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Impacting Benefit Agreements

in Featured/View From The Mainland by

BUDGET!

Yes, I’m intentionally avoiding the Labrador by-election and the NunatuKavut stories – both of which I will admit I have to recuse myself from, for the time being at least.

And yes, I’m coming late to the game, again, on a big news piece that happened some time ago. But you’ll have to agree with me that not all the (post-mortem) horses have been beaten yet. No. In fact, some horses are off wandering a-lea yet.

WOW. What a budget. Nobody saw that coming for, say, at least the past seven years, right? I mean, there weren’t any academics, bloggers, media types, or pretty much anyone who weren’t totally convinced that we were now – and always will be – a have province due to a couple of bumps in our revenue stream (thanks Labrador mining boom, and of course the oil)? Nobody screamed that these are NON-RENEWABLE resources or anything.

I remember when Danny Williams first took the helm…

…screaming fiscal restraint, budget cuts, rein in the public sector, cap their wages,  and all those wonderfully “progressive” yet “conservative” ways of governing.  That all pretty much changed when government realized they had an immense bump in the revenue stream (jumping from about $5 billion to well over $8 billion). Something changed in the psyche when reliance on federal government transfers fell from nearly half to practically non-existent. It made it super easy to pander to the public’s incessant demands for election (and ego) pavement, etc.

Everyone else has covered how we came to this financial point already, but just a couple quick points and I’ll move on. The provincial conservative government acted conservative and cut taxes: half a billion dollars less per year now than in 2006. The provincial conservative government acted decidedly unconservative and (massively) increased public service sector spending – by a billion a year more since 2008. This is a socialist approach to disseminating resource revenues, since the number of workers in the oil industry is very few relative to the vast revenues generated (and nobody likes the idea of cutting cheques to every citizen).

Sadly, most public sector spending (i.e. oil money redistribution jobs) lands in the “urban” areas of the province, specifically St. John’s. So how do you make the rest of the province feel the “prosperity”?  Pay down debt? Pay off unfunded pension liabilities? Nah, let’s blast the province with “hard core infrastructure” spending. (I actually totally agreed with the government doing this. We had/have an infrastructure deficit and we have to build infrastructure to attract and grow other industries outside the overpass and on the mainland – plus you hire a few locals along the way.)

Problem now is, we’ve passed peak oil

Yes, that’s right. 2008 was the year oil finally contributed more to the ProvGov than Labrador minerals, like I mentioned in a previous column. But now oil is poised to fade away from our memories and Labrador mineral revenues will once again surpass it as the greatest (overall historical) contributor of provincial revenues.

So the long and short of it really is that they knew these $8 billion budgets were going to contract again. They decided against cutting back early to ride that gravy train for just one more year, instead of easing off the gas pedal – better for last year’s polls I s’pose. So this year they decided the band-aid had to come off all at once, causing a giant outpouring of red, all across the board – and they still came up short. And a typical government trick is to sprinkle in some fries to keep the image of the gravy train goinglook at the good things we’re doing to distract you from the cuts we shouldn’t have to make because we were spending like someone on shore leave for eight years.

You know what puts the curds on this poutine?

The one thing that hasn’t already been beaten to death? Heck, I could barely believe my ears when I heard this was coming months ago, let alone try to find some kind of media coverage about it since it happened.

I’m talking about the unnecessary withholding of mining tax revenues from the Inuit and Innu governments in Labrador.

‘Yeah, so what?’ you say. ‘They’ll get them in a few years,’ you say. Like anyone believes governments when they make that kind of promise. Further, it’s completely unwarranted and totally dishonourable. Sure the provincial government has the legal right to do this, otherwise this would already be big news with Nunatsiavut and the Innu Nation suing the province. But how would this go over if Canada did this to Newfoundland? My guess is some lunatic would be ripping down Canadian flags and screaming that we should go it alone or something.

We wouldn’t be here without Voisey’s Bay

There are many who would argue that the Inuit would not have yet completed a land claim agreement without Voisey’s Bay. To a lesser extent the Innu land claim also benefited from withholding approval of the development of Voisey’s Bay (and perhaps later the Lower Churchill projects). Simple, if not simplistic, logic states that a trillion dollar mine is quite the motivation to settle claims and obtain certainty for other developments in the region. Believe you me, it’s better to get certainty over who owns what than to frig around with losing a project that has, so far, generated over $1 billion for the provincial coffers.

And whether you like it or not, resource extraction companies quite like signing these Impact Benefit Agreements, or IBAs. It’s good publicity, it gets buy in, and more importantly participation from the local communities. And it’s just plain good business.

Before you go off on Aboriginal groups being reckless with their money…

…or unaccountable, or any of that stuff. I have to point out that Nunatsiavut has a constitutional obligation to financial accountability and to maintaining zero deficit budgets. Besides all that, having access to royalties (that were agreed to by corporations AND the governments) means Nunatsiavut and the Innu Nation can fill infrastructure and program shortfalls of the provincial government in their territories.

If you read the past stories about what these mining tax revenues have been able to provide, one year involved a $12 million bump (not unlike the first oil bump), allowing Nunatsiavut to develop/replace some of its own hard core infrastructure. Usually, however, it has allowed them to avoid their own deficits by taking last year’s surplus revenues. Now, not all years are $12 million boons from Voisey’s Bay royalties (5% of the province’s share, which is about 20%): generally the revenues so far have been in the $1 to $2 million dollar range.

Which begs the question: why does the province really care about one or two million bucks? Why would the province risk the capacity of a highly transparent, constitutionally-obligated-zero-deficit-budget, responsible local government over a million bucks a year?

To Nunatsiavut, that million or two means a lot

To Newfoundland it’s dribs toward the giant hole of hundreds and hundreds and hundreds and hundreds and hundreds and hundreds of millions of dollars (or more) of mismanagement-induced deficit.

Arguably, Nunatsiavut allowed Newfoundland to commence mining at Voisey’s Bay.

Arguably, Newfoundland has gained over $1 billion in revenues from it, and counting.

Arguably, it’s breaking the trust (and the written agreements) between the Aboriginal people who allow the entire province to benefit from their lands. And now Newfoundland is turning off the little dribble of money they get from their traditional lands?

Maybe Newfoundland should be obliged to be as fiscally responsible as Nunatsiavut, instead of dragging everyone else down with her.

Who’s next?

 

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