Deep thought

So it's all but official: instead of the prodigiously wrong Rod Gantefoer as Saskatchewan's Minsiter of Finance, we can look forward to...somebody who Brad Wall considers a second choice behind Rod Gantefoer.

The verdict is in

It's a source of endless mystery that right-wing governments manage to carry a "fiscally responsible" brand even when their consistent track record is one of unsustainable tax slashing leading to mountains of debt. But Murray Mandryk points out that the Wall government is on the verge of having its popular image reflect its public mismanagement, with particular thanks to a rare opportunity to directly test the Sask Party's spin:

(W)hat might be more troubling for the Saskatchewan Party government's reputation as fiscal managers came as a result of blasts from a couple sources with expertise and objectivity on financial matters.
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(M)ore damning, however, was what (Acting Provincial Auditor Brian) Atkinson had to say about "inappropriate accounting policies" that have resulted in the government reporting "net debt and annual surplus inaccurately." Had the government properly accounted for all transactions, the government would have recorded a net debt of $8.07 billion instead of $3.85 billion and a surplus of $1.62 billion instead of $2.39 billion in 2008-09, the acting auditor said.

Atkinson's criticism come at a time when both the Sask. Party and the NDP are running advertisements with diametrically opposing claims on the government's debt record. If one views the auditor as the arbiter, his recent report certainly comes down in the NDP's favour.

In fact, the auditor's report pretty much buttresses the NDP's complaints about massive deception in that Sask. Party flyer that landed on your doorstep recently, in which it claims provincial debt under the NDP was $6.8 billion, but is now only $4.1 billion under the Sask. Party government. The debt graph Wall strategists drew up in their propaganda was (at best) misleading or (at worst) downright deceitful, as it tries to pass off general revenue fund debt as being the same thing as overall provincial debt (which is again on the rise).

On misleadership

The Sask Party's inevitable decision to put Don McMorris' political interests ahead of the Legislature's ability to request accurate information from government ministers can't come as much surprise. But while the prima facie breach of privilege in McMorris' misinformation is certainly worth pointing out, it's worth noting as well that the significance of McMorris' falsehood pales in comparison to other examples from the Wall government.

Indeed, it's been in just the last week that Brad Wall has publicly presented a patently false explanation as to how the WEPA supposedly differs from the TILMA which he previously promised not to sign. And there's no lack of earlier issues where there's an obvious gap between what the Sask Party has said publicly and what it's planned internally: see e.g. Rod Gantefoer's sudden reversal in going from claiming one day that the province would never enter a recession, to deciding three days later that we were coming out of one.

Of course, McMorris' statement lent itself to immediate censure in that it was made in the Legislative Assembly itself on an issue where the Sask Party couldn't plead that the issue was one of interpretation or debate. But neither McMorris' inaccuracy nor the Sask Party's refusal to acknowledge any problem with it can be said to reflect any particular departure from the Wall government's usual standards. Which means that the McMorris story reflects just one more indication that it'll take a sharp message from the province's voters in 2011 to ensure an honest government.

Update: For more on the McMorris incident, see columns from the Star Phoenix editorial board and Murray Mandryk. h/t to Kent and Leftdog.

Oh dear

Apparently the Wall government's hack-and-slash budget is based on the modest assumption that Saskatchewan will be home to "more than 20 per cent of the world supply of natural resources". No word yet what proportion of that estimate consists of projected exports of magic beans and unicorn meat.

Friday Morning Links

Since we're all up for some politics for the long weekend, here are a few pieces worth a look...

- Erin slams the National Post for its exceptionally biased coverage of the Fraser Institute's anti-stimulus diatribe. Though it's worth noting that there's likely at least a grain of truth behind the study: while the institute's predictable anti-government bias obviously affects its assessment of the effect of stimulus dollars spent, there's certainly reason to think that the Cons' choice of a photo-op-friendly distribution scheme led to relatively little money actually flowing when it was most needed.

- The Star Phoenix on the HST: getting less plausible by the day, but now prebutted for your convenience.

- While I don't agree with Bob Plamondon's view that less choices are better on the federal scene, there's little reason to disagree with his main point about Michael Ignatieff's missed opportunity.

- Douglas Bell is right to note that the federal opposition parties haven't taken a strong enough stance in opposing the Cons' costly and useless "dumb on crime" policies. But while there's room for improvement on all sides, it's worth noting which party has both had MPs take stands on principle, and which has been closer to the mark in rejecting the worst of the Cons' excesses.

- Finally, is this officially Unveil Unpopular Policy Week for Brad Wall's Sask Party government? Because Rod Gantefoer has tossed more fuel on the fire by pointing to health care user fees as a way to deal with unnamed "abuses" in the system. Naturally he's backtracking again, but considering that he looks to have brought them up unprovoked this looks to be even less plausible than his denials about tax harmonization.

On cowardice

Leftdog has already pointed out the Sask Party's declaration that simply have to try to push the HST onto Saskatchewan. And not surprisingly, I'll have plenty more to say on the topic - particularly after the Wall government's ideological cousins in the B.C. Lib government imposed the tax shift onto citizens after running a campaign where they similarly claimed they didn't have any plans to do so.

But for now, let's note one other interesting aspect of Gantefoer's handling of the issue, as both before and after Gantefoer's backtracking he's basically said that he wants corporate Saskatchewan to push the issue so the government won't have to:

Gantefoer said in a Friday morning speech in Saskatoon that he’d welcome that debate.
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“I think there should be a good and wholesome debate in Saskatchewan beginning now if the business community sees fit that that is appropriate. I expect and would welcome the debate going into the next election.”

The finance minister stopped at the Saskatoon Inn to sell his budget to the business community. He spoke about reducing spending, growing Saskatchewan exports to Asian economies and maintaining investments in post-secondary education.

Later on Friday, Gantefoer's office sent out a media release that said, "business groups and other may have this debate" but the government's opposition to HST remains unchanged.

In effect, Gantefoer's position looks to be a twisted version of FDR's "I agree with you. I want to do it. Now make me do it." response to activists within his own party. But there's one key difference, being that he isn't honest enough to say he agrees with the HST in principle since he doesn't want to wear the political cost of that position.

And it'll be a surprise if at least some of the business community doesn't take up the invitation and try to force the issue - presumably with plenty of cheerleading from the province's corporate media. See for example Bruce Johnstone's delightful new argument that we should assume based on zero evidence that Manitoba will suddenly reverse course, leaving Saskatchewan as the lone non-harmonized province.

But there's good news in the fact that the Sask Party wants to let big business do the actual work in selling the HST. After all, the Wall government tried the same strategy when it came to nuclear power, and was forced to back down once it realized that it's people rather than dollars who ultimately get their say at the polls. And hopefully Gantefoer's obvious fear of letting any positive comment about the HST stand will help to make sure we don't waste too much time on the subject.

The reviews are in

Murray Mandryk on how the Wall government "flawed" budget thoroughly contradicts its rhetoric:

If the Brad Wall brand is integrity, there was serious damage done by trying to sell this budget as a surplus when it actually spends $174 million more than it takes in. In fact, the further one probes into this budget, the worse the political accounting games appear to be.

Balanced with spending cuts? Take a closer look. Its spending reduction is largely based on slashing $300-million worth of capital spending while low-balling traditional operational costs. In other words, there will undoubtedly be another massive correction at mid-term in November -- this time, on the spending side. (The only saving grace is that revenue forecasts may also be low-balled.)

Now, add to all this the thousand little cuts that will nag away at the Sask. Party government and Wall's image for the next year or so.

It is the deepest hope of Wall's spin doctors that he emerges from this budget and goes into the 2011 election year with an image of being a tough, but fair and kind leader.

The problem, however, is that this budget might not allow them to do that.

Reason for hope

If there's any particularly good news coming out of the Sask Party's budget yesterday, it's that there seems to be plenty of public interest in what the Wall government is up to. Take for example the SCN Matters Facebook group - a group of "fans, viewers and industry professionals who are dedicated to saving SCN", which already has upwards of 700 members less than a day after the Sask Party's shutdown was announced.

Saskatchewan Budget - Winners and Losers

So far the budget has been remarkably well covered from all kinds of angles, so I'll hold off on delving into too much detail about any particular area. But there are a few themes which are either worth highlighting, or pointing out to the extent they haven't been mentioned yet.

Winners

Premier's Office - Someday I'll get around to developing my own set of laws of politics. And near the top of the list will be "when a right-wing government says people need to tighten their belts, it's going back for thirds".

Selected Social Services - The budget is far from universally beneficial for social services, and a good chunk of the nominal increases are based on increased need rather than any improvement in accessibility. But the addition of autism and child welfare funding in a cut-laden budget at least offers room for guarded praise.

Pankiwites - A hack-and-slash approach to government, combined with an apparent repudiation of the duty to consult as major changes are imposed on First Nations without even a trace of input? For the radical right, it's like Christmas in March!

Losers

SaskTel - I noted yesterday that all of the Crowns are facing a rough time - and that was without mentioning that they too are facing job cuts. But SaskTel stands out as the chief target of the Sask Party: not only is it the main Crown being sold off piece by piece (rather than merely outsourced through replacement as in the case of SaskPower), but it's being given the responsibility to handle some of SCN's money-losing mandate. Which means that SaskTel is being forced to add to its level of work with less staff, secure in the knowledge that any success will be confiscated to be dumped in the general revenue fund.

Film Industry - The NDP has already criticized the Wall government for driving away 70% of what was a thriving industry just a couple of years earlier. But with the slimination of SCN as a television channel, there will be even less opportunity for film professionals to work in the province - meaning that this budget may be the blow that kills off Saskatchewan's film industry entirely.

Public Safety - The outsourcing of inspections for elevators, amusement park rides and boilers can be done one of two ways: either it can increase costs as layers of government contract management and private profit are added to the expense of actually carrying out the inspections, or it can involve government washing its hands of the issue and creating incentives for corner-cutting. And with the Sask Party in full-on slasher mode, Saskatchewan citizens would be well advised to start taking the stairs.

First impressions

More to come on today's provincial budget. But from the coverage I've seen so far, there are two takeaways that look to be particularly significant even if they're not the most obvious problems with the Sask Party's management of the province.

First, as noted by James Wood, the Wall government is taking the "unprecedented" step of stripping all Crowns other than SaskPower of all anticipated profits. Which, combined with the current selloff of Crown assets, figures to do some serious damage to their ability to operate on anything but a bare-bones level.

Second, as mentioned in the NDP's immediate response, the Wall government is treating loan guarantees differently so they won't count against the province's public debt, and also making other changes to acounting practices which will make it more difficult for anybody to scrutinize exactly what they've done.

For this year, the loan guarantee change in particular seems to be aimed at allowing the Sask Party to claim that a program for homebuyers won't add to the provincial debt. But would anybody be at all surprised if the move is just a prelude to Wall putting the province on the hook as guarantor for all kinds of white elephant projects without accounting for the resulting debt?

Clap louder!!!

I've noted that the Saskatchewan Party convention was noticeably lacking in any ideas or questions from its delegates. But let's note in fairness that while the Sask Party's members did manage to rouse up at least some contribution to the proceedings:

Standing O for Gantefoer.

Yes, that Gantefoer - the Finance Minister whose combination of gratuitous cuts, perpetually misguided estimates and massive deficits makes him somebody who's done plenty to earn the ire of Saskatchewanians of all political stripes. Which would tend to explain much of what happened at the convention - as instead of having the time to work on any new ideas for themselves, the delegates had to go through a rigorous seal-training process to ensure a standing ovation for whatever Wall placed in front of them.

The competition heats up

Sure, Rod Gantefoer might seem to have an early lead in the Owelympic Games' Jaw-Dropping Incompetence event. But B.C. Finance Minister Colin Hansen isn't going down without a fight:

Last September, Hansen said that B.C. had opted to take the federal monies over a three-year period -- $750 million in 2009/10; $374 million in 2010/11; and $475 million in 2011/12 -- rather than in a lump sum. The timing of those federal payments, Hansen added, was solely at B.C.'s discretion.

But today's budget shows that the Campbell Liberals have decided to fudge the timing of those federal payments. Instead of receiving $750 million in the current fiscal year (which ends on March 31), Victoria will accept just $250 million from Ottawa -- thereby deferring $500 million in revenues to later years.

So, instead of obtaining Ottawa's HST inducements when they're needed most -- now, when B.C.'s fiscal deficit is at its nadir of $2.8 billion -- the Campbell government intends to shove those transfers to some point in the future.

Why ever would they do that? It's simple, really: the BC Liberals believe windfall federal government monies are most-needed -- not at the present time, just after they won a provincial-general election -- but just before the next general election, scheduled for 2013. That way, the Campbell government can be assured of recording a balanced (or surplus) budget when next they face the electorate.
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(I)nstead of accepting federal windfall payments immediately, we'll now be borrowing monies to cover the annual fiscal shortfall. And we'll be paying interest on those borrowed monies.

How much will that be? According to this author's calculations (using the Interest Rate Forecasts on page 119 of the government's Budget and Fiscal Plan, 2010/11 - 2012/13, here), the unnecessary interest charges incurred by the Campbell government will cost British Columbians $49.9 million in 2010/11 and $24.4 million in 2011/12. That's a total of $74.3 million over a two-year period.

For all the criticism the federal Cons have taken for their incessant use of public money for partisan advertising, at least they managed to buy air time and produce PR material for their tens of millions of taxpayer dollars. (Which leads to the question: what does Deficit Jim Flaherty have in his bag of tricks to be revealed tomorrow?)

In contrast, Hansen seems entirely happy to spend upwards of $70 million on nothing but raw political calculation. And I'd have to wonder whether B.C. citizens left with the bill will be happy to see public money thrown down the tubes for the B.C. Libs' gain - or whether they'll be roused enough to recall Hansen and enough of his partymates to change B.C.'s government before the supposed payoff.

On undisclosed risks

Murray Mandryk weighs in on the Sask Party's $200 million potash payout. And the background raises even more serious questions about what we're being told by the Wall government:

The "profit tax portion of potash royalties is paid on a calendar-year basis", meaning that producers are required to estimate their full-year profit and full-year payments in the first quarter of their calendar year. That also happens to be the last quarter of the provincial budget year. Based on these estimates, potash producers must "remit an installment payment equal to 25 per cent of total forecast payments for the year."

In short, the industry already paid taxes or royalties in last year's budget on potash that it didn't wind up selling.
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The net result of this is that we wound up collecting too much from the industry in the banner 2008-09 budget and now have to pay it back in 2010-11 when we have less capacity to afford it. As (NDP MLA Trent) Wotherspoon pointed out, it not only makes the 2009-10 budget a sham, but it also calls into question the validity of the record 2008-09 budget.

Whatever it is, it's incompetence well beyond anything voters should ever have to tolerate.

So what does Mandryk's explanation tell us that we may not have known before? Let's take a closer look at the timeline involved.

Apparently the money being paid out to potash corporations is money that was collected in 2008-09. Which means that it's been a part of the books reported by Gantefoer for at least a year, and should have been part of the province's evaluation of potash revenue throughout 2009 as the province's estimates dwindled from $1.9 billion to under $100 million.

But at no point did Gantefoer did give any indication that there would be another cost to factor into the mix. And in fact his spin last fall as to why we should stop worrying about the growing shortfall portrayed "near zero" as the lower bound of what could become of potash revenues.

Which means one of two things. It could be that Gantefoer, in the midst of presenting yet another explanation for a massive miscalculation, chose to hold back from the province the reality that money sitting in the province's accounts since early 2009 had the potential to make matters worse. Or it could be that Gantefoer himself still isn't close to developing a clue how the province's revenue system works, with the result that he's as surprised as anybody about the payout - even in the wake of a year where potash revenues have constantly been in the spotlight.

Now, one can't rule out the possibility that the issue actually is one of utter incompetence rather than deliberate dishonesty. After all, Gantefoer has a history of not knowing his own job description - so it shouldn't come as much surprise if he just hasn't bothered to figure out the mechanics of how the provincial finances work either, even after two years as the minister responsible for them.

But for Saskatchewan voters, it's hard to see how either explanation would be the least bit reassuring about the Sask Party's ability to manage the province.

Beyond the limits

I doubt that most readers would accuse me of being overly generous toward Brad Wall's Sask Party government. But I'll have to admit to just that, as it seems that I've underestimated its ability to make a mess of the provincial books.

Surely, I thought, the laws of mathematics would at least prevent the Sask Party from turning a revenue stream into a negative number. But apparently even that isn't beyond Rod Gantefoer's anti-Midas touch.

So congratulations to Gantefoer for proving that there are truly no limits to his government's incompetence - and I won't be caught again thinking that things can't get worse. But for those of us whose idea of dreaming big for Saskatchewan doesn't involve regular feats of unprecedented and seemingly impossible flows of red ink, there's even more reason to work to put a more responsible party back in charge.

Edit: fixed typo.

On limiting factors

Sask Party Finance Minister Rod Gantefoer sets what has to be the lowest standard I've ever heard for "good news" in explaining how it is that he's managed to overestimate Saskatchewan's potash revenues yet again:

Rod Gantefoer, who made the comments while speaking in Saskatoon on Thursday, said compared with the nearly $2 billion in revenue the province expected from potash at the beginning of the fiscal year, the final figure will seem like almost nothing.

"The good news is it's not decreasing by the exponential rates it used to -- when you're getting near zero, the numbers get smaller. But, it is less than $100 million," he said.

That's right: the Wall government is proudly spinning that its earlier failures were so massive that its later ones seem relatively unimportant in comparison. But if the only limit on its incompetence is the outer boundary of mathematical definition, that hardly offers reason for confidence in how the province is being governed.

The reviews are in

Murray Mandryk gets at part of the reason for the consistent gap between conservative parties' claims to fiscal responsibility and their actual track record of massive deficits. But unfortunately, both the provincial and federal governments are offering up ideal case studies:

The political instinct that the Saskatchewan Party premier must fight in 2010 is his dyed-in-the-wool conservative belief that we will simply grow our way out of the budgetary problems we're now encountering.

Of course, Wall and his officials are quick to dismiss any such unflattering characterizations. And with a remarkable economic upturn in its first 18 months of rule, the Sask. Party has been spared from having to put any of its philosophy to the test. However, its first taste of economic adversity (in the last few months) has really served to demonstrate how deeply rooted this Conservative economic philosophy might really be in Wall's governing Sask. Party ranks.

Facing a mid-year 2009-10 budget report that ushered in Wall's first real governing challenge (in the form of a $1.05-billion overall deficit), what we saw is a disturbing return to some old Conservative notions:

- Debt and deficit are manageable.
- That $1.8-billion overestimate of potash revenues was a blip on a market that will correct itself next year, and;
- You can always rely on your resource economy to grow your way out of deficit.

This was a wrong-headed belief made famous by former Progressive Conservative premier Grant Devine, who said early in his term that you could "mismanage the Saskatchewan economy and still run surpluses." But it was also the fervent belief of Brian Mulroney's federal Progressive Conservatives of the 1980s and, to some extent, the Stephen Harper Conservatives of today.

Unfortunately, the history of the Devine and Mulroney governments demonstrated that market recoveries...don't automatically translate into the end of a deficit cycle.

Disturbingly, it was a similar unfettered belief in the surging market that likely led the Sask. Party government this spring to ignore the better advice of its own ministry of finance and bet the budget on a repeat of 2008's record potash revenues.

The reviews are in

The Star-Phoenix editorial board:

While it is always wise for a government to examine carefully every penny of the public's money it spends, Finance Minister Rod Gantefoer's conversion to fiscal conservatism is coming late.

And it has all the appearances of desperation instead of prudence.

It is increasingly looking like the Saskatchewan Party entered the public treasury with all the finesse and forethought of Ali Baba's brother Kassim when it took office just more than two years ago. The excitement of so much wealth seems to have addled its decision-making, and now the prospect of having the taps turned off seems to be a daunting challenge.

As was pointed out when Mr. Gantefoer presented his budget in March, it is always dangerous for a government to spend one-time money -- particularly from such fluctuating sources as resource revenue -- as if it would continue to flow indefinitely.

So much to learn

Sure, we anonymous wannabe opinion makers may have been the ones who publicly reported the recent committee meetings where Bill Boyd and Rod Gantefoer demonstrated that they lack the slightest clue about issues for which they're directly responsible as Sask Party cabinet ministers.

That said, though, CanWest's superior news-gathering resources and insider access still count for something. And it apparently took James Wood to report that Boyd also whispered the word "bastards" under his breath at the same meeting which he singlehandedly turned into a farce with his lack of knowledge about the subject involved. So clearly we bloggers have a long way to go in matching the corporate media's ability to cover what's really important.

Previewing the holiday news dump

Saskatchewan's fall session of the legislature undoubtedly answered some key questions about the Sask Party. For example, on the all-important issue of whether Brad Wall's government can find its own ass with a map and a flashlight, the clear answer is that it can't even find the flashlight.

But there also more than a few questions which the Wall government failed or refused to answer over the last few months. So let's note a few of the areas where it seems likely that there will be some important news trickling out over the next few weeks (and seemingly conveniently timed to avoid any questioning in the Legislature):

The Revenge of TILMA. As Len Taylor noted on Monday, the Sask Party has signed onto the "Western Economic Partnership Agreement" with a promise to finalize the details by January 1, 2010 - but hasn't actually carried out a minute of public or legislative consultation. Which figures to mean that we'll see the agreement emerge fully-formed during the holidays with little to no intention on the Sask Party's part to allow the mere public to influence its contents afterward. (See Owls and Roosters for more information.)

The Nuke Question. The conventional wisdom seems to be that Wall and company have rightfully backed away from nuclear power. But at last notice, Wall was still promising a final decision whether or not to push ahead with nukes by the end of the year - and given that the Sask Party has already spun itself into knots trying to keep open the prospect of nuclear power, there may be reason to worry it's simply been waiting until it can avoid answering for the decision before giving the go-ahead.

Cutbacks to Come. In yesterday's question period, Dwain Lingenfelter made a seemingly reasonable request for answers to written questions about the Sask Party's plans to try to make up for their own fiscal incompetence. And Wall's response was to ignore the request entirely in favour of resuming his party's "don't worry, be happy" reaction to evidence that the province might have problems worth addressing. Which would seem likely to signal that the answers will be dished out in tiny pieces intended to slip under the radar over the holidays, rather than being provided at a time when the government would face direct questions.

All of which is to say that there's plenty of reason for suspicion that the holiday season will be a busy one on the Saskatchewan political scene. And we'll find out before long just how much worse off the Wall government can make the province during the legislative break.

The reviews are in

Eric Howe via Murray Mandryk:

One of the province's foremost economists says the Brad Wall government is suffering from the same mindset that plagued the Grant Devine government and added $10 billion in debt in 10 years.

University of Saskatchewan economist Eric Howe -- whom the Saskatchewan Party government recently praised for insisting that this province had avoided the recession -- said in an interview Wednesday that the current government has a spending problem and not a resource revenue problem caused by falling potash sales.

"If I were to ask the Finance Minister (Rod Gantefoer) one thing, it would be: 'Where did the money go?' " Howe said Wednesday, adding that the Devine government also blamed its deficits on recessions even when Saskatchewan wasn't in recession.

Just three years ago, the provincial government had only $8 million in revenue and still managed a billion-dollar surplus, Howe noted. Even with the $1.8-billion decline in potash revenue from what was projected in the March budget, the mid-year financial statement shows that the government still has $10 billion in revenues.
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Describing himself to be as "fiscally conservative as anyone you'll ever meet," Howe said the Saskatchewan Party government has dug itself a "fairly deep hole" -- the largest deficit the province has seen since the Progressive Conservative government's last budget in 1991.