Tuesday, 19 April 2016

Muskrat Falls: Will the Madness Never End?

Muskrat Falls: Will the Madness Never End?

By: Ryan Young

In the wake of the fallout from last week’s budget, the Liberals and Nalcor were dealt another blow to their credibility on Monday when the Nunatsiavut government released the full report of the Harvard study on methylmercury. The study, led by Dr. Elsie Sunderland, reports that the downstream effects of methylmercury in relation to the Muskrat Falls project will be 13 to 380 percent higher than was predicted in the original environmental impact assessment for the project.

To catch my loyal readers up on the issue at hand, methylmercury is a toxic compound that is formed from naturally occurring inorganic mercury by the action of anaerobic organisms that live in aquatic systems and oceans. Through the methylation process, inorganic mercury is converted to methylmercury in the natural environment. In layman terms, bacteria in aquatic environments break down organic matter such as vegetation and convert it into the toxic methylmercury compound. Methylmercury is commonly found in small amounts in aquatic systems but in terms of Muskrat Falls, the amount of methylmercury that will be produced is directly related to the available organic carbon content of reservoirs derived from flooded soils and vegetation. Nalcor has only committed to clearing a small amount of the vegetation in the area where the reservoir flooding will take place. The residents of the Lake Melville area had their fears about a possible dramatic rise in methylmercury when the reservoir is flooded confirmed by the release of yesterday’s report.

The study suggests that anywhere from 30-200 residents could see exposure to toxic methylmercury that exceed the acceptable levels set out by Health Canada. Of particular concern is for the people of Mud Lake and Rigolet. Many residents there still depend on local game and forage for a large part of their diet. With the toxicity numbers outlined in the study, it will only be a matter of time before we start to see direct health effects on the people who live downstream from Muskrat Falls. Methylmercury is primarily a central nervous system toxin. In adults, dietary exposure can affect cardiovascular health, immune health, and hormone function. Even more disturbingly, chronic exposure from dietary consumption has been linked with brain impairment in children, including IQ deficits, attention deficit behavior, and reductions in verbal function and memory. These are very serious and very real concerns and the people living in the Lake Melville now have the facts to back them.

So where does Nalcor stand in all of this? While a spokesperson for the crown corporation said that “we will take the time to study the findings further,” VP of the lower Churchill project Gilbert Bennett was quick to say that “we do not predict that the creation of the Muskrat Falls reservoir will heighten risk to people in Lake Melville.” Bennett maintained that environmental studies for the project “have been undertaken by nationally-recognized technical experts.” While this is no doubt true, it is hard for anyone, lest of all Gilbert Bennett, to criticize the credentials of the study. Harvard University cannot be brushed off as a biased neigh-sayer. They are one of the most respected research institutions in the world and this report demands serious consideration by Nalcor. For Gilbert Bennett or anyone else to shrug this study off is nothing but pure contempt for the people of Lake Melville.

On the other side of the issue, the Nunatsiavut government says they are considering “all options,” including the courts, to force Nalcor to clear the reservoir before flooding. Nunatsiavut president Sarah Leo told media that the concerns are valid and that the culture and health of the Inuit people living near Lake Melville is being directly threatened from the development of Muskrat Falls. Nalcor has stated that it will issue warnings about consuming fish and seals when methylmercury levels spike. Leo says that is unacceptable and that this study confirms their fears about long-term toxicity. Her message to Nalcor was: “until full clearing is carried out, flooding must not be allowed. It’s as simple as that.”

So where does that leave us? The brass at Nalcor have all but outright said that they will disregard this study and continue with their plans to flood the reservoir without clearing it. In the grand scheme of things, people like Gilbert Bennett and Ed Martin can’t be expected to care about 200 Inuit when they have six figure salaries and big bonuses at stake. For Nalcor it will be business as usual. I fully suspect that the Nunatsiavut government will file a court challenge based on the Harvard study. Whether or not it is successful, it might certainly add further delays to an already over-delayed project.  Frankly this issue should have stopped the project in the environmental assessment stage. It makes this blogger wonder what strings were pulled to push it through in the first place.

For many people in this province, the Muskrat Falls project has been all about cost. With the release of the study yesterday, however, it is very clear that we have an ethical and environmental dilemma on our hands as well. Instead of measuring the project in dollars in sense we now have to think about it in terms of the environment and human life. Is it worth it? If I was sitting on the fence about shutting down Muskrat Falls now, this issue would push me over the edge. With a price tag that will likely reach $15 billion or more, a little more to clear the reservoir and spare the people of Lake Melville is not too much to ask for…unless you are Nalcor. The people of this province need to stand firm with the Nunatsiavut government and demand that Nalcor take action on this issue. If not we will all bear the responsibility of hundreds of our own in Labrador, sick or dying, to keep the lights on in Nova Scotia. I don’t want that on my conscience. Do you?

Friday, 15 April 2016

Budget 2016 - Who Pays for Rainy Days?

Budget 2016  - Who Pays for Rainy Days?

By: Ryan Young

There was doom and gloom hanging in the air of the House of Assembly yesterday as Finance Minister Cathy Bennett stood to deliver her maiden budget speech. You could have almost mistaken the event for a funeral. The only difference being that a funeral would likely be a more uplifting event. There were more than a few shocked gasps and whispered “oh-my’s” going around the gallery as Minister Bennett delivered the news and there was a look of shell-shock on the faces of many advocates and officials that were trying to digest a very difficult afternoon. If reaction on social media is any indicator the funeral analogy is quite apt as many people see this budget as the end of Newfoundland and Labrador as we know it. That may be a bit of a stretch, but there is no doubt that people are worried about what this budget means for them.

For many it was not the budget that they expected or wanted. Most people expected harsh measures but I don’t think many could have predicted what actually came down. As I wrote in my pre-budget analysis, I was not expecting any major public service cuts. On that issue I was correct. On the issue of taxes, however, I was dead wrong. The HST raise will create plenty of rhetoric in the house after all that Dwight Ball has said to defend his cancellation of the plan that had been put in place by the previous administration to raise it by 2 points. You can expect Paul Davis to beat that horse to death and back again during question period. Minister Bennett pulled no punches in delivering the bad news, sparing least of all the PC’s who she blamed for creating the financial mess we are in. Bennett said the tough budget was made necessary by a "failure to plan" by former governments, and oil royalties that once accounted for 30 per cent of revenues dropping to just over 7 per cent.

Bennett promised that a new zero-based budget approach would be taken as we move towards future budgets. This approach would see future budgets being costed from the ground up and not based on budgets from previous years. As a show of good faith cabinet members took a 10% pay cut for themselves. The gesture will save the province just over $60 000. With a mini-budget planned for the fall and more bad news expected in 2017, it looks like this is only the beginning of the rainy days for Newfoundland and Labrador.

So what does Budget 2016 mean for you?

The Good

There were certainly no sunny ways to celebrate in this budget, but despite words to the contrary by Cathy Bennett this week, it did include a few positive investments. The province put up about $60 million for innovation and diversification including funding for culture and heritage initiatives, tourism marketing, improving rural broadband capability, and research and development. They will invest a further $13 million to expand opportunities in seafood, mining, forestry and agriculture. There was also $11 Million earmarked for planning for the new Corner Brook and Waterford hospitals and an additional $2 million for long term care planning.

Some of the better parts of the investment plan were strangely absent from Minister Bennett’s speech in the house. $570 Million was announced for infrastructure spending but the minister failed to mention the $63.7 Million that was earmarked for the Trans-Labrador Highway. I had the pleasure of sitting next to the Mayor of Red Bay in the gallery and she had traveled to St. John’s with the hopes of hearing an announcement on the TLH. She left feeling that Labrador had gotten the shaft again. In fact, even though there were several budget initiatives aimed at Labrador, Minister Bennett failed to mention a single one of them. It kind of puts the “left-out” feelings of the people of the big land in better perspective.

There were also a few social spending surprises in the budget. The major announcement was $76.4 million for a new low income subsidy and an expansion of the existing senior’s benefit. Not included in Bennett’s speech but found in the budget highlights were also announcements for $12 million for renovating and modernizing public housing and improved supportive housing. There was also $119 million for inclusive education initiatives and $1 million for an expansion of the existing family court facilities. These are all well needed initiatives but we can’t help but feel that this budget did not go very far to address the extra pressure that will be added to our social systems as a direct result of the financial measures contained in Budget 2016.

The Bad

An additional $882 million annually will be raised from Newfoundlanders and Labradoreans through what Minister Bennett calls a series of “revenue adjustments”. Personal Income taxes are going up by 2% in each bracket over the next 2 years. HST is also going up 2 points, despite Dwight Balls previous insistence that the HST was a “job-killer” when he canceled the PCs plans to raise it just after the election in November. The gas tax will double with a rise of just over 16 cents. Tobacco taxes will increase, and there will be over 300 fee increases and 50 new fees added to government services. HST will be applied to insurance premiums as well, meaning residents will pay more on their insurance bills starting this year.

Some other less than favorable announcements included deferred infrastructure funding for some schools and capital works programs as well as increased class sizes in schools. The previous administrations decision to replace student loans for post-secondary students with grants has been reversed and $14 million has been cut from the budget at MUN. The province will leave the decision to keep the current tuition freeze in place with the university.

In the public service, 450 full time positions were cut from agencies, boards, and commissions. Another 200 positions in the core civil service have also been cut, however many of these employees will be restructured instead of losing their jobs outright. These cuts will have a negligible impact on the overall bottom line of the province but it is not surprising that they were so few as the government is about to start collective bargaining with the unions. More cuts should be expected in the fall.

The Ugly

The worst part about this budget is the fact that it puts the burden of past mistakes squarely on the backs of regular working families. In addition to the tax and fee increases, the government also announced a new temporary deficit-reduction levy that will range from $300 per year for lower income earners to $900 per year for top earners. Bennett promised a rollback of the levy would start in 2018 but for right now each and every worker in this province will have to pay just a little more. For someone earning $200 000 annually, $900 is a non-issue, but for a family living on $35 000, $300 will hurt. It is the regular taxpayer left holding the bag again.

The government estimates that the average worker will pay an additional $3000 per year based on their budget estimates. When you factor in the elimination of the baby bonus and the increases on gas and insurance premiums, it becomes clear that working-class families will bear the brunt of this budget. For many people the $1.3 Billion earmarked in the budget for Nalcor will be too much. On top of all of the increases we will also have to deal with constantly rising power bills starting this July. When asked if the massive hydro-electric project was a mistake, Bennett said the risks of cancelling the project are "enormous" but added, "We're going to make the changes that allow our government to have strong oversight on that project."

That might be hard to swallow when Ed Martin and his $600 000 salary are still in charge of the ongoing quagmire of construction delays and cost overruns that is known as Muskrat Falls. Cathy Bennett is very familiar with Ed Martin from her time as the chair of the Nalcor board and she should have some first-hand insight into how the corporation is run. Dwight Ball said over and over before the election that he had faith in the Muskrat project but not in its management. His solution to the management problem since the election, however, is to keep everything the same and issue Ed Martin  $1.3 billion to spend as he sees fit. This budget might be a little easier to take if it were not for the gathering shadow that Muskrat Falls has become.

Looking Forward

With an all-in philosophy on Nalcor being made quite clear, Cathy Bennett has delivered a budget that will be very hard on the working class people of this province in order to continue the development of Muskrat Falls. While we all realize that there needed to be strong and decisive action taken to begin repairing our fiscal outlook for the future, the decisions brought down by the minister yesterday will have a very negative effect on our economy and on the confidence of the young families that are left wondering if they have a future in Newfoundland and Labrador.

While more cuts to the public service are coming, it is likely that they will be based on seniority and will have an even greater effect on young families who want to stay in the province. The overall impact to our economy will reduce our real GDP by 3.2%. For those who don’t follow economics that translates into less jobs and a decreased tax base which means that the “temporary” measures outlined in yesterday’s budget may not be as temporary as the government would like you to believe.

There is some hope for this budget but only if major, targeted public service reductions follow it in the fall or next spring. If we can trim another $500 million and if oil goes back up in the neighborhood of $55 a barrel we could be back to running manageable deficits where any additional oil revenues could be used to balance the budget or pay down the debt. In the absence of that, however, this budget falls flat on the backs of our working families. We, the people, will continue to bear the brunt of loose fiscal management and be responsible for funding the Muskrat Falls project for generations to come.

If one positive thing can be taken from this budget it is that more people may begin to realize that the politics that they wish to ignore are about to start hitting them where it hurts. People might just begin to listen to what the politicians are saying and start to hold them accountable for their actions. Everyone’s wallet is about to get a little thinner and the only thing we will get out of it is a power bill that is three times higher. The people who didn’t care before might just start to take notice of what is really going on in this province. We can’t solve new problems with old ideas and there is nothing new or innovative to be found in Budget 2016. As far as I see it we have 2 choices. We can bend over and grin and bear it or we can start to come together and say enough is enough. If we want our government to be accountable, standing on the sidelines may no longer be an option.

Wednesday, 13 April 2016

The Honeymoon is Over - Pre Budget 2016

The Honeymoon is Over - Pre Budget 2016

By: Ryan Young

As Finance Minister Cathy Bennett prepares to table her first budget in the House of Assembly tomorrow, the public eagerly waits to see if we will finally be let in on the Liberal “plan.” Dire words came from the minister this week when she said that “not a single happy choice” would be found in Budget 2016. Those are certainly ominous words to hear from a finance minister just a few days before a provincial budget. Based on what we have seen from the Liberals thus far and the admission that the budget will actually be a three-part series that will include the 2017 budget as well as a mini-budget sometime in the fall, I don’t expect tomorrow’s budget to be quite as gloomy as the minister would like us to believe. Certainly there will be a few painful cuts and tax increases, but overall I don’t think that the real pain will come until a year from now when the Liberals finish up their government renewal initiative. Let’s take a look at what to expect in tomorrow’s budget.

Taxes and Fees

Despite the desperate need to raise some revenue, I don’t expect that this budget will backtrack on the Liberals decision to cancel the HST increase. That may come in 2017, but I am not sure that Dwight Ball feels confident enough yet in his shoes as premier to stand up and try to defend that decision in the house. More likely we will see increases on gas tax as well as on so called “sin taxes” such as tobacco and alcohol. You can also expect government fees to increase. Things like driver’s license renewals and hunting license fees could all see a moderate increase in this year’s budget. It is possible that we might see an increase in personal income taxes but that will, again, likely come in the fall or most likely, next spring.

Public Service

The disproportionate size of our public service has to be addressed. Indeed, this province spends half of its expenditures on salaries and benefits for public employees. With the Liberals promising no civil service layoffs as part of their election platform, they will be very wary about any cuts that they make this year. With contract negotiations with public sector unions looming in the very near future it is more likely that the government will, for the most part, leave the public service unscathed in this budget. What we might see from Cathy Bennett is some consolidation of certain positions that have proven to be clear redundancies during the line-by-line assessment of the government books. Most likely though, those positions will be retained and shuffled elsewhere, possibly in positions that have been vacated through attrition. Speaking of attrition, it will be the only real thing that we will hear from the Liberals this year on the issue of the public service. They will outline their continued plan for attrition (which by the way Dwight Ball opposed while in opposition) and promise a broader review of the public service following contract negations with the unions.

Program Cuts

This is the area that worries me a little. With Cathy Bennett telling us that “everything is on the table” we don’t really know what to expect in terms of cuts from this budget. Certainly there are some areas where programs may be outdated, underutilized, or redundant. In these cases it would be wise to consolidate or cut funding to inefficient programs that are not benefiting residents in the way that they were intended. On the other side of the coin, we have to be very careful about which social programs and tax credits that we eliminate without first performing due diligence on what the repercussions of such cuts might be. It will be interesting to see what balance Minister Bennett tries to achieve in her attempt to streamline government programs and services.

No Sunny Ways

Unlike the sunny ways budget brought down by Minister Bennett’s federal counterpart last month, we have already been put on notice that there will be no rays of sunshine from the budget she delivers tomorrow. Doom and gloom is leading the way and even the false optimism and political platitudes that we are so used to hearing at this time of year are strangely absent from the Liberals. One would expect that with so much of the Liberal election platform centering around diversification that we might see a few crumbs to encourage some small scale economic growth. With promises to get work underway for a new Corner Brook hospital and a new Waterford, we might have even expected to see at least some basic expenditure to tell us that these projects are moving forward, even if at a snail’s pace. And what happened to all of that social infrastructure money that was announced in the federal budget? Won’t any of that money be funneling down to our province to fund affordable housing, child care, and clean water initiatives? It is hard to swallow the sunny ways mantra when our own finance minister is singing songs of despair. Maybe the minister is just having us all on a bit so that when the budget comes down she can point to a few sound investments that say to the public that they are not giving up. Yes the situation is bad, maybe even dire, but there is still a province that needs to be governed and you can’t cut your way to prosperity. Growing our local economy was part of the Liberal platform and in order to do that you need to invest in local industry. If this budget fails to provide any new economic investment at all it will make it even harder for Dwight Ball do defend the diversification claims he made during the election campaign.

Hard Times Yet to Come

As we move towards the fall mini-budget and the general provincial budget in 2017 the message from the finance department will only continue to get worst. Muskrat Falls cost overruns, obscene debt servicing payments, and what we can only expect will be a shrinking tax base as even more people seek employment in other provinces and beyond, will force the governments hand at dramatically reducing expenditures. Whether they will do it through across the board cuts (most likely) or through targeted, independent audits (less likely but a better option) remains to be seen. Whatever they decide, they will need to do it soon so that we can all forget the pain before the next election.

Thursday, 7 April 2016

What is Austerity and Do We Need It?

What is Austerity and Do We Need It?

By: Ryan Young

Webster’s Simple Definition:

Austerity: a simple and plain quality : an austere quality
§  a situation in which there is not much money and it is spent only on things that are necessary
§  austerities : things that are done to live in a simple and plain way

Does anyone remember when the word “austerity” started showing up everywhere? It was in 2009, during the global economic crisis. The country of Greece was the first to implement drastic austerity measures and the term quickly caught on as a buzzword in the mainstream media. With the economic crisis putting the crunch on many of the worlds developed economies, the “austerity-doctrine” soon began to be implemented, especially in the Euro zone. The problem in Greece, however, was quite unique. After a decade of record prosperity, the Greek economy foundered in 2008 with massive debt holdings left over from financing the 2004 Athens Summer Olympic Games that left the country dangerously close defaulting. The austerity measures that the Greek government were forced to implement were a condition of an agreement with the Euro zone to provide a massive bailout to stabilize the country. The Greek economy had become unsustainable and drastic measures were needed to get it back on track.

But what is austerity, and what does it mean for us? By the very definition of the word, austerity is a situation where there is not much money and it is spent only on things that are necessary. In terms of government austerity, it means the cutting of government expenditures to only programs and services that are deemed necessary. But that is where it gets tricky. What is considered necessary spending can differ greatly from person to person. As we saw from our own government’s renewal initiative, there is a very wide variety of fiscal ideologies in this province. We know there will be serious short-term economic problems involved whenever government cuts jobs, but what we elect our leaders to do is balance those problems against the bigger problems such as skyrocketing debt and decreasing revenues.

One idea that was a common theme throughout all of the government renewal consultations, is that we spend too much on our public service. About 30% of our provincial work force is employed in the public sector. That is twice as much as Alberta or Ontario and well above the national average which sits at about 18%. According to Stats Canada, out of about 240 000 employed workers in the province, over 70 000 work in the public sector. The total amount spent on public sector wages is now approaching $4 Billion. To put that in perspective, in 1997, the total real amount spent on salaries and employee benefits was $1.7 Billion. In just twenty short years we have seen the size of our public service double. By 2013 the government was spending 47% of its expenses on wages and benefits. Add to that the $500 Million we spend each year in professional services and the unwise tax cuts of the Williams era, and you start to see where our fiscal problem came from. Our expenses are currently more than 50% more per person than the average of all other provinces. The simple truth is that the public service is too big for our tiny population and it needs to be adjusted before it implodes.

So why then, with all of this knowledge, do we have groups still waving the anti-austerity flag? A planned anti-austerity rally is being organized by the Social Justice Co-operative for next weekend and The Independent continues to publish articles that suggest that we do not have a spending problem at all. I understand the view from the left. Nobody wants to see job losses, and public service cuts will definitely have a temporary negative effect on our economy. But as much as we don’t want that to happen we have to address the reality of our fiscal situation. We can’t continue to bury our heads in the sand and hope that Newfoundland and Labrador will find some magical new source of revenue to lift us from despair. I find it ironic that many of the people who oppose spending cuts are the same people who oppose our offshore oil industry. It’s easy to see how the left often gets painted as a “crowd of dreamers” who write and talk with no grasp at all on the realities of fiscal solvency. The fact that organizations like The Independent are funded by the NDP, which are funded by the labor unions, might offer some clue into why there is such a push from the left against cuts of any kind to the public service, but no matter what they tell us, the real numbers about our public service expenditures do not lie.

I will agree with the fact that 30% across the board cuts are a bad idea. This blogger has already stressed the need for independent audits of each department to eliminate dead wood and free up employment for younger generations of job seekers. Across the board cuts based on seniority will not change the culture of inefficiency within government and will only further destabilize the labor market for the young families that we so desperately need to keep here in the province to grow the tax base. Each and every department is overspending while the quality of programs and services they provide is declining. There seems to be no accountability, and despite Premier Dwight Ball’s promise to clean out inefficiencies within government, for the most part it has been business as usual.

I don’t believe that the anti-austerity people have too much to worry about right now. I expect that this year’s budget will not contain too much shock value for most people. Most likely we will see some new fee and tax increases and some elimination of peripheral spending that will not ruffle too many feathers. The real shock won’t come until next year when the Liberal’s officially wrap up their Government Renewal Initiative. That’s when Dwight Ball’s government will have to make the choice between continuing to sit on the sidelines or tackling on the problem head-on and leaving a real mark on government that will carry them into the next election.

That was the path that led Clyde Wells to a second term despite “Clyde Lied,” and if this government wants to be there when the dust settles after the next election they have to do the dirty work now and show us that a stronger tomorrow really is within our grasp. We can only hope that this new government will at least use this year’s budget to let the public in on the direction they are planning to take with our fiscal future.

As for austerity, we need it whether we want it or not. The real question is: Does this government have the guts to make those hard choices? I guess we will have to wait and see.