A no-holds-barred report that lays out a five- to six-year plan to re-imagine Newfoundland and Labrador in order to avoid a “perilous situation” and prepare for the future was revealed in St. John’s on Thursday.
As expected, Moya Greene, chair of the premier’s economic recovery team, delivered a ground-shaking plan — proposing everything from tax increases and deep spending cuts to a streamlining of the public service and a focus on transitioning to a green economy — to reverse a course that threatens to send the province into insolvency.
She described the province’s debt and spending practices as a “fiscal crisis” and said “immediate changes are required.”
“What happens when we can no longer borrow? What if interest rates rise? What if we have to quickly and chaotically shut down services? What is the future like under these circumstances?”
Those sobering questions were posed by Greene as she described the contents of her report to the media.
In order to rein in a soaring public debt and end the long pattern of deficit spending, Greene recommended a five per cent reduction in core government spending, and that operating grants for Memorial University and the College of the North Atlantic be slashed by 30 per cent, at a rate of five per cent annually.
She also proposed that operating grants to the province’s four regional health authorities be cut and that the province develop new ways of delivering “top quality health care.”
In referencing the 180 health-care facilities throughout the province, Greene said the province “must reduce our footprint.”
Some of her sharpest points were directed at the health system, which accounts for 37 per cent of public spending.
She said the province spends 24 per cent more per capita on heath than the Canadian average, yet despite this, Newfoundland and Labrador’s health indicators are “among the worst in Canada.”
But she didn’t stop there.
She also recommended the abolishment of Nalcor, the province’s energy corporation and the entity that oversees the controversial Muskrat Falls project.
“The current operations model for Nalcor is expensive and includes duplication in many areas,” she said. “The organization’s size and complexity does not reflect the small size of this province.”
And since the province has one of the largest public sectors in the country on a per capita basis, she recommended the province re-examine its relationship with unions.
“The compensation and benefits paid to many public sector employees are higher than those received by people doing the same jobs in the private sector workforce,” she said.
But Greene is not recommending spending cuts for the K-12 education system.
In fact, she said the system needs a shakeup so today’s generation can be better prepared for a new economy that is built on technology and low-carbon industries.
She said the province has the most teachers-per-student in the country, “but the structures appear unable to adapt” to the changing needs of students.
“Our children have to be prepared to contribute more that the previous generation,” she said in reference to a birth rate that is the lowest in the country.
On the revenue side, Greene recommended “modest” tax increases, including wealth and second home taxes.
She also called for the creation of a future fund, with perhaps 50 per cent of oil and gas revenues and carbon tax revenues being funnelled into the fund. She said the fund should be used exclusively for transitioning to a green economy, and paying down the province’s staggering debt.
Greene said her plan, named “The Big Reset,” is a gradual and deliberate strategy for a province that has the highest per capita revenues, expenditures, deficit and net debt of any province in Canada.
According to Green’s report, the province also has the oldest population, highest unemployment, highest per capita health-care spending and the poorest health outcomes in the country.
Cultural change needed
She said the current governance culture — one that views budgets as “notional” and deficits as something that “do not matter” — has to end.
She said the belief that the federal government will save the province is also misplaced.
“If the province requires outside assistance, we are fearful the feds will have to put measures in place and enforce changes; not the ones we would make, but would be forced on us by bond rating agencies,” she said.
When the province’s full range of liabilities and obligations are totalled, Greene said the overall debt sits at more than $47 billion, for a province of just over 500,000 residents.
When Nalcor’s costs are factored in, she said the debt servicing charges, what it costs to repay that debt, are now above $1.5 billion annually, which is twice the amount spent on K-12 education.
She said the province risks not being able to pay salaries, operate hospitals and other public services, or even pay pensions to retired public sector workers.