Monday, March 28, 2016

THE GATHERING STORM

And it begins....Newfoundland and Labrador's largest city council has been struggling to deal with the financial crisis that has gripped providers of public services across the province and much of Canada.

The council has been under attack from all fronts for not being prepared for the current downturn after unprecedented growth in the capital city. It is hard to find a business person, or a tax payer, who felt they were getting value for their taxes before the latest downturn, let alone today.

There is a general consensus that our councilors have not been good stewards with our taxes. Many feel that this current crisis is the result of incompetence, waste, poor planning and overspending over the generations. 

I am not one of those. 

Yes, I think there should have been a more conservative approach to growth projections. 

Yes, I think the cost of labor grew and associated pensions has made running the city unsustainable. 

Yes, I think the municipal government has got to get back to the basics like fire protection, police protection, municipal services and providing our seniors, working poor and most vulnerable affordable services.  

Costs have to be cut. It is time to decide what we can afford, what we can not afford and what compromises our society is willing to accept.

As the lowest and most local of the three levels of government in this country, municipalities have the least ability to generate revenue. They are really restricted to property and business taxes, plus some transfers from gas taxes and provincial transfers.

I often find myself saying that each of us shares responsibility for poor public policy, planning and decisions made by those we (if we even bother to vote) elect. 

We have the ability to question, sculpt and advocate public policy but the majority of us sit on our asses where we grumble, question or ignore public affairs until we are woken by that  freezing bucket of freezing cold water called reality. Than it is how did that happen and let's throw these bums out.

The fact of the matter is that revenues at city hall are much lower than projected. Those highly paid managers (That recently were sent packing) provided financial and planning advice that turned out to be wrong.  While the city was barely living within it's means - those means have dried up. What goes up must come down, expansion leads to contraction.

The huge contributor to the recent boom was the price of oil. While other industries faltered our reliance on black gold grew.  High oil prices meant for high salaries in St. John's and Alberta. Those high salaries in the private sector spilled over to the public sector - where a generation of restraint was erased with a 27% salary increase.  All of whom benefited from what I always felt were unnecessary and unsustainable tax breaks. 

Meanwhile, the size of our working poor increased along with their ability to enjoy the benefits of the boom times. The result was a huge divide between the haves and have nots. 

When I started this blog, one of my primary interests was the  high cost of food and energy in our province.  However, the monthly and annual inflation rates were not alarming because they did not reflect the real costs faced by average families because they look at a basket of prices. The cost of buying a big TV, or a car or a computer might have been lower but those are not necessities. 

Some folks had all kinds of money for recreation, renovations, new houses, boutiques, high end restaurants, new cars, fine art.  The NDP and social minded groups began to warn us about the growing fault lines between the rich and poor, the increase in homelessness and the inability of average families to absorb the increases in the prices of staples like milk, fruit, flour, hydro, oil and  vegetables. 

Many of us  - as individuals, and as governments, made hay while the sun shone. We lived like the good times would never end fueled on the assumption that oil prices would stay high, employment levels would remain high and the future was bright. 

As goes the price of oil, so goes our local government's ability to provide for our wishes and our needs. There is no reserve, there is no one coming to bail us out. We have to solve this riddle on our own.

No generation before us ever had it so good, for so long. This correction is going to hurt. People are leveraged to the hilt. Upward pressure on interest rates always had the potential to turn people's lives upside down, not having an income is going to put a lot of people underwater.

So before we get too angry with those we chose to lead us, not just facilitate our requests, for getting it wrong. They were not alone. Look in the mirror or around your street. The blame can be spread around.

The challenge for us as a society is how we meet the challenges ahead. Together we can weather the storm but the status quo much change. 

No longer can public servants be isolated from the reality faced by those of us that work in the private sector. 

Public sector benefit packages, salaries and the size of government must be reigned in. 

Services will need to be cut, taxes will have to be increased and we need to confront the demographic/geographic challenges that we so willingly ignored when we thought we were paying the bills.   

Brace for impact, the provincial government is up next! 

But lets be mature and honest about how we got here.

1 comment:

Anonymous said...

Interesting post Peter. These salary increases have had an unintended consequence. People at all levels of government who could of retired did not and stuck around to top up the pensions. As a result we have had a bunch of retired people on the job for last number of years at top dollar and these jobs were not replaced by younger and cheaper salaries. If public workers want these comparable salaries in good times then they must be willing to accept comparable action in downturns. They should look to roll back salaries asap. This would push a lot of these bubble pensioners out to retirement and cut some costs right away. They also need to reduce management positions and salaries. The list recently published with salary was mind boggling and surprising to many taxpayers and I can understand the upset that followed.