A no-nonsense report was released in St. John’s on Thursday outlining a five- to six-year plan to reimagine Newfoundland and Labrador to avoid a “dangerous situation” and prepare for the future.
As expected, Moya Green, chairman of the Prime Minister’s Economic Recovery Committee, presented an earthquake plan – focusing on regulating public service from tax increases and drastic spending cuts and shifting to a green economy – certainly threatens to send the province bankrupt.
He described the province’s debt and spending practices as a “financial crisis” and said “immediate changes are needed.”
“What happens when we can no longer borrow? What if interest rates rise? What if services stop quickly and confusingly? What is the future in these circumstances?”
Green raised those questions as he described the contents of his report to the media.
Post secondary cuts
To control rising public debt and end the long-running pattern of deficit spending, Green recommended a five percent cut in core government spending, and a 30 percent cut in operating grants to Memorial University and the North Atlantic College, at a rate of five percent a year.
He proposed that operating subsidies for the province’s four regional health officers be reduced and that the province create new ways to provide “high quality health care.”
Referring to the 180 health care facilities across the province, Green said the province “needs to reduce our footprint.”
Some of his sharp points were directed at the health system, which accounts for 37 percent of public spending.
He said the province spends 24 per cent more per capita than the Canadian average, however, adding that Newfoundland and Labrador’s health indicators are “the worst in Canada”.
But she didn’t stand there.
Abolition of the quadrant
He recommended the cancellation of Nalgor, the provincial energy company and the company overseeing the controversial Mascrat Falls project.
“The current operational model for the quad is expensive and includes duplication in many areas,” he said. “The size and complexity of the system does not reflect the small size of this province.”
He recommended the province to reconsider its relationship with the unions as the province is one of the largest public sectors in the country on an individual basis.
“Compensation and benefits offered to many public sector employees are higher than those received by individuals doing the same work in private sector employees,” he said.
But Green does not recommend cost-cutting for the K-12 education system.
In fact, this system needs a shake-up, so today’s generation can be better prepared for a new economy built on technology and low-carbon industries, he said.
The province has more teachers per student in the country, but “but the structures have not been able to adapt” to the changing needs of students, he said.
“Our children need to be prepared to contribute more to previous generations,” he said, noting that the birth rate is the lowest in the country.
On the revenue side, Green suggested “moderate” tax increases, including wealth and a second home tax.
He called for the creation of a future fund, which would probably include 50 per cent of oil and gas revenues and carbon tax revenues. He said the funds should be used exclusively for the transition to a green economy and to repay the province’s massive debt.
Green said his plan, dubbed “The Big Reset,” is a step-by-step and deliberate strategy for a province with the per capita income, expenses, deficit and net debt of any province in Canada.
According to the Green Report, the province has one of the oldest populations, high unemployment, personal health care costs and the worst health effects in the country.
Cultural change is needed
He said the current management culture – one that views budgets as “imaginary” and deficits as “not a bar” – must end.
He also said that the hope that the central government would save the province was wrong.
“If the province needs outside help, we fear that the Fed will have to put in place action and implement changes; not what we have to do, but will be forced upon us by bond valuation agencies,” he said.
Green said the total debt to a province with a population of more than 500,000 is more than $ 47 billion when the total responsibilities and obligations of the province are total.
When quadruple costs are a factor, what does it cost to repay that debt? Credit service fees are now more than $ 1.5 billion a year, more than double the amount spent on K-12 education, he said.
He said the province was in danger of not being able to pay salaries, run hospitals and other public services or even provide pensions to retired public sector employees.