Breaking Down the Budget: Why, How, and What Now?

How Bad is Our Financial Situation? In a line, interest payments on debt is our second biggest expense right now.

How Bad is Our Financial Situation? 

In a line? Interest payments on debt is our second biggest expense right now. We owe over 14 billion: that’s the highest level of net debt in the Province’s history. And it’s going up.

All these taxes, trimmings, fees, and streamlining-layoffs in governmental departments haven’t been for nothing. We’re knee deep in crippling debt, and the interest payments are preventing us from marching forth in to a good future.

Wrap your mind around this: the second biggest expense for our government right now isn’t healthcare (like a new mental health institution!) or fabulous employment initiatives, nor anything approximating services to improve our collective joie du vivre — instead, it’s interest payments on debt. . As a taxpayer, that should outright depress you.

Presumably, we’re here because of our history of electing politicians who made poor financial decisions, and for putting all our eggs in the oil basket. Or if you’re open to accepting the blame, we’re here because we force our politicians to focus on short term gain, by only electing candidates who promise you everything NOW (even if that means austerity measures later).

A population wouldn’t elect a candidate saying “we’re screwed you all have to pay for it!” But that’s the truth of it: we’re screwed and we all have to pay for it. Because money doesn’t grow on trees. It comes from taxpayers’ pockets, fee revenues, and efficiently streamlined industries.

What’s the Plan Again? 

When the austerity budget dropped last year, we were told The Liberals were handed a deficit of $2.2 billion from the PCs, and if they did nothing, that number would jump to $2.7 Billion.

The deficit was largely attributed to manic overspending when times were good + a steady decline in offshore oil royalties we were expecting (with crossed fingers as much as hard logic). So Cathy and Dwight dropped some big truth bombs and austerity measures on us last year. Some of which stunk more than others, like their justifying the pittance saved of closing libraries in a shockingly illiterate province.

Their end goal was to increase annual revenue for government, and reduce its expenditures, with the hopes of being out of debt by 2022–2023.

Is the Plan Working? 

Well, yes, if the goal is running a government like a business. The deficit is down from 2.2 billion to a revised 1.1 billion.

“I am happy to announce that we are currently ahead of our forecasting in terms of deficit projections,” Bennett said an hour ago, “and are on track to return to surplus in 2022-23.”

To meet her own targets for the year ahead, Bennett had to lower the deficit to $800 million-ish this year, and the final figure for the 2017-18 deficit is projected to be $778 million.

They attribute their success to “focussing on a stronger economic foundation and a more efficient public sector.”

But is the goal to run a government like a business, and to get us out of debt, or is it to come up with brilliant innovative ways to make us make money, have jobs, and a self-sustaining economy?

Some Good News from the Budget Announcement: 

The Gas Tax is Cut

“Beginning on June 1, 2017, gas tax will be reduced by 8.5 cents per litre; on December 1,it will be reduced by a further four cents per litre, for a total reduction of 12.5 cents per litre by the end of the calendar year.”

The Budget Had No New Taxes or Fees

Not really a surprise, because what was left to tax? “Good news” might have been a lowering of more fees and taxes, but hey, this is working, and the end of debt is hypothetically near.

Good News for Seniors

The Provincial Government will invest $120 million to maintain the Newfoundland and Labrador Income Supplement and the Seniors’ Benefit.

$ 3 Billion Infrastructure Plan for the People

“Through a $3 billion multi-year infrastructure plan, government will invest in education, health, buildings, as well as transportation and municipal infrastructure. These investments, which leverage federal, municipal and private sector funding, are expected to generate an average of $560 million in annual GDP and the equivalent average of 4,900 full-time jobs annually over the next five years.”

But Have the Minded Their Spending?

There is still some muttering from intelligent, rational people about government spending. Namely, that since dropping their 2016 austerity budget, some say there’s been no significant change in their spending. Without reductions in government spending, there can’t be as much in the way of tax and fee reductions. Math is a balancing act. And it was, after all, years of unchecked overspending (exasperated by drops in oil’s value) that got us here.

But HOW CAN an NL Government Mind Their Spending? It’s a Pickle

Newfoundland needs its rural communities to be less financially dependent on it, or else it’ll always bleed financially. Saying so makes everyone uncomfortable. And we’re not willing to confront it for fair reasons. It’s a gushing expense no one’s been able to solve because we all want a Newfoundland & Labrador that looks like the one we currently have.

But so long as we’re running things like expensive roads and electrical into countless tiny communities that generate little money, we’ve got a unique spending problem. Naturally, creditors are warning the government about its spending right now, but we live on an island where most of our communities rely on government spending.

Expensive actions, like putting jobs and services in remote towns, benefit a community, not the province’s bank account, making it near impossible for the government to be a moneymaker. Per capita expenses in NL are the highest in Canada, by a lot.

If We Freak Out Credit Lenders, We’re Over 

If creditors look at government’s actions and see gross financial negligence, naturally, we’re unlikely to get another loan. But we need more loans, no matter what course of action we take. We’re so in debt, we have to keep borrowing, big time, for years to come. So, as much as no premier and fiance minister wants to piss off the people, it needs to act in a manner that, first and foremost, looks good on paper to the money lenders. Or it’s all over.

With regards to borrowing, it was announced today that borrowing requirements have been reduced by $2 billion, to $400 million.

One Year More Graceful:
Government  Did a Better Job of Reassurance and Communication

The tactless and poorly communicated manner in which government dropped its austerity budget shocked people into protests and panic last year. There was no plan communicated, just “The Sky Is Falling! We’re Coming For Your Money!  Run!” It left people petrified, and pinching pennies to the point of slowing the economy.

Seems they learned a lesson. Today, we’re still paying the same fees and taxes (minus the soon-to-drop gas tax), but there’s certainly less outrage, and far more hope and understanding from the populace, now we know there’s a plan and we’re told it’s working. Cross your fingers, I guess. It’s the Newfoundland tradition for long-term planning.

Still, Austerity: Even If “It’s Working” It Lacks Innovation

While it’s all sounding like positive news that the austerity budget it working, it still is what it is: an austerity budget. With no mitigation beyond the gas tax.

“There’s no plan for growth, and no job strategy unless you count the projection of an 18 per cent unemployment rate by 2021,” NDP’s Earle McCurdy said today. “They haven’t just slowed the economy with this budget; they’ve put it in reverse. Look at the indicators they provide: housing starts going down, disposable income down, population numbers down. The Liberals are showing a remarkable lack of imagination. Worse, they’re showing no signs of learning from past mistakes. Once again, we’re relying on an increase in oil prices to save us. People were expecting worse, so they’re inclined to think of this as good.”

I mean, we are still taxing books and closing libraries. It’s pretty embarrassing.

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6 Comments

  • The only aim of this budget is to benefit the incumbent. Indeed, it is clear that the current budget was politically and ideologically motivated, crafted purely in a reactionary fashion to the negative political backlash they received over what I can only describe as one of the worst austerity/tax hike budgets I have ever seen. For instance removing the gas tax. According to consultants this was one of the most successful revenue streams the Liberals had and was mostly responsible for them potentially hitting their deficit targets. However, now that it has been removed financial consultants are not sure if NL will remain on track to meet their deficit target in 2022. Moreover, it was suggested by multiple consultants from “far away” that not only should the Liberals keep the gas tax but remove the levy and the book tax, two taxes that only cripple NLanders in terms of education and average home income – but alas it was removed because the Liberals wanted to increase their popularity, hardly responsible governance). Another thing that seems to have flown under everyone’s radar is their slash and burn policy for MUN. Indeed, MUN already has the lowest endowment fund/student among the U16 and the comprehensive universities (in case you are wondering comp. universities offer a wide range of programs whilst practicing research intensity) – and this is largely associated with the provincial government not investing in higher learning. Indeed the Liberals have slashed our endowment to the point that it is nearly impossible to teach or conduct research effectively (some departments have no budget because the university is that broke). This year the Grits removed another 3 million from MUN and also instituted a tuition freeze making it impossible for MUN to increase its revenue from fees – minister of higher education said we were lucky it was not 7 million, with these cuts he will be lucky that MUN even exists in a few years. Perhaps this province needs a reality check? Tuition at MUN is already the lowest in Canada and even if it was raised by 5% would remain the lowest. Moreover, a modest increase would go a long way – a 5% increase would increase MUN’s revenue by about 3 million dollars which would solve a lot of fiscal issues. However, because governments here do not think long term and craft budgets that for political and reactionary purposes MUN cannot even increase tuition by 1% (which would amount to a couple of bucks by the way). According to Maclean’s student satisfaction is lowest at MUN because the university has no resources or services. Why? BECA– USE THERE IS NO FUCKING MONEY…..and this NL Liberal government just made a bad situation for higher education in this province a lot worse. This may very well be the most fiscally incompetent government I have ever seen and if they don’t change the course they are going to see a provincial brain drain.

  • The only way for this province to flourish is by creating industries that can supply products and services to the entire world. Like having an auto manufacturing unit, pharmaceuticals, food processing and many more on a large scale. Industries that are always going to be in demand and immune to fluctuating economies. To do that, we need a much competitive business environment. One with lowest possible business taxes and attractive business policies.

  • It’s unbelievable that so many people are willing to settle for just getting by. I know the romantic image of Newfoundland is a place that will take whatever comes its way – good or bad, but that doesn’t change the fact that the government has historically and continuously kept its people in a state of disarray. How many normal people actually felt the benefits of “the boom?” What was so different? Rent in St. John’s went through the roof, and every bayman bought a new Bench jacket. Ok… then what? Nothing will change in NL until the attitude does. Just getting by is not good enough. Someone needs to be held accountable, and until Newfoundlanders deal with the hard truth that paying for rural NL in its current state is just not feasible, I see no reason why the government has any reason to believe that they can’t get away the crimes they’ve been pulling for generations.

  • I dunno, I don’t think Earle’s comment is fair. The economy, housing starts, and the population were already free-falling when the Liberals took over, mainly due to big picture influences well beyond the control of a year’s worth of governance. As for learning from past mistakes, we’ve never seen this sort of caution from a government in NL. It actually DOES represent a u-turn from the usual spend, spend, spend, get elected, spend, spend, spend cycle we’re used to. It’s hard to say now whether it’s going to work, but we clearly needed a new approach. What they announced this week is exactly what they said they’d do in year two. As far as i can see it, they’re executing the plan just they way they laid it out back when they got in. I’m cautiously optimistic…

  • I simply packed my things and left in February.

    I’m tired of government waste and ineptitude. I’m tired of the welfare-state. One in six Newfoundlanders and Labradorians are either too good to work or too unskilled to work. By 2019 it’s projected to be one in four.

    I’m tired of working 100-hour work weeks to make a good living for myself. An entire family could comfortably live off the money I pay in taxes but instead we have bloat, government waste, broken services, and overpaid politicians.

    So, I left and immediately doubled my salary. Newfoundland and Labrador is a sinking ship until the attitudes change. This would be a great place if it wasn’t for it being full of Newfoundlanders and Labradorians.

    I’m out of patience for things to change.

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