Newfoundland and Labrador has finally delivered its long-awaited 2020 budget. While Deputy Premier and Minister of Finance Siobhan Coady closed her speech by declaring that “today marks… a renaissance for Newfoundland and Labrador,” her message to reporters in the lockup on September 30th was significantly more subdued: “this is a pandemic budget.”
The key takeaway: watch this space for Budget 2021, when the Premier’s Economic Recovery Team (spearheaded by Moya Greene from her home in London, England) will have “review[ed] expenditures across government, provid[ed] independent analysis of our fiscal capacity, and re-imagin[ed] government service delivery.”
Otherwise, this budget was about “holding the line” six months into the Covid-19 pandemic that has overturned the world economy and our daily lives.
Highlights and Lowlights
The major highlight is the announcement of Premier Andrew Furey’s signature $25/day daycare program—with policy details “to be developed,” though officials expect that it will cost a minimum of $12 million a year. ($3 million has been budgeted for the first quarter of 2021.) $30 million has been allocated to a Small Business Assistance Fund and $3.2 million is going to organizations in the community sector (such as non-violence programs, womens’ centres, SHOP, and Indigenous organizations). An additional $1 million is going towards ArtsNL, bringing total annual funding to $3.9 million.
Memorial University has been allocated $363.2 million for its annual operating grant, which includes $68.4 million to preserve the existing tuition freeze for Newfoundland and Labrador students. College of the North Atlantic has been granted $87.9 million, which includes $14.9 million for its own tuition freeze for Newfoundland and Labrador students. $2.1 million has been allocated to marketing the province to new immigrants and helping them settle once arrived.
Otherwise, the big news is that the fiscal situation is marginally better than the July 2020 update: $300 million better, give or take. The deficit came in at $1.84 billion (instead of the projected $1.87) and net debt has been clocked at $16.4 billion (instead of the anticipated $16.7). While there were approximately $524 million in unanticipated extra expenditures this year, roughly 93% of that is directly related to the costs of handling Covid-19.
There are no changes in personal or corporate income tax. There is a modest increase in taxes on tobacco products—five cents per cigarette, 10 cents per gram of fine cut tobacco, and a new 20% tax on vaping products. (A further $1.7 million is being advanced to provincial anti-smoking initiatives.) Revenues from oil and gas are anticipated to be $533 million in 2020-2021, down $430 million from 2019-2020.
The federal carbon price is rising to $30/tonne—which would have led to an increase in gasoline prices by more than two cents/litre. But the provincial government is also lowering its own gas tax by two cents at the same time, so that the price only increases by 0.21 cents/litre. While this effectively nullifies the federal efforts locally on carbon pricing, Coady insisted that the province’s commitment to achieving net-zero carbon emissions by 2050 demonstrates Newfoundland and Labrador’s dedication to climate action.
There was no mention in the budget of rate mitigation for Muskrat Falls, as negotiations with the federal government remain ongoing; the project represents one third of provincial debt. No attempt was made to forecast the province’s fiscal future beyond this year’s budget, with officials citing uncertainty around the ongoing pandemic—as well as the absence of a federal budget for 2020.
The economic overview for 2020 is bleak. The surplus posted in 2019-2020 from the Hibernia Dividend has been downgraded from $1.9 billion to $1.1 billion, largely on account of the collapse in oil prices. Gross borrowing for 2020-21 will be $3 billion, up from $1.2 billion in the previous year. Real provincial GDP is expected to decline 4.8% in 2020 as a result of the impacts of Covid-19 on the economy. Capital investment is expected to decrease 13.6%, real exports are expected to go down 3.9%, and employment is expected to drop 5.8%. Household income, however, is expected to increase by a modest 1.8%, largely thanks to emergency transfers from the federal government. (The province remains committed to clawing back CERB payments made to individuals on low-income support programs.)
While oil royalties made up roughly 13% of provincial revenue in 2019-2020, this year they are projected to be closer to 7.5%. The province is forecasting a price of US $39/barrel of oil for 2020-2021. Despite this low price, budget documents note that “numerous long-term exploration programs bode well for the future of the oil industry in the province.”
The Province: “We’ll Wait and We’ll See”
Much budget discussion from provincial officials centred around tempering expectations—and looking ahead to the spring. Siobhan Coady repeatedly emphasized that this is a “pandemic budget,” and that something more substantive was coming in the wake of Moya Greene’s economic review.
“From a budgeting perspective, this is a very responsible budget, especially for in the middle of a pandemic,” Coady told reporters in the lockup. “[But] I think every Newfoundlander and Labradorian recognizes that there are some structural issues that need to be addressed.”
“We’ve got one of the best and brightest Newfoundlanders helping us with that, Moya Greene, and she’s going to look at all of our expenses, the financial situation of the province, our economy, and give good suggestions,” she explained. “I think Newfoundlanders and Labradorians, who have tremendous pride in where we live, want to address some of the structural concerns within this province and want to start looking at how we manage the deficit and manage the debt.”
Despite the grim outlook on oil prices in the foreseeable future, Minister of Industry, Energy, and Technology Andrew Parsons was bullish on the prospects of offshore oil and gas.
“There’s absolutely no intent on the part of this government to give up on this industry,” Parsons told reporters. “Oil and gas will continue to be a part of this province, just looking at what it does provide. There will be creativity needed in some ways to use some of [the $320 million announced by the federal government on September 25]. It’s not just about putting a direct cheque into the bank account of one of these companies.”
“As the federal minister said, this is about trying to find a way to get this industry back to work. We’ll see where November 4th brings us on how the [exploration] bidding goes. We cannot give up this commodity right now, absolutely cannot. But we need to continue the efforts to diversify.”
In particular, Parsons highlighted the technology sector and the mining sector as areas with significant promise.
“The tech sector is huge. If you look at some of those big entities we have here, they’re building big headquarters because they’re adding jobs,” the minister explained. “You look at a company like Verafin, their issue is that there’s not enough people around to hire.”
“Mining, too. Just looking at gold in particular, gold has historically been really stable, it’s been a good investment,” Parsons continued. “But it’s gone through its own fluctuations. At this particular time, we have a huge amount of interest. Our job is to help them, especially the juniours, where capital is always the issue that they face.”
“We’re still trying to interest these companies in coming here. I think the investments that we’ve made over this past year [show] stability, and that’s what people want. People want some stability in what has been a historically unstable year.”
Meanwhile, Minister of Education Tom Osborne explained that the operating grant for Memorial University and the tuition freeze would remain more or less untouched for 2020-21. But that situation may change depending on the results of an ongoing post-secondary review anticipated to conclude in December.
“I’ve been in discussion with the committee of experts who are conducting the post-secondary review,” Osborne told reporters. “Based on that review, it will help provide a roadmap for government and our public post-secondary institutions on what they look like going into the future. One of the things they’re looking at, and going to be making recommendations on, are how tuitions look into the future.”
“We’re not going to do something prior to receiving the post-secondary review,” the minister continued. “So we’ll wait and we’ll see that and see what they say about what the academics look like, the collaboration between government, industry, and post-secondary, what the infrastructure issues are within our post-secondary institutions, and how they receive tuition.”
Stakeholder Responses: We Will Also Wait and See
Every stakeholder who spoke with the Independent had their own perspective on what the government was offering in the budget; some were more enthusiastic about its content than others. But the consistent sentiment from everybody was that the real meat would be found in Budget 2021.
The Opposition
“I think the most important number in the budget is 13,000,” Ches Crosbie, leader of the Progressive Conservative Party, told the Independent. “That’s the number of people who are going to be unemployed in the coming months. That’s the government’s own forecast. That’s coming on top of all the other job losses we’ve had in the past months.”
“I think the fact that the province—I think most people would say that the province is on the wrong track,” Crosbie continued. “Superficially, these budget documents, as you read them, with all the glossy covers and all the messaging in them, they try to make people feel upbeat about a situation that really doesn’t give cause for any kind of optimism at all. They’re trying to put a brave face on a pretty desperate situation.”
But despite his misgivings, Crosbie indicated his party will be voting to support the budget.
“My caucus will vote in favour of the budget, on the basis that we don’t think the people of the province want an election,” he explained. “What they want is some reasonable reassurance of stability in going through the pandemic. So now is not the time to precipitate an election. In fact, I think any politician who does that will be selfish and is not paying attention to the needs of the public.”
Alison Coffin, leader of the New Democratic Party, had a marginally more charitable take on the budget.
“It’s the same budget as last year,” she told the Independent. “It’s devoid of any creativity. However, I will say that it’s great to see $25/day childcare, a NDP platform issue for such a long time. We’re finally seeing a little bit of movement on it. So special thanks to the federal government for that.”
Coffin was less certain that this budget signalled an imminent provincial election gambit from the Liberals.
“Well, there’s no money in the Chief Electoral Office budget,” she laughed. “You will note that last year there was about $7 million. This year it’s down to one, which is their regular operating budget, and I guess provision for the byelection. So that tells me that, perhaps no. But given that the budget has a lot of NDP ideas in it, it often smells like it’s going to be an election because we often see that Liberals tend to grab a lot of New Democratic ideas to campaign from the left but govern from the right.”
“What we see here is there’s no five-year plan. There’s very little being done to address our economic and fiscal future. Other than the [Premier’s Economic Recovery Team], and we’ve also got a task force on rate mitigation and a task force on gender equity. So you know, lots and lots of ways to defer making a decision by creating task forces.”
Education
“There are a couple things that are positive,” Dean Ingram, President of the Newfoundland and Labrador Teachers’ Association, told the Independent. “We see the student assistant allocations being referenced as a positive. We see the $20 million that was previously committed to technology as being a positive.”
“We have been advocating for a number of years for a complete independent review of the teacher allocation model,” Ingram continued. “We know that class sizes continue to be an issue. They were an issue before Covid—that need was crystallized during Covid, and we need to take steps to ensure that it’s not an issue after Covid.”
“This review was committed to by Minister [Brian] Warr back in Fall 2019. We are disappointed not to see a commitment to that review in this budget, but we’ll be advocating strongly and looking to see it in Budget 2021. Investments in education need to be done and we’re looking forward to seeing some of the things that needed to be done in this budget in place for Budget 2021.”
“There’s $20 million put aside in funding for laptops in schools. That’s great unto itself. It sounds very fancy,” Sarah Bartlett, a Board member of the Social Justice Co-op, told the Independent. “But we have parts of this province that have little to no internet access. Should students be forced to go back to their homes for distant learning, we’re going to have kids and young people who are completely cut off from their education. I think that demonstrates a lack of foresight, as the rest of the country actually goes into a second wave. Should that be the case here, we’re going to see lots of students who are completely disenfranchised and left out of the equation entirely.”
“We’re really excited to see the extension of the tuition freeze for NL students,” Bailey Howard, Chairperson of Canadian Federation of Students-Newfoundland and Labrador, told the Independent. “It is unfortunate to see that it’s just for NL students and doesn’t cover out-of-province and international students, who do have differential fees compared to our in-province students. We would like to see more of a commitment for [them] as well.”
“Memorial University had talked about the potential of a tuition increase for 2020-21 in response to the funding cuts that they incurred from government,” Howard continued. “So we’re happy not to see those cuts in this budget, but we are worried that this could be a potential for the future—especially when our government is talking about post-secondary education being so important.”
“Overall for the university, it’s a status quo budget,” Vianne Timmons, President of Memorial University, told the Independent. “It’s like moving some of the checkers around. The budget is the same as it was last year. I guess if I wanted to look at the economic situation for the province, it could be a positive thing. [But] if I look at the growth on campus in terms of enrolments, it’s a bit of a challenge for us to manage. And we’ve also taken a big pandemic hit as a university, so we’ll have to figure our way through that.”
“Am I concerned about the [university’s] relationship with the province and the money? I wouldn’t say it keeps me awake at night,” Timmons continued. “But what I do need, what we need as a university, is to have much more nimbleness and flexibility fiscally. The only way to do that is to diversify our revenues. And I’ve gotta do that. We need to have a tuition discussion. We have to have that. So, there’s a number of things we need to work on.”
“So I have a job to do. Post-pandemic, the university will be essential for the economic recovery of this province. So I’ve got to work with government and get that message through that investing in the university is investing in economic recovery for the province. [So far] I’ve had great discussions with government. Very collegial, very forward-looking. So that gives me hope.”
Capital and Labour
“We’re generally encouraged by the language that they understand there are systemic problems, and they plan on addressing them,” Andrew Wadden, President of the St John’s Board of Trade, told the Independent. “We’re most encouraged by the [Small Business Assistance Fund], that’s going to help a lot, especially the smaller businesses. This is sort of a bridge until in six months time, when we’ll hold [government] accountable.”
“Everybody would like more,” Wadden continued. “But at this time, it is a pandemic budget. I don’t think we would expect much more at this point. But what I want to see in six months time is solutions having been provided by this group of people that Moya Greene is putting together, and talk about the plan for the implementation of those solutions.”
“If we don’t see that, then we’ll be more critical.”
“I mean, [the budget] is very status quo,” Jerry Earle, President of the Newfoundland and Labrador Association of Public and Private Employees, told the Independent. “What do you say?”
“For NAPE and our members, we always look at budgets to see how many people are going to basically lose,” Earle continued. “But in this particular budget it seems they’ve stayed the course. There is no step backward but no major steps forward. It was less painful than we thought.”
“In terms of the long term impact, we do have concerns,” he concluded. “There’s going to be some difficult decisions that have to be made. Some people don’t like some of those decisions, especially in years where revenue is a problem. Taxation is one way that we gain revenue, and we may have to look at some of those for those on the higher end and then try to help those on the lower end up.”
“I’m pleased that government did not listen to the voices calling for austerity measures, because we have long advocated that austerity measures do not work,” Mary Shortall, President of the Newfoundland and Labrador Federation of Labour, told the Independent. “So the fact that at least there was no austerity measures is hopeful. It gives some breathing space to people to sit down and think about where we go next on this. That’s a really important thing.”
“There seems to be a recognition in the documents that poverty and inequality are bad for economic growth, that they’re bad for the economy,” she continued. “The next six months will be very important to ensure that workers’ voices are heard, that our vision for economic recovery is one that prioritizes a worker-centred economy. Without workers there’s no economy.”
But while Shortall was cautiously optimistic, she also noted they were getting mixed messages from the province.
“On the one hand, we have a new premier who has met with us, and it was very positive that he listened,” she explained. “The Minister of Labour came to our Labour Day presentation when we said quite clearly that ‘we will be at the table, or we will be on the street, but we won’t stop pushing for what we need so you may want to bring us to the table.’ We didn’t get shut down, so I remain hopeful. But then the next day, we see Dame Moya Greene becomes the chair [of the Economic Recovery Team]. She does not have a good relationship with the public sector. I was a worker at Air Canada when we were privatized and deregulated. I’ve seen what’s happened with Canada Post and the Royal Mail. It doesn’t make me feel good about our position on investment in public services and the public sector.”
“Workers can’t always pay the price,” Shortall concluded. “That’s always been the problem in successive budgets. It’s not the workers’ fault we get into this mess, but the workers are always the first line of trying to fix something. And we only dig the hole deeper and deeper doing that.”
Environmental and Social Justice
Although most major policy announcements concerning Newfoundland and Labrador’s offshore oil and gas industry had been made prior to the budget, the sector remained at the centre of discussion. But with the provincial government projecting oil prices at US $39/barrel through 2020-21, the mood this year was more funereal than fun.
“The big announcement for oil and gas is the exploration incentive, and it was done last Thursday,” Charlene Johnson, CEO of the Newfoundland and Labrador Oil and Gas Industry Association, told the Independent. “But we’re really happy to see money that would have gone into general revenue reinvested for the purpose that it was intended. Everything starts with exploration. If you don’t explore, you don’t discover, you don’t get all those capital works jobs, and you don’t get the production for the royalties. So it all starts with exploration.”
“The price of oil is volatile,” Johnson acknowledged. “But one thing that the world is going to be looking for is lowering the carbon footprint, and our oil is already some of the lowest greenhouse gases in the world. You combine that opportunity with hydro from shore to power the platforms, offshore wind—we can lower that by another 60-70%. So I think it’s about marketing our oil. As long as the world needs it, it should come from here. I think the future is bright going forward.”
“One thing that we’re competing with is other jurisdictions offering particularly attractive incentives to go there and drill their oil,” she continued. “But you know, Premier Furey did come up with a ‘made in NL’ solution and did what he could with the money he had. Stretching the $320 million [announced last week by the federal government] and leveraging that will help.”
“But it’s the price of oil, it’s volatile, and they did use $39,” Johnson concluded. “I have to say, it’s good to see that they went on the lower end. I haven’t seen any projections that have said $39. In fact, Goldman Sachs, I just read yesterday, put it at $65. There are others around that area as well. So, that’s a bonus then if it is $65, that means that the $1.8 billion deficit is actually much lower. I guess it remains to be seen.”
Others did not share Johnson’s sense of optimism about the offshore oil and gas industry.
“It’s really disheartening to see that we are still [investing in further oil and gas exploration],” Heather Elliott, Spokesperson for the Coalition for a Green New Deal in Newfoundland and Labrador, told the Independent. “[We’re] looking in our rearview to try and get back to the way things were when oil was a booming industry. It’s not. And we have no guarantee that it’s going to be. So if you’re taking money from other areas of the budget, and putting it into investing and trying to do more exploration, you’re trying to say that you’re going to get us back to the way things were. And that’s just not feasible right now.”
“The budget is nowhere near as progressive as we would have hoped for, in terms of seeing real movements towards a sustainable industry,” Elliott continued. “There are some initiatives that we are pleased to see, such as money going into the Nunatsiavut Government’s housing commission, which is excellent because housing insecurity is a huge problem in this province. But there’s no real line items around moving towards greener industry.”
“We’re in the middle of a climate crisis,” she concluded. “The reality is that in order to take us to where we need to be, everybody is going to become a little uncomfortable. They’re going to have to bend a little, someway, in order for us to see the change that we need. To effectively diminish that discomfort is just going to make it worse when it becomes evident that we need to do these things. It’s another example of the government refusing, adamantly refusing, to take concrete steps towards change and innovation. It’s absolutely not enough.”
“I’m glad to see that there’s still the $3.2 million going towards women’s and non-violence organizations,” Sarah Bartlett, from the Social Justice Co-op, told the Independent. “That is a continued commitment. There are several things presented in the budget as though they are new, which they are not. They have also for the upcoming year increased the budget for the [Royal Newfoundland Constabulary], in a year when we have seen massive upheavals demanding the defunding and abolition of the police, the rethinking of our justice system. I think putting more money into our policing system, our provincial policing system, is a bit of a smack in the face.”
“I don’t want to bash our newly sitting premier,” she continued. “[But] I don’t think [his government is] interested in being movers and shakers. I don’t think they are interested in a massive upheaval of our systems and the way things are and the status quo. I don’t think this is a government that wants to create all this change.”
“Andrew Furey tends to lean on the advice of ‘experts,’” Bartlett concluded. “And people who are the generally well-established experts, who are going to be hired by the government, are going to be people who are invested in the way things currently are.”
Photos by Alex Spracklin.
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