Wednesday, February 27, 2013

The Education of Tim McMillan

Saskatchewan Minister of Energy and Resources Tim McMillan has seen fit to respond to last week's column on Keystone XL and its connection to climate policy. But it's well worth noting that McMillan's argument looks to fall short on a few fronts.

Let's start with the fact that McMillan doesn't even pretend to refute my concerns that his government has done absolutely nothing on climate change over a period of years. (Which hardly serves to address the genuine concern from the Obama administration that the Canadian voices lobbying for Keystone XL have no interest whatsoever in meaningful climate change policy.)

Instead, McMillan focuses largely on repeating what I pointed to as a wild claim about the impact of Keystone XL - only unlike Wall, he helpfully offers the weasel words "up to" in saying that a pipeline might add $300 million per year to the province's coffers.

Which is probably an entirely valid claim, in much the same sense that upon purchasing a lottery ticket one's net worth might increase by up to $20 million.

But for those of us who would prefer to see policy based on reasonable assumptions, McMillan doesn't do anything to back up a number which Wall seems to have pulled out of thin air. And that's problematic since based on my back-of-the-envelope calculations the Sask Party's claim seems to involve both an assumption that upon pipeline construction there will be no gap between the price of Brent crude and West Texas Intermediate for oil sent via Keystone XL, and an assumption that every drop of conventional oil delivered via Keystone XL will come from Saskatchewan rather than adjacent oil-producing states and provinces.

That said, I haven't yet arrived at the best part...
The math is simple: the lower price of oil is costing the province up to $300 million a year. The lost revenue from 2012 alone could fund the construction of 15 new elementary schools. 
Apparently McMillan's preferred unit of exchange for public policy choices is the $20 million elementary school. So let's see how that applies as compared to some of his government's other choices.

To start with, it certainly doesn't reflect an accurate measure of how the Sask Party itself has used provincial revenues. The Ministry of Education's own talking points have the Wall government allocating $500 million in total into school capital projects over the course of five years in office, compared to total provincial expenditures of about $10 billion per year ($50 billion total).

So on average, about 1% of the provincial budget has gone to McMillan's proposed use of new revenue. Which means that if the highest and best use of provincial revenue is the construction of elementary schools, then McMillan must be a singularly useless voice for that cause within a government whose priorities are utterly wrong.

More importantly, though, the "elementary schools given away" standard surely applies equally to areas where Wall and company have chosen to slash revenue coming into the provincial treasury.

Take for instance the $200 million price tag for a 2% cut in Saskatchewan's corporate tax cuts - implemented based on the profound public policy analysis that "big biz likes free $$$!!!" By McMillan's rationale, his government is deliberately giving away 10 elementary schools every year through that single choice alone - while investing on average in no more than 2.5 schools.

And in other areas such as resource royalties, the cost of the Saskatchewan Party's refusal to collect reasonable revenue rates in the billions of dollars per year. Or by McMillan's standards, dozens upon dozens of schools left unbuilt.

Needless to say, I'd suggest that McMillan encourage his own government to focus its own choices on ensuring it has the resources to build schools (and address other public needs), rather than counting on speculative future returns from projects beyond its control. And if the Sask Party chooses to remedy its climate change neglect to facilitate the approval of Keystone XL rather than engaging in a ritualistic chant of "pipeline! pipeline! pipeline!" as its sole answer to all issues of concern, then so much the better.
he math is simple: the lower price of oil is costing the province up to $300 million a year. The lost revenue from 2012 alone could fund the construction of 15 new elementary schools. - See more at: http://www.leaderpost.com/opinion/Sask+needs+Keystone/8015309/story.html#sthash.210daD1y.dpuf
The math is simple: the lower price of oil is costing the province up to $300 million a year. The lost revenue from 2012 alone could fund the construction of 15 new elementary schools. - See more at: http://www.leaderpost.com/opinion/Sask+needs+Keystone/8015309/story.html#sthash.210daD1y.dpuf
The math is simple: the lower price of oil is costing the province up to $300 million a year. The lost revenue from 2012 alone could fund the construction of 15 new elementary schools. - See more at: http://www.leaderpost.com/opinion/Sask+needs+Keystone/8015309/story.html#sthash.210daD1y.dpuf
The math is simple: the lower price of oil is costing the province up to $300 million a year. The lost revenue from 2012 alone could fund the construction of 15 new elementary schools. - See more at: http://www.leaderpost.com/opinion/Sask+needs+Keystone/8015309/story.html#sthash.210daD1y.dpuf

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