No to appear smug, but when the government announced a few weeks ago that the Port Mann bridge cost had doubled to $3.3 billion and that taxpayers would loan more than $1 billion to the public-private partnership because no private lender would take the risk, I raised some concerns. One was that the numbers no longer made sense - that the $3 tolls, rising with inflation, would not be enough to cover construction and operating costs and taxpayers would end up subsidizing the private partners.
No way, said the enthusiastic Transportation Minister Kevin Falcon. Full speed ahead.
Now the public-private partnership has fallen apart, because - in large measure - the companies didn't think the future tolls would cover their cost. (Which raises the question of how I could do the numbers and Falcon couldn't.) Either tolls wil be higher, or taxpayers will be paying for the bridge, contrary to Falcon's repeated commitments.
Public-private partnerships can be a sound choice. The costs are potentially higher, but the risks of overruns and delays - the norm in megaprojects - can be largely transferred to the private partners.
But if the private sector walks away from the projects with too much risk, questions can be asked about whether government should be looking harder at traditional approaches for projects - even large ones - where risks are manageable.
One area of debate about public-private partnerships has been the extra cost of corporate borrowing compared to the government's low rate. Jeff Nagel nailed down the premium in this case and learned interest costs will be reduced by $200 million now that the Port Mann is not a P3. Again, that could be a worthwhile investment in risk reduction in some cases, but not for every project.
Saturday, February 28, 2009
Friday, February 27, 2009
Child care "system in crisis" starved in budget
Let us begin with four realities.
It's bad to be a kid in the government's care - in foster care or group homes. No matter how well it goes - and statistically, it likely won't - the care of the state is not the same as a family home.
It's challenging to give kids in care a real chance. When parents can't care for a child, things have usually already gone wrong. Children born into neglect, abuse, poverty, illness, disability - or simply unlucky - wear some scars.
It's certain that things will go wrong, sometimes with terrible consequences. Child protection workers, for example, make huge decisions based on their best professional judgments. Leave a child with a struggling family or send her off, with a little suitcase, to a home of strangers? Either way, the outcome can be bad.
And how we do in helping these children is one of those fundamental tests of whether we are a successful society, or a collection of self-interested individuals. There is no moral difference between walking past a lost toddler in the street and failing to pay attention to the life of a four-year-old in care.
The NDP had a leaked government report this week that suggested that, in some form, that's what we're doing.
The ministry of children and families had noticed that residential costs for the some 9,000 children in care were rising, even though the number of children being raised was stable and they weren't doing any better.
So it set up a group to look at why costs were going up.
They did good work, although the recommendations focus heavily on process and more study.
The report, completed last summer, found costs were rising for a lot of reasons.
The level of support required for children in care has risen. They are more likely to have serious health and behavioural problems. That could be seen as a positive, of course, because it might mean children with fewer problems are being supported with their homes.
Compensation, for foster parents and care home workers, has fallen behind. The ministry report noted that the pays is the same for hosting an international student, with few responsibilities, or a troubled 14-year-old foster child with attitude to burn.
Foster parents were either aging, or inexperienced. (About 12 per cent per cent were over 60.) Either way, they really weren't able to foster the more challenging children.
And schools, facing their own pressures, have become more inclined to expel or suspend students, the report found. That's obviously bad for the children and also increases the costs of providing care.
The results of all this compound the problems. The report found social workers were scrambling to deal with the lack of resources. That means less attention to the needs of the children - barely one in four children in care have the required plans for their development. And it means more foster parents give up in frustration.
The number of foster homes fell by eight per cent across B.C. in the 18 months prior to the report. In the North and on Vancouver Island about 15 per cent fewer homes were available; in the Interior, about 11 per cent.
As a result, foster homes often had more children than ministry guidelines called for and costly alternative placements became more common.
The report, done by the ministry's own staff, highlights real problems. It concludes that the review "revealed a system in crisis and in need of innovation."
You would expect some specific actions in response, starting with the most obvious - additional funding to deal with the problems.
But the provincial budget for child and family development is effectively frozen for the coming year - it will increase less than one-quarter of one per cent. The budget increases for the following two years are about the same.
It's no response to a "system in crisis."
Footnote: Child and Youth Representative Mary Ellen Turpel-Lafond, the legislative officer tasked with monitoring the ministry as a result of the Hughes report, said she had asked for any reports dealing with financial pressures. This report had not been provided by the ministry. Christensen could not say why.
It's bad to be a kid in the government's care - in foster care or group homes. No matter how well it goes - and statistically, it likely won't - the care of the state is not the same as a family home.
It's challenging to give kids in care a real chance. When parents can't care for a child, things have usually already gone wrong. Children born into neglect, abuse, poverty, illness, disability - or simply unlucky - wear some scars.
It's certain that things will go wrong, sometimes with terrible consequences. Child protection workers, for example, make huge decisions based on their best professional judgments. Leave a child with a struggling family or send her off, with a little suitcase, to a home of strangers? Either way, the outcome can be bad.
And how we do in helping these children is one of those fundamental tests of whether we are a successful society, or a collection of self-interested individuals. There is no moral difference between walking past a lost toddler in the street and failing to pay attention to the life of a four-year-old in care.
The NDP had a leaked government report this week that suggested that, in some form, that's what we're doing.
The ministry of children and families had noticed that residential costs for the some 9,000 children in care were rising, even though the number of children being raised was stable and they weren't doing any better.
So it set up a group to look at why costs were going up.
They did good work, although the recommendations focus heavily on process and more study.
The report, completed last summer, found costs were rising for a lot of reasons.
The level of support required for children in care has risen. They are more likely to have serious health and behavioural problems. That could be seen as a positive, of course, because it might mean children with fewer problems are being supported with their homes.
Compensation, for foster parents and care home workers, has fallen behind. The ministry report noted that the pays is the same for hosting an international student, with few responsibilities, or a troubled 14-year-old foster child with attitude to burn.
Foster parents were either aging, or inexperienced. (About 12 per cent per cent were over 60.) Either way, they really weren't able to foster the more challenging children.
And schools, facing their own pressures, have become more inclined to expel or suspend students, the report found. That's obviously bad for the children and also increases the costs of providing care.
The results of all this compound the problems. The report found social workers were scrambling to deal with the lack of resources. That means less attention to the needs of the children - barely one in four children in care have the required plans for their development. And it means more foster parents give up in frustration.
The number of foster homes fell by eight per cent across B.C. in the 18 months prior to the report. In the North and on Vancouver Island about 15 per cent fewer homes were available; in the Interior, about 11 per cent.
As a result, foster homes often had more children than ministry guidelines called for and costly alternative placements became more common.
The report, done by the ministry's own staff, highlights real problems. It concludes that the review "revealed a system in crisis and in need of innovation."
You would expect some specific actions in response, starting with the most obvious - additional funding to deal with the problems.
But the provincial budget for child and family development is effectively frozen for the coming year - it will increase less than one-quarter of one per cent. The budget increases for the following two years are about the same.
It's no response to a "system in crisis."
Footnote: Child and Youth Representative Mary Ellen Turpel-Lafond, the legislative officer tasked with monitoring the ministry as a result of the Hughes report, said she had asked for any reports dealing with financial pressures. This report had not been provided by the ministry. Christensen could not say why.
Thursday, February 26, 2009
Balancing the budget at the expense of kids in care
The budget for child and family services is neffectively frozen in the budget, with token increases averaging less tahn 0ne-half per cent per year.
Yet a ministry working group reported last year that children are already being hurt - and social workers swamped - because of inadequate residential care for many of the more than 9,000 children in care. A Times Colonist editorial looks at the betrayal.
Yet a ministry working group reported last year that children are already being hurt - and social workers swamped - because of inadequate residential care for many of the more than 9,000 children in care. A Times Colonist editorial looks at the betrayal.
Wednesday, February 25, 2009
Bleak moments in the legislature
A video from Hansard of so-called debate in the legislature that is worth viewing. The dispute came as Kevn Krueger, always a loyal foot soldier, refused to answer even the most simple questions about spending in his ministry, looking increasing a person who had lost all contact with reality. It ends with a spectator getting kicked out for an outburst about Krueher's bizarre performance. The only wonder is that people aren't moved to shouted protests more often.
Tuesday, February 24, 2009
Games security secrecy, overruns and taxpayer abuse
One of the surreal moments in last week's budget lock-up came when Finance Minister Colin Hansen was asked about Olympic security costs.
Yes, there was extra money in the budget for Games security, he said.
But the amount was secret.
So was where it had been hidden in the hundreds of pages of budget documents. The federal government wanted the costs to be kept from the public for now, Hansen said.
Two days later - on the day Barack Obama visited Ottawa and grabbed all the media attention - the federal government came clean.
Games security, which was to cost $175 million, is now forecast at $900 million. The cost might go higher and the figure doesn't cover all the Games-related security costs.
It's the kind of trick governments play when they hope to get away with something. If there's bad news - and a 500-per-cent increase in security costs is bad news - they try and release it on a day when there's a bigger story, or late on a Friday afternoon before a long weekend.
Hansen then came clean on the province's contribution. It's the kind of deal that would make most corporate CFOs nervous.
This gets a little hard to follow - always a bad sign when it comes to organizations' financial wheeling and dealing.
The original agreement was that the federal and provincial governments would each pay half of the $175 million.
As the real costs rose higher and higher, the governments secretly wrangled about how much the province should pay. B.C. feared being stuck with paying for new equipment or training exercises that weren't really needed for the Games.
Everyone played nice and B.C. agreed to pay about 22 per cent of the excess costs, instead of half - about $163 million on top of the already committed $87.5 million.
That was still bad news, since both Hansen and Premier Gordon Campbell had insisted the security budget was adequate.
The promised cap of $600 million on provincial Olympic spending - a total misrepresentation itself - had also been broken.
The Games are now, even by Campbell's accounting, more than 25 per cent over budget.
But here it gets weirder. The deal won't see the province actually write a cheque to Ottawa for the extra costs.
Instead, it cut a side deal. The federal government and B.C. have about $2 billion worth of cost-shared infrastructure projects in the works. The province will increase its contribution to those by $163 million; the federal share will be reduced.
On the plus side, it lets the province spread the spending over the next three years.
But the deal also distorts the province's budgets. You're supposed to record expenses as they occur. The Games security costs would have been included in the budget that Hansen just introduced. That would have pushed the projected deficit from $495 million to $650 million.
The whole Games security costs should be a significant scandal.
The $175-million security budget was part of the package used to sell the Games to British Columbians. The IOC said it was inadequate almost from the outset of the process. The auditor general warned six years ago that more money would likely be needed. The RCMP sounded the alarm.
But Hansen and Campbell continued to insist the funding was adequate. Even last year Hansen told the legislature he didn't expect the province to contribute more than $87.5 million for security.
So either the costs increased 500 per cent in the last few months, the government wasn't paying adequate attention or it wasn't being open and straightforward with the public. Or perhaps some combination of the three.
The big political problem is the secrecy and evasions. The Games' costs have actually been well-managed, particularly venue construction.
An early admission of problems with the security budget, along with a straightforward willingness to acknowledge all the real Games costs, would have headed off the scandal.
Footnote: How ridiculous was it to keep defending the original $175-million security budget? Consider that security in Salt Lake City for the 2002 Games cost twice that amount. By the Turin Games four years ago, the security budget had reached $1.4 billion. Yet B.C. still claimed that protecting the scattered sites in Vancouver and Whistler would cost far less.
Yes, there was extra money in the budget for Games security, he said.
But the amount was secret.
So was where it had been hidden in the hundreds of pages of budget documents. The federal government wanted the costs to be kept from the public for now, Hansen said.
Two days later - on the day Barack Obama visited Ottawa and grabbed all the media attention - the federal government came clean.
Games security, which was to cost $175 million, is now forecast at $900 million. The cost might go higher and the figure doesn't cover all the Games-related security costs.
It's the kind of trick governments play when they hope to get away with something. If there's bad news - and a 500-per-cent increase in security costs is bad news - they try and release it on a day when there's a bigger story, or late on a Friday afternoon before a long weekend.
Hansen then came clean on the province's contribution. It's the kind of deal that would make most corporate CFOs nervous.
This gets a little hard to follow - always a bad sign when it comes to organizations' financial wheeling and dealing.
The original agreement was that the federal and provincial governments would each pay half of the $175 million.
As the real costs rose higher and higher, the governments secretly wrangled about how much the province should pay. B.C. feared being stuck with paying for new equipment or training exercises that weren't really needed for the Games.
Everyone played nice and B.C. agreed to pay about 22 per cent of the excess costs, instead of half - about $163 million on top of the already committed $87.5 million.
That was still bad news, since both Hansen and Premier Gordon Campbell had insisted the security budget was adequate.
The promised cap of $600 million on provincial Olympic spending - a total misrepresentation itself - had also been broken.
The Games are now, even by Campbell's accounting, more than 25 per cent over budget.
But here it gets weirder. The deal won't see the province actually write a cheque to Ottawa for the extra costs.
Instead, it cut a side deal. The federal government and B.C. have about $2 billion worth of cost-shared infrastructure projects in the works. The province will increase its contribution to those by $163 million; the federal share will be reduced.
On the plus side, it lets the province spread the spending over the next three years.
But the deal also distorts the province's budgets. You're supposed to record expenses as they occur. The Games security costs would have been included in the budget that Hansen just introduced. That would have pushed the projected deficit from $495 million to $650 million.
The whole Games security costs should be a significant scandal.
The $175-million security budget was part of the package used to sell the Games to British Columbians. The IOC said it was inadequate almost from the outset of the process. The auditor general warned six years ago that more money would likely be needed. The RCMP sounded the alarm.
But Hansen and Campbell continued to insist the funding was adequate. Even last year Hansen told the legislature he didn't expect the province to contribute more than $87.5 million for security.
So either the costs increased 500 per cent in the last few months, the government wasn't paying adequate attention or it wasn't being open and straightforward with the public. Or perhaps some combination of the three.
The big political problem is the secrecy and evasions. The Games' costs have actually been well-managed, particularly venue construction.
An early admission of problems with the security budget, along with a straightforward willingness to acknowledge all the real Games costs, would have headed off the scandal.
Footnote: How ridiculous was it to keep defending the original $175-million security budget? Consider that security in Salt Lake City for the 2002 Games cost twice that amount. By the Turin Games four years ago, the security budget had reached $1.4 billion. Yet B.C. still claimed that protecting the scattered sites in Vancouver and Whistler would cost far less.
Monday, February 23, 2009
Truth in budgeting
I did not think the Liberals would stumble like this . The government has earned good marks for financial transparency and - except for the excessive conservatism that produced excessive surpluses - reasonable projections.
But last week's budget underestimates expenses and, according to at least one respected economist, inflates revenues.
What's particularly strange is that this is all unnecessary. As Stephen Harper showed, deficits are considered OK in the face of the economic slide. (As they should be.)
But last week's budget underestimates expenses and, according to at least one respected economist, inflates revenues.
What's particularly strange is that this is all unnecessary. As Stephen Harper showed, deficits are considered OK in the face of the economic slide. (As they should be.)
Friday, February 20, 2009
The effectiveness of Patrick Kinsella
The client list of adviser Patrick Kinsella - former provincial Liberal election campign co-chair - is impressive. So was his dismissal of B.C.'s lobbyist registry as, ultimately, a failure.
Sean Holman has identified another interesting client .
Once you've read the piece, search Holman's site on Patrick Kinsella and read the other posts.
Sean Holman has identified another interesting client .
Once you've read the piece, search Holman's site on Patrick Kinsella and read the other posts.
Budget looks more hopeful than credible
The more time I spend with the government's numbers, the more improbable the budget looks.
The plan - especially in years two and three - looks to rely heavily on optimism. The claim that budgets will be balanced by the 2011 fiscal year, after small two deficits, is shaky at best.
Unless, that is, the government is prepared to do some heavy slashing and burning in programs and services.
It's a touchy subject for both main parties. In 1996, the NDP tabled a budget that claimed two successive surpluses - in the fiscal year just about to end and the new budget year.
The claims were false, based largely on unrealistic revenue forecasts. A lot of Liberals believe the NDP stole that election. It still rankles.
Now, on the eve of another election, the Liberals are projecting a skinny surplus this year and two years of small deficits before a legislated return to balanced budgets.
The surplus this year should be attainable. There are less than two months until the March 31 fiscal year-end and a big contingency fund.
And the government might be able to hit its projected $495-million deficit in the coming year.
But there are questions even about that.
Finance Minister Colin Hansen has abandoned one of the symbols of Liberal prudence. Budgets have included "forecast allowances" of about $800 million - a cushion against surprises.
There is no forecast allowance for the next three years. If something goes wrong, spending must be cut or deficits will rise.
And spending cuts would be difficult.
The three-year-plan sees overall expenses rising by about two per cent on average.
But that's mostly health spending. Strip away health and education, and government spending is to be cut almost four per cent this year, three per cent next and then frozen at the lower level in the third year, resulting in a barely balanced budget.
Which, as you run options through a spreadsheet, might seem perfectly possible.
But the Environment Ministry, for example, faces a five-per-cent budget cut this year, and then another one per cent cut in each of the next two years. By 2011, the ministry responsible for environmental protection and climate change action, will have seven per cent less resources than it does today.
Attorney General Wally Oppal has been batted around in the legislature in the days since the budget.
With good reason. His budget calls for cuts to prosecutors and court services, at a time when gangs are doing their best to act out Scarface on Vancouver streets. The 767 people working on prosecution services are to be cut to 661 over the next three years.
Pressed in a scrum, the lightly prepared Oppal said the budget numbers for the last two years of the three-year plan were flexible. If the ministry needed more money, it would spend it.
But that means either cuts somewhere else or a deficit instead of the promised balanced budget in 2011.
And there really isn't anywhere else to cut. The Ministry of Children and Families gets increase of one per cent, one per cent and zero. It plans to cut almost 200 positions in child and family development work.
There's less money for housing, forests, tourism, at a time when needs are acute.
The budget documents even highlight the problems.
The finance deputy minister notes that the budget includes $250 million more in spending cuts by 2011/12 that have yet to be identified.
It's weird, really. Instead of deficits of $495 million and $245 million, big risks and harsh cuts, the government could have gone with $1.2-billion deficits each year and put off a balanced budget for an extra year.
The debt increase wouldn't have been significant, especially if the government's prediction of a quick return to growth is accurate.
And services and the Liberals' credibility would have both been protected.
Footnote: Politically, the budget makes no sense. If Stephen Harper has embraced five years of deficits, surely three years in B.C. would be acceptable. And why raise the spectre of a hidden agenda of cuts to programs and services?
The plan - especially in years two and three - looks to rely heavily on optimism. The claim that budgets will be balanced by the 2011 fiscal year, after small two deficits, is shaky at best.
Unless, that is, the government is prepared to do some heavy slashing and burning in programs and services.
It's a touchy subject for both main parties. In 1996, the NDP tabled a budget that claimed two successive surpluses - in the fiscal year just about to end and the new budget year.
The claims were false, based largely on unrealistic revenue forecasts. A lot of Liberals believe the NDP stole that election. It still rankles.
Now, on the eve of another election, the Liberals are projecting a skinny surplus this year and two years of small deficits before a legislated return to balanced budgets.
The surplus this year should be attainable. There are less than two months until the March 31 fiscal year-end and a big contingency fund.
And the government might be able to hit its projected $495-million deficit in the coming year.
But there are questions even about that.
Finance Minister Colin Hansen has abandoned one of the symbols of Liberal prudence. Budgets have included "forecast allowances" of about $800 million - a cushion against surprises.
There is no forecast allowance for the next three years. If something goes wrong, spending must be cut or deficits will rise.
And spending cuts would be difficult.
The three-year-plan sees overall expenses rising by about two per cent on average.
But that's mostly health spending. Strip away health and education, and government spending is to be cut almost four per cent this year, three per cent next and then frozen at the lower level in the third year, resulting in a barely balanced budget.
Which, as you run options through a spreadsheet, might seem perfectly possible.
But the Environment Ministry, for example, faces a five-per-cent budget cut this year, and then another one per cent cut in each of the next two years. By 2011, the ministry responsible for environmental protection and climate change action, will have seven per cent less resources than it does today.
Attorney General Wally Oppal has been batted around in the legislature in the days since the budget.
With good reason. His budget calls for cuts to prosecutors and court services, at a time when gangs are doing their best to act out Scarface on Vancouver streets. The 767 people working on prosecution services are to be cut to 661 over the next three years.
Pressed in a scrum, the lightly prepared Oppal said the budget numbers for the last two years of the three-year plan were flexible. If the ministry needed more money, it would spend it.
But that means either cuts somewhere else or a deficit instead of the promised balanced budget in 2011.
And there really isn't anywhere else to cut. The Ministry of Children and Families gets increase of one per cent, one per cent and zero. It plans to cut almost 200 positions in child and family development work.
There's less money for housing, forests, tourism, at a time when needs are acute.
The budget documents even highlight the problems.
The finance deputy minister notes that the budget includes $250 million more in spending cuts by 2011/12 that have yet to be identified.
It's weird, really. Instead of deficits of $495 million and $245 million, big risks and harsh cuts, the government could have gone with $1.2-billion deficits each year and put off a balanced budget for an extra year.
The debt increase wouldn't have been significant, especially if the government's prediction of a quick return to growth is accurate.
And services and the Liberals' credibility would have both been protected.
Footnote: Politically, the budget makes no sense. If Stephen Harper has embraced five years of deficits, surely three years in B.C. would be acceptable. And why raise the spectre of a hidden agenda of cuts to programs and services?
Thursday, February 19, 2009
Budget, third thoughts
Attorney General Wally Oppal has a tougher time staying on message than most politicians. His candour, or lack of preparation can lead to blurts and admissions in the public interest. Of course, that means political staffers cringe in terror whenever he stands up to speak.
This week, Oppal raised questions about how real the numbers are in years two and three of the budget plan — the ones that show the path to a return to balanced bnudgets.
Confronted with the fact that the budget calls for staff cuts in the justice system just as the public is concerned about gang crime, Oppal said there is nothing to worry about. The numbers are just projections anyway. If they need to spend more, they will.
But that's not what the budget is supposed to be. It's supposed to be prudent and an accurate forecast of government plans. Unless, of course, that got lost in the rush to paint a picture that showed only two, small deficits.
This week, Oppal raised questions about how real the numbers are in years two and three of the budget plan — the ones that show the path to a return to balanced bnudgets.
Confronted with the fact that the budget calls for staff cuts in the justice system just as the public is concerned about gang crime, Oppal said there is nothing to worry about. The numbers are just projections anyway. If they need to spend more, they will.
But that's not what the budget is supposed to be. It's supposed to be prudent and an accurate forecast of government plans. Unless, of course, that got lost in the rush to paint a picture that showed only two, small deficits.
Tuesday, February 17, 2009
Budget, second thoughts
I've been having second thoughts about the budget column. Mostly, I'm looking at ministry service plans and thinking that cuts will be deeper than it first appeared. Sean Holman has some interesting reports on the budget and a memo from public sector head Jessica McDonald to employees suggesting significant layoffs are possible.
Budget '09: Timidity trumps vision
We got a timid provincial budget Tuesday, when boldness would have been welcome.
The good news, for most British Columbians, is that health care spending has been protected. It will increase by about six per cent a year through the budget period.
That's not enough to allow improvements, given population growth and inflation, but things shouldn't get worse.
But except for health, the Liberal government worried too much about keeping deficits small and brief and too little about economic stimulus and the needs of British Columbians.
Across the rest of ministries, taken as a whole, spending will be pretty much frozen in the coming year, rising by about one-half of one per cent.
Finance Minister Colin Hansen hopes that administrative savings - travelling less, or using fewer consultants - can be found to avoid program cuts.
The big guys always say that. The reality is usually different.
The budget for children and families, for example, is effectively frozen, despite increasing demand, rising costs and frustrations about inadequate services now. B.C. Housing spending will be cut by $92 million - about 15 per cent.
Funding for police will rise 5.1 per cent this year, mainly to cover RCMP contract costs, and then be frozen for the following two years. Aboriginal Affairs will lose 18 per cent of its funding this year; Community Services about 17 per cent.
The focus on "belt-tightening," as Hansen described it, is misplaced.
The Liberals' commitment to balanced budgets was laudable in normal times. In this kind of slowdown, it risks further damage to the economy, individuals and communities.
The budget projects a deficit of $495 million and $245 million in the following year before being exactly balanced in 2011/12.
Those projections - for the first time in years - include no forecast allowance. Typically, the government has included at least $750 million as a cushion against the unexpected.
Hansen points to infrastructure spending as the province's preferred form of economic stimulus. But the budget basically included already scheduled projects, plus about $2 billion in new spending as a result of the federal stimulus package.
But at the same time, the government appears to have turned its back on other forms of stimulus that doesn't involve paving or building bridges.
Arts and culture spending, for example, will be cut in half by the 2010 budget year. That means lost jobs, but also lost economic opportunities as festivals and community events fold.
The budget also comes up short on measures specifically aimed at B.C. communities outside the Lower Mainland. (Although that might change, if the infrastructure funding details include money for throne speech commitments in the north, like the Cariboo Connector and new power transmission lines.'
It's also unclear how much this budget will ultimately matter. The government will shut down the legislature before it is voted on. A new version, possibly quite different, will be introduced in September.
The budget is also based on a quick economic recovery for B.C., something that is far from assured.
It was also striking how little this looked like a pre-election budget. There's no theme, no grand vision, just a commitment to health care and caution. It suggests a Liberal election campaign built upon the argument that they are more prudent and trustworthy than the NDP in tough times.
The Liberals, despite Premier Gordon Campbell's frequent policy enthusiasms, have sometimes appeared focused on cutting government rather than in exploiting its potential to make life better for citizens.
And there is a sense in this budget of a government that is somewhat adrift. Past priorities, like the Heartland and children and even climate change, are scarcely mentioned. It portrays a model of governing as a series of administrative functions, with little vision.
Of course, that vision thing can create big problems, as the former NDP government demonstrated with the fast ferries and grand, unmanaged initiatives like the Jobs for Timber Accord. (And the current government demonstrated with the Vancouver convention centre.)
But this was a time for leadership. The government's cautious budget falls short.
Footnote: The government plans to impose a two-year wage freeze when the current public sector contracts expire in a little more than a year. It does not, however, appear to plan significant staff reductions or layoffs.
The good news, for most British Columbians, is that health care spending has been protected. It will increase by about six per cent a year through the budget period.
That's not enough to allow improvements, given population growth and inflation, but things shouldn't get worse.
But except for health, the Liberal government worried too much about keeping deficits small and brief and too little about economic stimulus and the needs of British Columbians.
Across the rest of ministries, taken as a whole, spending will be pretty much frozen in the coming year, rising by about one-half of one per cent.
Finance Minister Colin Hansen hopes that administrative savings - travelling less, or using fewer consultants - can be found to avoid program cuts.
The big guys always say that. The reality is usually different.
The budget for children and families, for example, is effectively frozen, despite increasing demand, rising costs and frustrations about inadequate services now. B.C. Housing spending will be cut by $92 million - about 15 per cent.
Funding for police will rise 5.1 per cent this year, mainly to cover RCMP contract costs, and then be frozen for the following two years. Aboriginal Affairs will lose 18 per cent of its funding this year; Community Services about 17 per cent.
The focus on "belt-tightening," as Hansen described it, is misplaced.
The Liberals' commitment to balanced budgets was laudable in normal times. In this kind of slowdown, it risks further damage to the economy, individuals and communities.
The budget projects a deficit of $495 million and $245 million in the following year before being exactly balanced in 2011/12.
Those projections - for the first time in years - include no forecast allowance. Typically, the government has included at least $750 million as a cushion against the unexpected.
Hansen points to infrastructure spending as the province's preferred form of economic stimulus. But the budget basically included already scheduled projects, plus about $2 billion in new spending as a result of the federal stimulus package.
But at the same time, the government appears to have turned its back on other forms of stimulus that doesn't involve paving or building bridges.
Arts and culture spending, for example, will be cut in half by the 2010 budget year. That means lost jobs, but also lost economic opportunities as festivals and community events fold.
The budget also comes up short on measures specifically aimed at B.C. communities outside the Lower Mainland. (Although that might change, if the infrastructure funding details include money for throne speech commitments in the north, like the Cariboo Connector and new power transmission lines.'
It's also unclear how much this budget will ultimately matter. The government will shut down the legislature before it is voted on. A new version, possibly quite different, will be introduced in September.
The budget is also based on a quick economic recovery for B.C., something that is far from assured.
It was also striking how little this looked like a pre-election budget. There's no theme, no grand vision, just a commitment to health care and caution. It suggests a Liberal election campaign built upon the argument that they are more prudent and trustworthy than the NDP in tough times.
The Liberals, despite Premier Gordon Campbell's frequent policy enthusiasms, have sometimes appeared focused on cutting government rather than in exploiting its potential to make life better for citizens.
And there is a sense in this budget of a government that is somewhat adrift. Past priorities, like the Heartland and children and even climate change, are scarcely mentioned. It portrays a model of governing as a series of administrative functions, with little vision.
Of course, that vision thing can create big problems, as the former NDP government demonstrated with the fast ferries and grand, unmanaged initiatives like the Jobs for Timber Accord. (And the current government demonstrated with the Vancouver convention centre.)
But this was a time for leadership. The government's cautious budget falls short.
Footnote: The government plans to impose a two-year wage freeze when the current public sector contracts expire in a little more than a year. It does not, however, appear to plan significant staff reductions or layoffs.
Sunday, February 15, 2009
Just be quiet, and everything will be fine
Interesting Times Colonist story on former solicitor general John Les and liquor agents - small-town stores that sell gin along with groceries and hardware.
Worth a column, but two points now. First, many groups are silenced by a cabinet minister who says, 'play nice, and I might be able to help you. Raise a fuss, and you're toast.' They buy it, even though, like the liquor agencies, they get nothing in return foir silence.
Second, it is interesting that private liquor stores, with much tighter ties to the Liberals - former minister Gary Collins is a director of one major player - have succeeded in winning big cash windfalls from the government.
The gifts to private liquor stores have added up to about $50 million a year in extra profits. And, of course, that is $50 million less in revenue for government, that taxpayers have to come up with.
Worth a column, but two points now. First, many groups are silenced by a cabinet minister who says, 'play nice, and I might be able to help you. Raise a fuss, and you're toast.' They buy it, even though, like the liquor agencies, they get nothing in return foir silence.
Second, it is interesting that private liquor stores, with much tighter ties to the Liberals - former minister Gary Collins is a director of one major player - have succeeded in winning big cash windfalls from the government.
The gifts to private liquor stores have added up to about $50 million a year in extra profits. And, of course, that is $50 million less in revenue for government, that taxpayers have to come up with.
Friday, February 13, 2009
BC Rail and the MLAs' secrets
Bill Tieleman continues to serve the public well by following and reporting on the B.C. Rail corruption case's slow progress through the courts.
In the latest update Tieleman reports the Liberal caucus had a lawyer in court this week to ensure documents relating to communication between MLAs wouldn't be disclosed to the defence under a Freedom of Information request.
Which seems odd. If the defence believes the documents are relevant, the court can order their production.
But then an awful lot is odd in this case. Pretty much everything, really.
In the latest update Tieleman reports the Liberal caucus had a lawyer in court this week to ensure documents relating to communication between MLAs wouldn't be disclosed to the defence under a Freedom of Information request.
Which seems odd. If the defence believes the documents are relevant, the court can order their production.
But then an awful lot is odd in this case. Pretty much everything, really.
Games and guns make for rough legislature week
Ah, the legislature is a wondrous and often appalling place.
MLAs have been back four days, in a special sitting to change the balanced law so deficits are OK for the next two years.
No one has really paid attention to that debate, because the outcome is guaranteed. The Liberal majority now supports deficits now; so does the NDP.
Question period, the daily half-hour in which opposition MLAs attempt to catch out cabinet ministers, has been the main attraction.
That's because the press gallery crew watch each day for stories, ready to scrum both sides in the hall once the "Bell ends question period," as the Speaker says every sitting day. (Blessedly, I add quietly on many of them.)
On Thursday, they saw Finance Minister Colin Hansen, usually more sensible and effective, ignore eight questions about Olympic costs completely.
Each time, he stood up and talked about how great the Games would be and how the New Democrats were just gloomy worrywarts. It was the start of the one-year countdown to the Games, he said. Lighten up.
Carole James and company were, of course, trying to embarrass the government.
But the questions seemed legitimate. B.C. Hydro told the utilities commission Games-related security could cost an extra $7 million next year. It asked for a rate increase to cover the cost.
Natural gas suppliers are seeking increases. TransLink is spending millions. How much is all this costing British Columbians?
Should B.C. Hydro, for example, be collecting the security costs from low-income seniors through higher power rates, or should the government be paying it as an Olympic cost? That would mean a more equitable sharing of the burden.
And why did B.C. Hydro and ICBC - both effectively monopolies - become Games sponsors and buy 3,800 tickets to events? How much will customers pay?
The amounts are small. Perhaps the average household will pay $3.50 extra in electricity costs. But the questions deserved some response.
The other big theme for the week was the out-of-control gang shootings in the Lower Mainland. A lot of muscled, tattooed guys who watched Scarface too many times are shooting each other and spraying bullets around.
Gordon Campbell had a rare stumble on the issue. As the latest shell casings were being picked up, he said the government had done a lot on gangs. The effort would be stepped up, but only by shifting officers and prosecutors from other priorities. There would be no increased spending to deal with gangs.
But people in the Lower Mainland - from Abbotsford in - are worried about the daytime shootouts in supermarket parking lots. The answer seemed dismissive.
Inside the legislature, Attorney General Wally Oppal answered questions by saying the New Democrats did a worse job of dealing with gang crime in the 1990s.
Apparently no one had told him that's probably one of the many reasons the voters booted the NDP government.
Politically, it's interesting. The Liberals are trying to be the real Olympic boosters while portraying James as anti-Games; the NDP want to be boosters, but with a worried eye on the costs.
Practically, the focus is wrong. The Games are coming and the money is spent. The goal should be to get the maximum benefit. There will be a significant economic contribution in 2010, a needed boost.
But the challenge is to attract tourists, investors and creative people. Then auditor general Wayne Strelioff, in a 2006 report, said there could be big benefits. He added a warning, quoting consultants who worked on the assessment. "These benefits will not materialize automatically," they said. "They must be earned by a focused, adequately funded and skillfully executed marketing program."
The challenge is now much greater because of the recession.
The Games are coming; it's time to focus on benefits. Or end up like Turin, the forgotten host of the 2006 Winter Games.
Footnote: Campbell addressed the gang issue Friday, promising 131 officers would be transferred to the organized crime squad and 10 additional prosecutors dedicated to the work. The government also plans to ban body armour and seek tougher sentences and bail conditions for gun crimes.
MLAs have been back four days, in a special sitting to change the balanced law so deficits are OK for the next two years.
No one has really paid attention to that debate, because the outcome is guaranteed. The Liberal majority now supports deficits now; so does the NDP.
Question period, the daily half-hour in which opposition MLAs attempt to catch out cabinet ministers, has been the main attraction.
That's because the press gallery crew watch each day for stories, ready to scrum both sides in the hall once the "Bell ends question period," as the Speaker says every sitting day. (Blessedly, I add quietly on many of them.)
On Thursday, they saw Finance Minister Colin Hansen, usually more sensible and effective, ignore eight questions about Olympic costs completely.
Each time, he stood up and talked about how great the Games would be and how the New Democrats were just gloomy worrywarts. It was the start of the one-year countdown to the Games, he said. Lighten up.
Carole James and company were, of course, trying to embarrass the government.
But the questions seemed legitimate. B.C. Hydro told the utilities commission Games-related security could cost an extra $7 million next year. It asked for a rate increase to cover the cost.
Natural gas suppliers are seeking increases. TransLink is spending millions. How much is all this costing British Columbians?
Should B.C. Hydro, for example, be collecting the security costs from low-income seniors through higher power rates, or should the government be paying it as an Olympic cost? That would mean a more equitable sharing of the burden.
And why did B.C. Hydro and ICBC - both effectively monopolies - become Games sponsors and buy 3,800 tickets to events? How much will customers pay?
The amounts are small. Perhaps the average household will pay $3.50 extra in electricity costs. But the questions deserved some response.
The other big theme for the week was the out-of-control gang shootings in the Lower Mainland. A lot of muscled, tattooed guys who watched Scarface too many times are shooting each other and spraying bullets around.
Gordon Campbell had a rare stumble on the issue. As the latest shell casings were being picked up, he said the government had done a lot on gangs. The effort would be stepped up, but only by shifting officers and prosecutors from other priorities. There would be no increased spending to deal with gangs.
But people in the Lower Mainland - from Abbotsford in - are worried about the daytime shootouts in supermarket parking lots. The answer seemed dismissive.
Inside the legislature, Attorney General Wally Oppal answered questions by saying the New Democrats did a worse job of dealing with gang crime in the 1990s.
Apparently no one had told him that's probably one of the many reasons the voters booted the NDP government.
Politically, it's interesting. The Liberals are trying to be the real Olympic boosters while portraying James as anti-Games; the NDP want to be boosters, but with a worried eye on the costs.
Practically, the focus is wrong. The Games are coming and the money is spent. The goal should be to get the maximum benefit. There will be a significant economic contribution in 2010, a needed boost.
But the challenge is to attract tourists, investors and creative people. Then auditor general Wayne Strelioff, in a 2006 report, said there could be big benefits. He added a warning, quoting consultants who worked on the assessment. "These benefits will not materialize automatically," they said. "They must be earned by a focused, adequately funded and skillfully executed marketing program."
The challenge is now much greater because of the recession.
The Games are coming; it's time to focus on benefits. Or end up like Turin, the forgotten host of the 2006 Winter Games.
Footnote: Campbell addressed the gang issue Friday, promising 131 officers would be transferred to the organized crime squad and 10 additional prosecutors dedicated to the work. The government also plans to ban body armour and seek tougher sentences and bail conditions for gun crimes.
Wednesday, February 11, 2009
A campaign without embedded journalists
It's a tradition that news media send reporters and camera operators out on the road with the leaders' buses during election campaigns, paying the parties for the transport and picking up all the other costs.
But times are tough in the media world and the buses might be empty during the provincial campaign leading up to the May 12 election, according to Sean Holman and Vaughn Palmer.
That could be a good thing. The rolling photo ops tended to focus on the trivial and were awfully easy for the parties to manage.
Then again, the parties could decide to run the whole campaign in the Lower Mainland as an alternative, which hardly seems a step forward.
But times are tough in the media world and the buses might be empty during the provincial campaign leading up to the May 12 election, according to Sean Holman and Vaughn Palmer.
That could be a good thing. The rolling photo ops tended to focus on the trivial and were awfully easy for the parties to manage.
Then again, the parties could decide to run the whole campaign in the Lower Mainland as an alternative, which hardly seems a step forward.
Tuesday, February 10, 2009
WWE wrestlers should consider B.C. politics
The province's capital hit the media big time on the weekend.
A pro wrestler and pop culture figure named Chris Jericho got in a tussle as he tried to leave the local arena, and apparently decked a young woman. (She hit him first.) WWE fans were transfixed, especially as it all ended up on YouTube.
Then on Monday, MLAs arrived a week early, officially to hold an emergency legislative debate on repealing the balanced budget law. Gordon Campbell has accepted the need to run a deficit when times are tough.
Really, the opening of the legislature marks the beginning of the next phase in the election campaign that will end with a vote on May 12.
And that process has a lot in common with the World Wrestling Entertainment that provides a stage for Jericho.
And a big stage it is. A search on Google News revealed 1,402 stories about the altercation and its aftermath. The YouTube video had some 500,000 viewings by Tuesday morning.
The parking lot scuffle was, at least based on peoples' interest around North America, the biggest story out of Victoria in at least 15 years.
And within hours, it was being spun like a square dancer at the Williams Lake round-up.
Jericho, an interesting performer who slogged his way through a northern Manitoba wrestling circuit before hitting the bigs, was either a victim or a thug. Both worked for the wrestling fans, given his bad-guy ring persona. (He is an interesting guy - actor, writer, musician and professional celebrity.)
And spin is what we can expect over the next 12 weeks, as we count down to election day. Either party could hire Jericho and his advisers to guide their campaigns; the biggest differences between them and the parties' operatives are neck size and net worth. (The pro wrestling guys win on both counts.)
That's not really true, I admit. Almost all of the campaigners in the provincial election campaign are convinced they are offering a better path for the province's future. The wrestlers just want to make some money and stay in the public eye.
But the way the politics play out - the preening, the posturing and the over-the-top histrionics, the determination to divide the world into evil villains and white knights - has much in common with WWE wrestling. All that's missing are the steroids.
Our politicians don't slug spectators, for the most part. (Jean Chretien's attempted throttling of a critic being an exception.) But during question period, their feigned outrage and anger are every bit as rude, abusive and silly as the wrestlers' rants after every show.
It's too bad that what should be one of the more serious jobs in society has so much in common with a violent, sexist, cartoonish sports-entertainment-circus sideshow.
And it's mystifying. Out of 79 MLAs, there are bound to be a few whose emotional volume level is always set at 11. And you can expect a handful who actually think it's fun to shout insults at each other, like playground bullies except in dark suits.
But mostly, the people who become MLAs start with the idea of making things better in their communities. And by that, they don't mean making things better for their supporters, but for everyone.
Much of the time, they win the nominations in part because they have shown they can bring people together instead of dividing them. The NDP candidate might have attracted notice on the labour council, but she was also a good school trustee who worked well with parents and teachers. The Liberal candidate might have won praise as chamber of commerce head, but he's also respected for the great job he did rounding up volunteers to work on a new playground.
Then, for too many, something happens when they get elected. The next thing you know, they're standing up in the legislature and shouting about the other side's determination to destroy the province.
It's appalling behaviour in wrestlers; profoundly destructive in politicians.
Footnote: If you think I'm exaggerating, read the transcripts of question period, available on the government web site. (Click on Legislative Assembly on the main page, then Debates, then any afternoon session. Or for a grimmer view, tune in to the legislative broadcast around 1:50 p.m. most days.
A pro wrestler and pop culture figure named Chris Jericho got in a tussle as he tried to leave the local arena, and apparently decked a young woman. (She hit him first.) WWE fans were transfixed, especially as it all ended up on YouTube.
Then on Monday, MLAs arrived a week early, officially to hold an emergency legislative debate on repealing the balanced budget law. Gordon Campbell has accepted the need to run a deficit when times are tough.
Really, the opening of the legislature marks the beginning of the next phase in the election campaign that will end with a vote on May 12.
And that process has a lot in common with the World Wrestling Entertainment that provides a stage for Jericho.
And a big stage it is. A search on Google News revealed 1,402 stories about the altercation and its aftermath. The YouTube video had some 500,000 viewings by Tuesday morning.
The parking lot scuffle was, at least based on peoples' interest around North America, the biggest story out of Victoria in at least 15 years.
And within hours, it was being spun like a square dancer at the Williams Lake round-up.
Jericho, an interesting performer who slogged his way through a northern Manitoba wrestling circuit before hitting the bigs, was either a victim or a thug. Both worked for the wrestling fans, given his bad-guy ring persona. (He is an interesting guy - actor, writer, musician and professional celebrity.)
And spin is what we can expect over the next 12 weeks, as we count down to election day. Either party could hire Jericho and his advisers to guide their campaigns; the biggest differences between them and the parties' operatives are neck size and net worth. (The pro wrestling guys win on both counts.)
That's not really true, I admit. Almost all of the campaigners in the provincial election campaign are convinced they are offering a better path for the province's future. The wrestlers just want to make some money and stay in the public eye.
But the way the politics play out - the preening, the posturing and the over-the-top histrionics, the determination to divide the world into evil villains and white knights - has much in common with WWE wrestling. All that's missing are the steroids.
Our politicians don't slug spectators, for the most part. (Jean Chretien's attempted throttling of a critic being an exception.) But during question period, their feigned outrage and anger are every bit as rude, abusive and silly as the wrestlers' rants after every show.
It's too bad that what should be one of the more serious jobs in society has so much in common with a violent, sexist, cartoonish sports-entertainment-circus sideshow.
And it's mystifying. Out of 79 MLAs, there are bound to be a few whose emotional volume level is always set at 11. And you can expect a handful who actually think it's fun to shout insults at each other, like playground bullies except in dark suits.
But mostly, the people who become MLAs start with the idea of making things better in their communities. And by that, they don't mean making things better for their supporters, but for everyone.
Much of the time, they win the nominations in part because they have shown they can bring people together instead of dividing them. The NDP candidate might have attracted notice on the labour council, but she was also a good school trustee who worked well with parents and teachers. The Liberal candidate might have won praise as chamber of commerce head, but he's also respected for the great job he did rounding up volunteers to work on a new playground.
Then, for too many, something happens when they get elected. The next thing you know, they're standing up in the legislature and shouting about the other side's determination to destroy the province.
It's appalling behaviour in wrestlers; profoundly destructive in politicians.
Footnote: If you think I'm exaggerating, read the transcripts of question period, available on the government web site. (Click on Legislative Assembly on the main page, then Debates, then any afternoon session. Or for a grimmer view, tune in to the legislative broadcast around 1:50 p.m. most days.
Friday, February 06, 2009
Lots of questions on Port Mann project
Eight months ago, the government said twinning the Port Mann bridge would cost about $1.6 billion, with not a penny from provincial taxpayers.
A private consortium would build the bridge and maintain it in return for the future toll revenue. Good deal.
But now, the cost is $3.3 billion.
Taxpayers are on the hook for $1.2 billion in financing.
Oh, and the bridge isn't being twinned anymore. The existing bridge will be pulled down after a new 10-lane bridge is built.
There is a good case for another bridge to get people across the Fraser River. Traffic is a mess for large chunks of the day. (Though the question of what happens to the thousands of additional cars when they get off the bridge is still largely unanswered.)
But this announcement by Premier Gordon Campbell does not inspire confidence.
The government said the soaring cost is caused by inflation, the decision to tear down the existing bridge and a more realistic look what's involved in the project, like feeder roads.
Still, a doubling of costs before the first shovel of dirt is moved is hardly reassuring. Especially from the government that stuck taxpayers with $500 million worth of surprise overruns on Vancouver's convention centre.
That's far from the only worry.
The government has said the initial toll will be $3, rising with inflation. With a modest increase in traffic, that would produce $150 million a year for the bridge operators. (Toll collection will be high-tech. Electronic devices would log regular users crossings and deduct the toll from an account.)
When the bridge was to cost $1.6 billion, $150 million in revenue wasn't bad. That's about a 9.5-per-cent return.
But at $3.3 billion, the return is down to 4.5 per cent. The consortium is not likely to go ahead - especially not with the risks of construction cost overruns, shortfalls in revenues and interest cost - without more revenue.
So what will the province - that is to say, you the taxpayers - pay to keep the private companies committed to the project? Will it be $100 million a year, on top of the tolls, or more?
And then there's the whole question of the $1.2 billion taxpayers are advancing to pay for the project.
It's apparently a loan, at commercial rates. If it's repaid, the government should make money given its low borrowing costs.
The project is being funded with $1 billion from the construction consortium, which includes Macquarie Group, an Australian investment business that has done well in its dealings with government, but hit tough times. The province is to put up $1.2 billion; other lenders another $1.2 billion.
The theory is that provincial taxpayers are protected. The consortium, with $1 billion at risk, has a big incentive to make sure the project is completed.
But no other lender, no bank or pension fund around the world, could be found to provide the $1.2 billion in financing. That's why the province stepped forward.
OK, it's a skittish time for lenders.
But does that mean taxpayers have to take on the risk? Or should the government have waited for a year, developing a clearer assessment of the risks and a realistic business plan?
Transportation Minister Kevin Falcon, who has championed the bridge and other Lower Mainland road projects, says traffic delays cost B.C. $1.5 billion a year in lost productivity. If the Port Mann cuts that problem by 25 per cent, it's a good investment.
But that's not clear. And the government's leap into this megaproject is looking a little blind. It's hard not to worry that the desire to get a deal done before the provincial election is encouraging too much haste.
It's been tough to get information about other private-public partnerships. This time, the government should recognize the legitimate public concern and answer all the questions before the deal is done.
Footnote: The project is popular, mostly, in the Lower Mainland. But Liberal candidates in the rest of the province might find it a challenge to defend going ahead with another Vancouver-area megaproject even as cost estimates soar.
A private consortium would build the bridge and maintain it in return for the future toll revenue. Good deal.
But now, the cost is $3.3 billion.
Taxpayers are on the hook for $1.2 billion in financing.
Oh, and the bridge isn't being twinned anymore. The existing bridge will be pulled down after a new 10-lane bridge is built.
There is a good case for another bridge to get people across the Fraser River. Traffic is a mess for large chunks of the day. (Though the question of what happens to the thousands of additional cars when they get off the bridge is still largely unanswered.)
But this announcement by Premier Gordon Campbell does not inspire confidence.
The government said the soaring cost is caused by inflation, the decision to tear down the existing bridge and a more realistic look what's involved in the project, like feeder roads.
Still, a doubling of costs before the first shovel of dirt is moved is hardly reassuring. Especially from the government that stuck taxpayers with $500 million worth of surprise overruns on Vancouver's convention centre.
That's far from the only worry.
The government has said the initial toll will be $3, rising with inflation. With a modest increase in traffic, that would produce $150 million a year for the bridge operators. (Toll collection will be high-tech. Electronic devices would log regular users crossings and deduct the toll from an account.)
When the bridge was to cost $1.6 billion, $150 million in revenue wasn't bad. That's about a 9.5-per-cent return.
But at $3.3 billion, the return is down to 4.5 per cent. The consortium is not likely to go ahead - especially not with the risks of construction cost overruns, shortfalls in revenues and interest cost - without more revenue.
So what will the province - that is to say, you the taxpayers - pay to keep the private companies committed to the project? Will it be $100 million a year, on top of the tolls, or more?
And then there's the whole question of the $1.2 billion taxpayers are advancing to pay for the project.
It's apparently a loan, at commercial rates. If it's repaid, the government should make money given its low borrowing costs.
The project is being funded with $1 billion from the construction consortium, which includes Macquarie Group, an Australian investment business that has done well in its dealings with government, but hit tough times. The province is to put up $1.2 billion; other lenders another $1.2 billion.
The theory is that provincial taxpayers are protected. The consortium, with $1 billion at risk, has a big incentive to make sure the project is completed.
But no other lender, no bank or pension fund around the world, could be found to provide the $1.2 billion in financing. That's why the province stepped forward.
OK, it's a skittish time for lenders.
But does that mean taxpayers have to take on the risk? Or should the government have waited for a year, developing a clearer assessment of the risks and a realistic business plan?
Transportation Minister Kevin Falcon, who has championed the bridge and other Lower Mainland road projects, says traffic delays cost B.C. $1.5 billion a year in lost productivity. If the Port Mann cuts that problem by 25 per cent, it's a good investment.
But that's not clear. And the government's leap into this megaproject is looking a little blind. It's hard not to worry that the desire to get a deal done before the provincial election is encouraging too much haste.
It's been tough to get information about other private-public partnerships. This time, the government should recognize the legitimate public concern and answer all the questions before the deal is done.
Footnote: The project is popular, mostly, in the Lower Mainland. But Liberal candidates in the rest of the province might find it a challenge to defend going ahead with another Vancouver-area megaproject even as cost estimates soar.
Run-of-river gold rush or not?
Energy Minister Blair Lekstrom wrote the Times Colonist to argue there is no boom in run-of-river power applications in the province. The letter, published this week, said:
"Despite the claims of a "gold rush" in new independent power projects, only 46 such projects are in operation; almost half were started under the previous NDP government."
But the government handed out employee recognition awards this week and gave a Gold Award to a cross-ministry team from energy, agriculture and lands, environment and forests for their work on a flood of IPP applications.
"The team was brought together in response to a phenomenal increase over five years of 1,140 per cent in independent power project applications. Without a corresponding increase in resources, agency staff looked for new ways to do business. They came up with an integrated and coordinated inter-agency approach to application management."
Maybe a "phenomenal" 1,000-per-cent increase in applications isn't a gold rush for the minister, but the people who do the work see it differently.
"Despite the claims of a "gold rush" in new independent power projects, only 46 such projects are in operation; almost half were started under the previous NDP government."
But the government handed out employee recognition awards this week and gave a Gold Award to a cross-ministry team from energy, agriculture and lands, environment and forests for their work on a flood of IPP applications.
"The team was brought together in response to a phenomenal increase over five years of 1,140 per cent in independent power project applications. Without a corresponding increase in resources, agency staff looked for new ways to do business. They came up with an integrated and coordinated inter-agency approach to application management."
Maybe a "phenomenal" 1,000-per-cent increase in applications isn't a gold rush for the minister, but the people who do the work see it differently.
The drug mire in Afghanistan
The plan for NATO troops to start attacking opium producers in Afghanistan seems a pointless step into a nasty mess. The theory that drug money helps supports the Taliban is almost certainly true; if nothing else, looking Taliban leaders can collect taxes or protection money.
But poppy production provides income for one in 10 Afghans, in a country where the average monthly income is about $30. Every effort to end the industry — which provides some 90 per cent of the world's opium - will be fought by large sections of the public.
And, as this fine piece on the fumbling and corrupt eradication efforts from a couple of years ago shows, the effort is likely to cost vast sums and accomplish little.
Drug eradication spending in Afghanistan has been running at about $650 million a year — about $55 million froom Canada — while production increases.
There are alternate approaches. The Senlis Council, an international research agency with a focus on Afghanistan, has proposed a Poppy for Medicine program. Afghan villages would be supported in growing poppies and producing morphine. The pain-management drug is in desperately short supply for medical use in much of the developing world.
Western nations could also subsidize farmers to grow other crops or simply buy and destroy the poppy harvest.
But poppy production provides income for one in 10 Afghans, in a country where the average monthly income is about $30. Every effort to end the industry — which provides some 90 per cent of the world's opium - will be fought by large sections of the public.
And, as this fine piece on the fumbling and corrupt eradication efforts from a couple of years ago shows, the effort is likely to cost vast sums and accomplish little.
Drug eradication spending in Afghanistan has been running at about $650 million a year — about $55 million froom Canada — while production increases.
There are alternate approaches. The Senlis Council, an international research agency with a focus on Afghanistan, has proposed a Poppy for Medicine program. Afghan villages would be supported in growing poppies and producing morphine. The pain-management drug is in desperately short supply for medical use in much of the developing world.
Western nations could also subsidize farmers to grow other crops or simply buy and destroy the poppy harvest.
Tuesday, February 03, 2009
Campbell, thankfully, flip-flops on deficits
Heave a sigh of relief that Gordon Campbell has decided deficits aren't the ultimate horror after all.
Campbell has been an anti-deficit zealot for every one of the 16 years he's been in provincial politics. He brought in a law that made deficits illegal and denounced them as the folly of the weak and morally bankrupt.
Even in late October, when the premier went on television to announce his responses to the economic meltdown, he stuck to the claim that deficits are the tools of the devil.
"Let me be very clear, we are not going to run a deficit in the province of B.C.," he said at a press conference after the talk. "When anyone talks about a deficit, they're talking about turning their back on the next generation and sending our problems forward to them."
Less than four months later, Campbell has changed his mind. He and Finance Minister Colin Hansen called a dramatic press conference this week to confirm government revenues have plunged. Without deficits for the next two years, the government would have to cut spending on health and education. That would be worse than a deficit, Campbell said grimly.
Hallelujah.
The fact that Campbell and Hansen could only be persuaded now, two weeks before budget day, means disaster was dangerously near.
Hansen said if was only in the last couple of weeks that he accepted the impossibility of a balanced budget next year. That means the government was on the brink of a desperate gutting of spending to meet its ideological commitment to balanced budgets. Government officials have spent months looking for programs and spending to cut to bring expense in line with revenues.
The result would have been predictably terrible, with deep and damaging cuts to vital programs.
Hansen said this week that government revenue for the next three years is now forecast to be about $6 billion below the projections used in last year's fiscal plans.
Not surprising, as the resource industries struggle, tax revenues slump and home sales - and property transfer taxes - drop. But huge.
Consider the impact of building a balanced budget with that kind of revenue shortfall.
Assume a two-year freeze on health and education spending, which would mean growing waits and other problems as health authorities cut back to cover salary increases and critical needs.
The government would still have to cut 10 per cent from the rest of its spending to have a hope of delivering a balanced budget. That would mean deep cuts to services and programs, from policing to child protection to retraining.
The fact that Campbell was willing to cling to the idea that could be managed is alarming.
Deficits are, in most circumstances, to be avoided. Spending more than you take in - as an individual or a government - means racking up debt that must be repaid and interest costs. It's an easy way to put off hard decisions and leave the consequences for someone else.
But sometimes it makes sense to borrow to get over a brief period of lower income. That's especially true in a recession, when cuts would further weaken the economy and deprive people of services just when they are most needed.
It's still not clear whether Campbell accepts that reality. He said at the press conference that he only abandoned the idea of balancing the budget when it became clear that health and education cuts would be required. That raises, again, the suggestion that other government functions - children and families, forestry management - are expendable.
And he pledged to still try for a balanced budget, promising cuts to contracts with service providers, grants, contributions and government operations. Service providers - the agencies that actually do much of the work on behalf of the government - are already struggling. Cuts could be disastrous.
Still, count the flip-flop as a sign that Campbell found some common sense, in the nick of time.
Footnote: There was more encouraging news. Hansen said the panel of independent economists the government consults had knocked their growth forecast for this year down to zero. But in 2010, their average prediction is for 2.8-per-cent growth. That would point to a relatively quick emergence from the worst of the slump for the province.
Campbell has been an anti-deficit zealot for every one of the 16 years he's been in provincial politics. He brought in a law that made deficits illegal and denounced them as the folly of the weak and morally bankrupt.
Even in late October, when the premier went on television to announce his responses to the economic meltdown, he stuck to the claim that deficits are the tools of the devil.
"Let me be very clear, we are not going to run a deficit in the province of B.C.," he said at a press conference after the talk. "When anyone talks about a deficit, they're talking about turning their back on the next generation and sending our problems forward to them."
Less than four months later, Campbell has changed his mind. He and Finance Minister Colin Hansen called a dramatic press conference this week to confirm government revenues have plunged. Without deficits for the next two years, the government would have to cut spending on health and education. That would be worse than a deficit, Campbell said grimly.
Hallelujah.
The fact that Campbell and Hansen could only be persuaded now, two weeks before budget day, means disaster was dangerously near.
Hansen said if was only in the last couple of weeks that he accepted the impossibility of a balanced budget next year. That means the government was on the brink of a desperate gutting of spending to meet its ideological commitment to balanced budgets. Government officials have spent months looking for programs and spending to cut to bring expense in line with revenues.
The result would have been predictably terrible, with deep and damaging cuts to vital programs.
Hansen said this week that government revenue for the next three years is now forecast to be about $6 billion below the projections used in last year's fiscal plans.
Not surprising, as the resource industries struggle, tax revenues slump and home sales - and property transfer taxes - drop. But huge.
Consider the impact of building a balanced budget with that kind of revenue shortfall.
Assume a two-year freeze on health and education spending, which would mean growing waits and other problems as health authorities cut back to cover salary increases and critical needs.
The government would still have to cut 10 per cent from the rest of its spending to have a hope of delivering a balanced budget. That would mean deep cuts to services and programs, from policing to child protection to retraining.
The fact that Campbell was willing to cling to the idea that could be managed is alarming.
Deficits are, in most circumstances, to be avoided. Spending more than you take in - as an individual or a government - means racking up debt that must be repaid and interest costs. It's an easy way to put off hard decisions and leave the consequences for someone else.
But sometimes it makes sense to borrow to get over a brief period of lower income. That's especially true in a recession, when cuts would further weaken the economy and deprive people of services just when they are most needed.
It's still not clear whether Campbell accepts that reality. He said at the press conference that he only abandoned the idea of balancing the budget when it became clear that health and education cuts would be required. That raises, again, the suggestion that other government functions - children and families, forestry management - are expendable.
And he pledged to still try for a balanced budget, promising cuts to contracts with service providers, grants, contributions and government operations. Service providers - the agencies that actually do much of the work on behalf of the government - are already struggling. Cuts could be disastrous.
Still, count the flip-flop as a sign that Campbell found some common sense, in the nick of time.
Footnote: There was more encouraging news. Hansen said the panel of independent economists the government consults had knocked their growth forecast for this year down to zero. But in 2010, their average prediction is for 2.8-per-cent growth. That would point to a relatively quick emergence from the worst of the slump for the province.
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