The following is a set of notes I wrote for the local newspaper after the editor posted the following request on Facebook:
So, my thoughts on the budget.
The budget address itself was a bunch of canned macroeconomic platitudes based on 1940s theories and misinterpretation of statistics. I doubt your readers are interested in my detailed analysis. The main idea is that it's supposed to be an austerity budget with a surplus, but there is actually not much sense in talking about surpluses or deficits in the GNWT budget when it's 76% funded by the federal government. They call most of it a "grant" rather than "transfer payment" but that makes no difference to the reality that we're getting $1.67 billion in federal dole. So what if there is some spare change left at the end of the year? We're still $1.67 billion short of breaking even.
Speaking of our federal dole, it's increased by $73 million over last year per the main estimate. All the government has to do is exactly the same as last year. In addition, the main estimate shows an increase in corporate income tax from $20.3 million to $75.0 million, an increase of 269% year-on-year, and that's really bizarre. I'd really like to know how they figure that corporate profits are going to quadruple in a year, because even in China that doesn't happen.
So in total there is an extra $132.1 million in revenues, which is used basically to cover the shortfall in programs spending last year, plus a 1% increase which is more or less the cost of inflation. And the rest gets put in the bank. The $74.1 million "surplus" therefore depends on a huge increase in corporate tax take, and no real-dollar increase in program spending. I personally have little faith in either one of these assumptions.
The details of the main estimates are more interesting than the summary because there is actually a fair amount of money being moved hither and yon. It's not really a "everything stays the same" budget; what it's doing is moving money from programs with a positive future impact to programs with a crowd-pleasing current impact. For example, the largest dollar-amount increase is a $15.6 contribution to NTPC to subsidise power rates ($10.6 million) and the Inuvik gas problem ($5.0 million). In addition there is another $1.6 million increase in power subsidies through a different department office. For something that's supposed to be an "austerity" budget, it really makes no sense. Power subsidies make people happy in the short-run, but they're not good policy. They're not sustainable. And speaking of sustainable energy use, all those programs are getting slashed: the grant to Arctic Energy Alliance for the Community Energy Planning Program, the grants for wind energy, geothermal and hydro strategies are all gone, biomass energy grant is down $1.5 million, and the ITI Energy contributions ($4.8 million last year) are gone. Now some of these may have reached the end of their funding agreement, but the money isn't being put back into more energy sustainability programs.
The second-largest dollar increase is listed as "other" under Highways, for $5.3 million, so I have no idea what that is. And then a $3.5 million increase to law enforcement contract, i.e. the RCMP contract. That's a 10% increase. Then there is a $2.6 million increase in compensation and benefits, which sounds like a lot but it's a 1% increase with 27 positions being added, so it's barely inflationary. On the other hand the jobs are getting shuffled around, for example, the Office of Devolution is getting a $1.8 million increase in compensation, with 10 new staff based in Yellowknife; and the Health and Social Services directorate is getting a $0.8 million increase in compensation and 7 new positions in Yellowknife. On the other hand the Housing Corporation is losing $0.9 million in compensation and 6 positions, and ENR is losing $0.9 million in compensation from Forest Management but not losing any positions. So it's a zero-sum-game for the bottom line but it's not good news for GNWT employees. In that sense it's good news for the rest of us, who aren't the only ones getting the short end of the stick this time around.
The most exciting line item for the individual, in my opinion, is the $1.0 million Rent Supplement Program, which is going to subsidise working families who pay a disproportionate amount of rent. I think that's gonna be good news for everyone until we actually find out the needs test and discover that most of us barely don't qualify for any help. (I'm speculating here, but that's a pretty common feature in government programs.)
On the other hand, there are some large cuts happening, most noticeably $5.0 million from ENR's Fire Suppression budget. That's 53% of their budget. I'm not sure if we have a magical way of knowing we won't have any forest fires, or we just plan to let them burn. Also there is a $7.0 million (8%) cut to hospital services, which can't be good news for anyone, and a whole bunch of cuts to Health & Social Services, including $1.2 million (19%) from Prevention and Promotion Services, $2.1 million (9%) from Children and Family Services, $2.0 million (31%) from Population Health ("Broad population health through planning, design, development, co-ordination and ongoing management of health and wellness surveillance activities for the Northwest Territories. This includes the development of program standards, monitoring and evaluation in the areas of public health, health promotion, environmental health, disease control and epidemiology.") In all, Health & Social Services is losing $8.9 million (2%). Aptly, Tobacco Cessation was cut and the estimate for tobacco tax revenue is up. Smart!
So my overall comment on this budget is that it's neither "status quo" nor "austerity" but more "rearranging dinner seating on a sinking ship." The whole thing depends on very optimistic ideas about the business outlook, hoping there won't be any forest fires, and some important cut to some health programs. More specifically, the cuts are to programs that would produce future savings and resources, and there is nothing in it that can be expected to stimulate the economy. It's mildly bad for everybody, and there is no getting around the fact we're $1.2 billion short of paying our own bills.
Okay Hay River I need your thoughts for an article!The notes aren't intended to be published as a whole, of course, I expect her to pick one or two quotables. Less, I'll be displeased, more, she's gonna end up owing me money. But of course this is my blog, so you guys get the long version of my thoughts.
The territorial operations and maintenance budget for 2012-2013 was released last week, and I am looking for some feedback.
The budget has been called "status-quo" and will not see taxes increasing. This is the first surplus budget seen in five years, with a surplus of $74 million. Major spending this year includes education, health care, social programs, corrections and housing program -- $818 million in total.
The overall budget, which focuses on programs and jobs, comes in at $1.4 billion.
Does this sound like a budget that will benefit both the territory and Hay River itself? Let me know what you think!
So, my thoughts on the budget.
The budget address itself was a bunch of canned macroeconomic platitudes based on 1940s theories and misinterpretation of statistics. I doubt your readers are interested in my detailed analysis. The main idea is that it's supposed to be an austerity budget with a surplus, but there is actually not much sense in talking about surpluses or deficits in the GNWT budget when it's 76% funded by the federal government. They call most of it a "grant" rather than "transfer payment" but that makes no difference to the reality that we're getting $1.67 billion in federal dole. So what if there is some spare change left at the end of the year? We're still $1.67 billion short of breaking even.
Speaking of our federal dole, it's increased by $73 million over last year per the main estimate. All the government has to do is exactly the same as last year. In addition, the main estimate shows an increase in corporate income tax from $20.3 million to $75.0 million, an increase of 269% year-on-year, and that's really bizarre. I'd really like to know how they figure that corporate profits are going to quadruple in a year, because even in China that doesn't happen.
So in total there is an extra $132.1 million in revenues, which is used basically to cover the shortfall in programs spending last year, plus a 1% increase which is more or less the cost of inflation. And the rest gets put in the bank. The $74.1 million "surplus" therefore depends on a huge increase in corporate tax take, and no real-dollar increase in program spending. I personally have little faith in either one of these assumptions.
The details of the main estimates are more interesting than the summary because there is actually a fair amount of money being moved hither and yon. It's not really a "everything stays the same" budget; what it's doing is moving money from programs with a positive future impact to programs with a crowd-pleasing current impact. For example, the largest dollar-amount increase is a $15.6 contribution to NTPC to subsidise power rates ($10.6 million) and the Inuvik gas problem ($5.0 million). In addition there is another $1.6 million increase in power subsidies through a different department office. For something that's supposed to be an "austerity" budget, it really makes no sense. Power subsidies make people happy in the short-run, but they're not good policy. They're not sustainable. And speaking of sustainable energy use, all those programs are getting slashed: the grant to Arctic Energy Alliance for the Community Energy Planning Program, the grants for wind energy, geothermal and hydro strategies are all gone, biomass energy grant is down $1.5 million, and the ITI Energy contributions ($4.8 million last year) are gone. Now some of these may have reached the end of their funding agreement, but the money isn't being put back into more energy sustainability programs.
The second-largest dollar increase is listed as "other" under Highways, for $5.3 million, so I have no idea what that is. And then a $3.5 million increase to law enforcement contract, i.e. the RCMP contract. That's a 10% increase. Then there is a $2.6 million increase in compensation and benefits, which sounds like a lot but it's a 1% increase with 27 positions being added, so it's barely inflationary. On the other hand the jobs are getting shuffled around, for example, the Office of Devolution is getting a $1.8 million increase in compensation, with 10 new staff based in Yellowknife; and the Health and Social Services directorate is getting a $0.8 million increase in compensation and 7 new positions in Yellowknife. On the other hand the Housing Corporation is losing $0.9 million in compensation and 6 positions, and ENR is losing $0.9 million in compensation from Forest Management but not losing any positions. So it's a zero-sum-game for the bottom line but it's not good news for GNWT employees. In that sense it's good news for the rest of us, who aren't the only ones getting the short end of the stick this time around.
The most exciting line item for the individual, in my opinion, is the $1.0 million Rent Supplement Program, which is going to subsidise working families who pay a disproportionate amount of rent. I think that's gonna be good news for everyone until we actually find out the needs test and discover that most of us barely don't qualify for any help. (I'm speculating here, but that's a pretty common feature in government programs.)
On the other hand, there are some large cuts happening, most noticeably $5.0 million from ENR's Fire Suppression budget. That's 53% of their budget. I'm not sure if we have a magical way of knowing we won't have any forest fires, or we just plan to let them burn. Also there is a $7.0 million (8%) cut to hospital services, which can't be good news for anyone, and a whole bunch of cuts to Health & Social Services, including $1.2 million (19%) from Prevention and Promotion Services, $2.1 million (9%) from Children and Family Services, $2.0 million (31%) from Population Health ("Broad population health through planning, design, development, co-ordination and ongoing management of health and wellness surveillance activities for the Northwest Territories. This includes the development of program standards, monitoring and evaluation in the areas of public health, health promotion, environmental health, disease control and epidemiology.") In all, Health & Social Services is losing $8.9 million (2%). Aptly, Tobacco Cessation was cut and the estimate for tobacco tax revenue is up. Smart!
So my overall comment on this budget is that it's neither "status quo" nor "austerity" but more "rearranging dinner seating on a sinking ship." The whole thing depends on very optimistic ideas about the business outlook, hoping there won't be any forest fires, and some important cut to some health programs. More specifically, the cuts are to programs that would produce future savings and resources, and there is nothing in it that can be expected to stimulate the economy. It's mildly bad for everybody, and there is no getting around the fact we're $1.2 billion short of paying our own bills.
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