubert Hoover, he inherited a country in a deep economic depression.
The
concept of the “first 100 days” is simple; a leader must quickly implement
their strategy in a clear and demonstrable manner when their authority and
mandate is the strongest. Roosevelt’s
actions in his first 100 days of office set the scene for the gradual recovery
of the US economy from the Great Depression.
Although
it is not strictly fair to compare our present day economy to the great
depression, the current downturn in the oil economy is accelerating the
financial crisis in Newfoundland and Labrador.
We
will have an accrual deficit in 2015 in excess of $1.8 billion and there is a
rapid divergence between government revenues and expenditures. Other than the immediate impact on royalties,
the low oil price is delaying future oil projects, and will dramatically change
the expected level of royalties from the Hebron project over the next decade.
This
oil crisis will be met with a long known demographic time bomb - both creating a perfect storm
for the economy of Newfoundland and Labrador.
So, as we have a new government, with a resounding majority. Is there
anyone who doubts that the Liberals have inherited a province on the
precipice of an economic crisis?
Kim
Campbell is credited with stating “Elections are no time for policy debates”.
Our most recent election seemed to have adopted this mantra. Little was said
about our dire position and the tough actions which will be required. The people of the province were done a
disservice by this lack of real debate.
Yet
we have a change in government. It is a result over which we should all take
some collective relief.
By
all accounts, Mr. Ball is a likable and capable individual. Unlike recent leaders of the province, he
seems to have been able to recruit a strong team of candidates. He also seems to be reaching out to the strength
within his benches, as opposed to being threatened by them. I hope this continues as he will need Cathy
Bennett, Siobhan Coady, Dale Kirby and others to bear significant files over
the next 4 years.
Yet,
Mr. Ball is the one who must shape the strategy, and guide the team. So, I offer Mr. Ball my advice for his
“First 100 Days”:
1) A full review of the
provinces current 2015/2016 budget
The
news, last week, of a $1.8 billion dollar deficit should identify the
depth of our current financial struggles.
Mr. Ball has no choice but to undertake a full review of government
spending and revenue estimates for 2015-2016, both on an accrual and cash
basis. This number must be fact based,
and it needs to be known quickly. The Liberals
need to do this as one of their first actions to set a financial baseline. I
believe this financial update would provide cold reality to Mr. Ball and his
team.
2) A detailed review of
future revenue projections.
In
the budget series I wrote on this Blog, the post entitled “Revenue Projections – Close Your Eyes, Make a Wish, and Hope
for the Best”, I concluded that the Province was overstating future
revenues in the 2016-2020 time frame by over $500 million annually. Based on the collapse of the Alberta oil
economy, and impacts on royalty streams, I expect that the future prospects for
revenue will be even more dire than predicted 4 months ago.
The
Liberal government should immediately commence a 5 and 10 year revenue
projection, which is a bottom up assessment, based on country wide economic
inputs. This should be grounded in the assumption oil will remain below 80$/barrel (nominal) for the next 10 years.
An
essential part of this exercise is a detailed review of the royalty payment
profile from the Hebron project. The oil
price will have a dramatic impact on what Hebron will pay the province in
royalties.
Based
on latest cost estimates of oil price, and cost growth on the project, we need to knw when Hebron will reach Tier 1 payout.
Without understanding where our revenues will
be, the extent of budget cuts required will be unknown.
3)
A new 5 and 10 year
financial plan
Based
on items 1 and 2, the 10 year review will reveal just how weak our
present financial situation is. It will
also demonstrate that with a reasonable assumption on oil prices, and timing
for new offshore projects, that we have a structural problem. That is, we are outspending our revenues by
almost $1.5-2 billion a year, on a long term basis.
The
10 year projection is required because it will clearly demonstrate to those
who advocate for short term stimulus to weather the present slowdown, we will be unable to spend our way out of
this crisis. Short term stimulus will not correct the fiscal imbalance we have
in this province. We need to cut
spending, and raise revenue.
4) Action on the population growth strategy
The PC government generated a population growth strategy. Like most government documents, it is it full of graphics, pictures and
platitudes. We need to revisit this
strategy, put someone in charge of it, assign clear metrics, and conduct follow
up.
We need action on population growth. Dwight Ball would be wise not to start over,
but to build on this work, and to give it concrete and measurable actions.
He needs a cabinet minister who is capable, and
clearly responsible for this file. Fortunately he will be blessed with a
relatively strong cabinet. He should
assign this file to one of his best, and it is one of the most important long
term issues we face.
Population growth remains our number one, long term
challenge in this province.
5) Independent Review on Muskrat Falls
No new premier can ignore the largest public works
project currently underway. The project
is well behind schedule, and is hemorrhaging large amounts of money. We need to know the truth on the project
status, and we need to be able to plan our long term electricity supply. Dwight Ball cannot proceed without a full
status review on the project. This should be done immediately and focus on the following key tasks:
(i) Independent schedule review of the Muskrat Falls Project
(ii) Independent cost review of the Muskrat Falls Project
(iii) Release of North Spur engineering documentation to the
public.
(iv) Public release of the technical and financial risks to the
ratepayers and taxpayers of the province should CFLCo lose the current court
action in the province of Quebec.
I expect that following
the review, there will be calls for a public inquiry on the decision making for
Muskrat Falls.
The period May to November,
2010 is when incomplete data, bad decision making, and poor corporate
governance, allowed this ill-advised project to proceed past DG2, putting us on
the road to a $10 billion dollar expenditure.
Make no mistake, Muskrat
Falls is a boondoggle worthy of a witch hunt.
Mr. Ball needs to open the books in a clear and transparent
fashion.
6) Review of Oil Investments Made by Nalcor
There needs to be a full public disclosure on the real
return on investment made by the Provincial Government, by Nalcor’s investment
in the offshore developments. This
should duly consider the interest which the province has made on the equity
“borrowed” to fund those projects. This
should also properly account for decommissioning liabilities associated with
the developments.
I consider this to be a priority, as I see one of the
viable options for the province to raise much needed revenue in the sale of the
province's stake.
To have a clear policy debate on state investment in
oil projects, the public must first need to understand what the real rate of
return is on the investment. Right now
that information does not exist in the public domain.
7) Review of Article 8, 2005 Atlantic Accord
Back in 2005 when the
Province renegotiated the terms of the Atlantic Accord it was agreed that by
March 31, 2019 both parties would review the agreement. Specifically;
The review will address a) the extent to which the Atlantic
Accord objectives have been achieved, including the key objectives of the
Atlantic Accord that Newfoundland and Labrador be the principal beneficiary of
its offshore; b) whether Newfoundland and Labrador has realized lasting fiscal
and economic gains from its offshore petroleum resources revenues; c) the
Equalization arrangements then in effect; d) the fiscal disparities that then
exist between Newfoundland and Labrador and other provinces; e) Newfoundland
and Labrador’s undeveloped offshore petroleum discoveries; and will have regard
to the 1987 Canada-Newfoundland Atlantic Accord Implementation Act, any
legislation that implements the terms of this arrangement, and any other
relevant considerations.
This
Article 8 should really send shivers through the spines of all Newfoundlanders
and Labradorians.
Remember
that the royalties which accrue, and the local benefits negotiated, are the
result of the 1987 Atlantic Accord.
Without the Atlantic Accord most of these benefits would belong to the
Government of Canada.
We
may be naive enough to believe that no federal government would ever change the
governing principals of the original Atlantic Accord. But, with the Nova Scotia offshore currently
on its last life line, in 2019, we could have all 9 provinces of Canada seeking a share, and, as a minimum, equal access to our potential great wealth.
Furthermore,
by 2019 we have several international free trade agreements which may cause the
“local benefit” components of the Atlantic Accord to be potentially
problematic.
Mr.
Ball needs to complete the review, because he will inherit this major issue if
it unfolds in a manner permitted by the contract language. I for one would like
to understand the intent of the clause and why it was agreed to by the Williams
government.
8)
Program Review – Health
Care
I
am not a medical professional. However,
I have never made a trip to a health care venue without cringing with the waste
and inefficiencies in the system. There
is one thing that which cannot be debated: we need improve service delivery and
output for the dollars that we spend.
Mr. Ball should appoint his most capable cabinet minister to the health portfolio. It requires a person of great skill. Politically, it may be the poisoned chalice,
but it is one of the biggest challenges we face. We have to deliver more with less.
One
of Mr. Ball’s most important tasks, in the first 100 days, is to appoint the right
person to lead this review. For me the
choice is simple, Cathy Bennett. She
will quickly become the hardest working, and most capable person in the Liberal
cabinet.
9)
Rural Populations
Much can be written, and
has been written on this subject. We
need a premier whose head does not lie in the sand. An urgent priority is to
start to centralize our rural population before a crisis of elderly care is
before us. Its severity will unfold over the next 10 years; Mr. Ball would be
wise to tackle it early, in a real and substantive fashion.
The first order of
business is to change the present rules when communities vote for
resettlement. Only permanent residents
(year round) should be permitted to vote in such an election. A 2/3 majority should be sufficient to
initiate a resettlement of the town. Although
this will have minimal short term impact. It would be a powerful statement if it is seen that that
we have a government finally focused on the rural demographic crisis.
The second order of
business is to stop all public investment (schools, government buildings, old
age homes) in small communities where the average age is presently over 60
years old. It is pointless to build a
Public/Private nursing home in a community where the workers needed to operate
the facility are not available. We need to invest in communities that have a
fighting chance of survival.
The third order of
business would be to get the statistics department of the Department of Finance
to update their population demographics report such that it reflects current
trends. Rural investments should only be
made in towns which have a hope of survival 20 years from now.
The fourth order of
business is to consolidate all the rural and business development agencies
(Federal and Provincial) under a single jointly-managed agency. This agency should be focused on red tape
reduction, and should operate at arms-length from the government. Funds should be used for job creation, and
not for soft support items, as is the current practice. This would require the agreement of the
Federal government. However, there is
too much waste and duplication in the various funding agencies across the two
levels of government. Consolidation is
required.
We cannot give up on rural
Newfoundland, but we cannot be blind to the realities either.
10) Fisheries Marketing Board
When I travel internationally,
I always take the opportunity to visit fish markets in faraway cities. It is very clear that one of our major issues,
in this sector, is marketing.
Newfoundland and Labrador cannot do this alone. We would be wise to promote an Atlantic
Canada initiative and to market Atlantic Canadian seafood internationally.
In Atlantic Canada, we
have a supply of organic, wild fishery species.
It is a very valuable product.
But we need to come together to market and manage this industry. Like many
issues in this province, working with our neighbors might not be an easy sell,
politically. The result is that our
fisherman will continue to receive less for their product than their
colleagues in other parts of the country.
The concept of an Atlantic
Canada marketing agency is a good idea.
Mr. Ball would be wise to, at least, give it due consideration, and
earmark the CETA budget for what was intended.
To conclude there are many
other issues that need to be addressed.
But the priorities are simple and perhaps can be described in one phrase: “We must do better with less”. We
need good government not preoccupied with grand ideas, but one that does a good job in what governments should be doing: reduce waste, incubate opportunity, provide services
to the population, in an efficient and accessible manner.
Let’s see what the next
100 days brings. Good luck Mr. Ball. You
have your hands full.
________________________________________________________
Authors Note: I would like to
thank both Des Sullivan and Ed Hollett for the opportunity to express my
opinion on their blogs over the past 3 years.
My subject has largely been Muskrat Falls, which I have invested
considerable amounts of time to study and understand. My initial goal was to try to educate the
public on the project, which I am hopeful I did have some part in playing. But I fear the opportunity to influence the
project is passed, and as such this will be my final blog contribution for the
foreseeable future.
Writing on a blog is something that takes a considerable
amount of time and energy, especially to do it right. We are blessed in this province to have
several very good political blogs. Both Ed
and Des, whether you agree or disagree with their point of view, contribute
greatly to the debate in the province.
The public should thank them for their efforts, but more important they
should continue to read their work.
Editor's Note: The Uncle Gnarley Blog has always welcomed the insights and analysis of JM. He was among the first critics to assess the Muskrat Fals project and to warn of its risks, false justifications, and the options Nalcor ought to have examined. The issues he raised are now being exposed as cost overruns and financial impact on the province's fiscal capability . JM wrote an extensive analysis and submitted it to the PUB, during the DG-2 review of the project, which was acknowledged in the Board's Final Report.
I want to thank JM for his many valuable contributions; those published on this platform and on others. He should know that there will always be space for his work on the Uncle Gnarley Blog.
