Monday, 24 April 2017

A CASE OF THE FINANCE MINISTER BUSY BEING BUSY


Just before Easter, the Minister of Finance and her officials laid out 65 pages of cuts to government expenditures. This was the result of a process known as "zero based budgeting" (ZBB), a process which requires justification for every individual expense. There is nothing inherently wrong with ZBB. Processes like this one have their place as long as their limitations are understood.

Anyone with a basic understanding of how government functions will recognize that it takes a great deal of work to perform ZBB on an $8 billion operation. While periodically necessary, if it is ill-timed it accomplishes little more than giving licence to the folks in the Treasury Board to "be busy being busy".

But it does give the public the appearance that the Minister has her "sleeves rolled up" — another euphemism for action with little purpose — and Bennett wants to create the impression that she is assiduously tackling the deficit.  


Amidst all this hurly-burly $65 million in savings is being sought as government attempts to achieve a cost reduction target of $283 million — without causing significant layoffs.

Examples of the Minister’s ZBB achievements include "a $13,000 reduction to the supply budget in the endangered species and biodiversity department and $5,000 less to the Supreme Court for property, furnishings and equipment". 

It all sounds like good stuff. So why not just get on board?

The first problem is obvious. 

It is difficult to find $65 million in $5,000 — or even $15,000 — tranches. Just do the math on the number of cuts needed to hit that mark. Equally problematic is that many of the savings are merely perceived. They are costs that will reappear next year. The permanent kind are the ones the government badly needs.

An example of “temporary” savings is the cut in the budget for furnishings and equipment at the Supreme Court. Like a worn nail that won’t stay down, it will need to be hammered again and again. Expenditures on things like equipment, meetings materials, phones, stationary, travel — the normal requirements of running programs and services — are not saved but only temporarily delayed.

ZBB is most effective when it is conducted within a stable operating business environment.
The government has gone through great pains to demonstrate that it is removing layers of management from the public service, especially at the Director level — ostensibly to re-align responsibilities and to reduce duplication.

It would make far more sense if ZBB is conducted following the paring of senior staff and the completion of Departmental changes. At that stage, managers, directors or ADMs, having assumed larger roles, would be knowledgeable enough to make assessments about their enlarged responsibilities and the expenditure reductions that can reasonably be afforded — a process that should be above just pleasing the Finance Minister.

ZBB would make even more sense if it is conducted after the really big decisions on fiscal reform having been taken — presumptuous as that may seem.

The goal of cutting $283 million from operations this year — not nearly enough, given the high risk to achieving forecast revenues — is all about crafting illusion.

In the same way that you can’t make an omelette without breaking eggs, the real deficit — over $2 billion, which the Budget papered over with a bet on the price of oil — can’t be resolved with a bunch of nips and tucks. Our problem is chronic overspending on a massive scale.

Real and lasting savings can only be achieved with a serious paring of government programs — and, ultimately, the people who operate them. Government has clearly stated that significant staff reductions have been taken off the table. Yet, when the cost of labour represents about 46% of operating costs, how can ZBB be much more than a charade?

In addition, the deficit can't be tackled only by the "core" public service. The process has to include a terribly inefficient healthcare system simply because it represents 36% of government spending. The process has to include other sectors of public spending too.

When the government gets around to making some of the big decisions to cure overspending — the surgery having been performed — then ZBB should follow.

Politicians like Bennett are elected to make those decisions — not to bamboozle us with a charade.


Zero Based Budgeting? The Minister of Finance, like many of her officials, is just busy being busy.

29 comments:

  1. Has Eastern health started the phone reminders for MRI, CT scans etc yet. Should only take a phone call from, with immediate follow up written directive from the Premiers office, if more for less is to be achieved. If they cannot do this, this there is no serious intent to improve efficiency.

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  2. There are no published cuts to political staff positions or Crown corps like Nalcor. Why are they spared? There are several staffers in both the government and opposition members offices who are fully pensionable. Put them out to pasture and eliminate the position. If Bennett was serious about spending then she would not allow sanctuary for political partisan positions.

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  3. Good analysis Des. I think it all boils down to leadership and the lack of political will. These actions are band aids on an infected sore.

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  4. Little comment on this subject, to suggest that UG analysis is correct.
    Anyone wish to comment on the record freezing rain period. Is the dept of Climate Change disturbed, or this unusual event not ever noticed by them.
    We have had 4 previous long events of freezing rain since 1952, in the range of 30 to 37 hours' typical 15 years apart. An increase of 2 or 3 hours would be about 10 percent, so not all that unusual. This period, occurring over EARTH DAY, no less,when there were 600 worldwide marches on the climate change, produced an event here on the Avalon that was 60 hr duration, a 62 percent increase from the last 1998 event of 37 hours.
    Another item....Russell`s piece in the Telegram, about a dead mouse! We have UG concerned about the while elephant of Muskrat, and Russell is writing about a mouse that my have died in his heating duct.
    Now Russell says heating systems are harder to understand than electricity.........to suggest he understands electricity......so should he not be giving insight into the while elephant electricity issue. Perhaps he could start with these massive synchronous condensers being transported to Soldiers Pond......what is their purpose, the press has reported on their massive size and weight. Do nwe need to wait for the PUB investigation that seems will never start ,, to get some insight on why some of this is needed, and its effectiveness, and the high cost of this stuff........surely Russell can tell us.......as electricity is simple to understand he says.
    And by the way, Russell found 7 pennies in his duct work. Imagine that.......what investigative journalism can uncover!
    PF

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  5. What's left for the most of us? The days of settling for being undervalued/underpaid cause the cost of living here was low are long gone. Thanks to oil... government bloated and my tax dollars are paying salaries and pensions instead of adequately fixing roads or building schools. Real estate agents seized their opportunity to cash in while driving a market whose majority has nothing to do with oil offshore or abroad. Thanks to MF we will pay more for a lot less. I fear for our elderly. Now our fishery is in turmoil. Our gas prices are laughable considering we are an oil rich resource province. Our taxes are high and to top it off, the weather is horrible. I love it here but I have found myself contemplating a move. Unfortunately, others will have to pick up my share of governments take.

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  6. Seems most do not make the connection between our TERRIBLE weather and oil extraction.
    Over the last 30 years most all of the permanent artic ice that PERRY and Bartlett encountered in 1909 is broken up and gone. In the late 1980s and 1990s the ocean around Nfld had record low temperatures that drove off cod and caplin, and colder species of crab and scrimp moved in. The result was some 20,000 people leaving Nfld from the collapsed fishery.
    Ice bergs now are from Greenland and more remote areas, and ice coming here is recent ice, one third the thickness for decades past. The artic now does not get cold enough to produce thick ice.
    After 25 years the ocean is here agan warning a bit, and cod and caplin is recovering a little, but not enough for commercial fishery.......and the crab and scrimp are getting scarce and moving off, as would be expected, again causing turmoil for the fishermen with quotas slashed.
    Climate is in crisis , as in many parts of the world, and fish species follow what suits them.
    What is heating up temperatures in some parts of the world is pushing cold Labrador currents further here, as climate modeling predicted, and resulting in extended freezing rain for days on end.......so Terrible weather.
    Two years ago summer here started Aug 13.......instead of late June.
    And we do our part on extracting oil, and figure it our salvation, as if our oil do not get spewed into the atmosphere once exported. The connections.....joining the dots should be obvious.
    SO where is our environment minister being interviewed on the recent record event here. Will the next record be for 120 hrs straight of freezing rain. Where is Nfld in the climate change debate ......right with Trump it seems .......pump baby pump. We have 20 billion of debt to pay off, though the place becomes unlivable, whether from taxes or weather.
    PF

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  7. Interesting on tv news tonight that fish scientists say that the water was extremly cold in the early 1990s and that caplin were scare in Nfld and got more plentiful in other places, such as Nova Scotia.........and saying this should be studied more, as it is essential to cod........about time , and shows incompetancy of the fisheries science as fishermen claim

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    1. The cold water "theory" in the early 90's, was along with the perennial scapegoat, seals, blamed for the cod collapse. It was part of the denial that draggers destroying habitat and targeting spawning aggregations, had nothing to do with the collapse. DFO mismanagement and politicians like John Crosby who said you would have to be demented to follow DFO recommendations for steep cuts to prevent a collapse are to blame.

      Crosby came up with the "package" a short term support for the displaced workers to quell social unrest. It was all too successful and led to the loss of 20,000 jobs and 80,000 residents moving out perforce.

      The fishery has been moving to a corporate model since the 1980's. As Maurice Adams documents eloquently in the pieces that follow access to and benefit from the fishery go to fewer and fewer people over time.

      Fish stocks have become bargaining chips for politicians, nothing more. They have absolute discretion over allocation as I found out in the early 90's when I was part of an action in the federal court that tried to establish that the Minister should be bound by the spirit and intent of the Fisheries Act.

      In other words the Minister has absolute discretion and is not bound by conservation or social imperatives. He is free to use fish resources for his broader political goals. Crosby even admitted in his memoir that he kept the quota much higher than DFO recommended to keep a plant in his riding open to ensure victory in the federal election. Crosby is at the top of my list for the stockade that Winston recommends in his post.

      I have been saying for three decades that fish belong to adjacent communities, not self serving politicians. The reality is that governments prefer dealing with corporate interests, either domestic or foreign. They have no interest in social or community concerns.

      Sadly the FFAW has been co-opted since the early 90's and has become more and more opaque as the links, dependence and allegiance to the federal government increased over the years.

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    2. Bruno, I think we need to compose a list for the public flogging......you nominate John Crosbie.........who by the way, wrote to the Telegram a few years ago of his support of Muskrat. His son Ches, who wants the Premier`s job, has made no comment on Muskrat as far as I can see, which suggests he supports it.
      Who else can we add to the list......we should have at least the top 10. Names..............only one per reader.....and of course........how many lashes need to be determined....and after the lashes, have to kiss a sculpin, and then sit naked on the sculpin`s thorny spiked head for 1 minute, in silence, or else 10 more lashes. ...I go along with JC for the top 10, I think. And you. for JC, not only give a name , but the reasons.........very good.
      WA

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  8. Listened to one caller on VOCM with Paddy Daley.......said that what is happening to Nfld with the fishery is like what they did with the Indians, the government took away the resourses , like they slaughtered the buffalo etc and put the people on reservations......that our fishery was once as big as Norway and Iceland combined , that today in Norway , plant workers get 30 dollars American per hr as wages.......that Nfld fishery has been consistantly mismanaged..........maybe time the Uncle took up this subject, me thinks, while the Oversight Committee on MF keeps oversighting.

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    1. "Nothing rational about fisheries rationalization" http://www.thetelegram.com/opinion/letter-to-the-editor/2010/7/1/nothing-rational-about-fisheries-rationa-1458787.html

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    2. "Fish stocks for sale" http://www.thetelegram.com/opinion/letter-to-the-editor/2016/1/15/fish-stocks-for-sale-4404961.html

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    3. "Written Submission on DFO's LIFO Policy" http://www.dfo-mpo.gc.ca/fm-gp/peches-fisheries/comm/shrimp-crevette/pdf/LIFO.pdf

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  9. Maybe the Minister should be talking to Bill Holter; "Everything is run on credit". When the US defaults, Muskrat won't be worth a Damm anyway.

    http://www.silver-phoenix500.com/article/captains-dollar-are-panicked

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  10. Today the Federal Minister announces 5.2 million for PEI to encourage young people to seek jobs in agriculture, with enphasis on sustainable farming....the backdrop photo shows the Minister on a farm in PEI with ha big solar array behind him. In Texas, farmers(ranchers) are making hundreds of thousands of dollars a year by leasing out to the power companies their land forinstalling wind generators.
    Where is such plans for fishing and farming here. Nalcor dictates that there can be no competition for generation, not even Nfld Power, and Nfld power plays along, satisfied with distribution revenue and some 40 million in profit a year.They even assisted Nalcor with inflated power demands.
    No money for nothing, pot holes, health, fisheries , agriculture, new schools, new jail, new Waterford Hospital, new Corner Bk hospital, suitable long term care, home care, senior women with no teeth unable to get treatment, not a damm dime for anything worth while........but lots for Nalcor.......even more layers of oversight. Of course we cannot forget the banks and bonding companies who loan the money , and their shareholders.....we manage to pay them 1 billion a year. They are happy. One thing that keeps growing is the interest paid.
    UG needs to write another piece on the need of a public flogging....he has plenty to pick from.
    Winston Adams

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  11. By the way, speaking of public floggings........and seeing this is year 3 of a 4 year event to remember of WWI,and Nfld sacrifices.......things continue to educate me on one Winston Churchill.......allegation that ISIS is a natural fallout of the carving up of those Arab countries after WWI, the plans to do so made in 1916 or 1917. And British actions against the Arabs to keep them in check....in the early 1920ss.....even poison gas was acceptable.
    Churchill as kicked out as PM after the WW2, but re-elected around 1950 as PM. Records show that in the cabinet minutes in 1952 he proposed to bring back public flogging, in Britain. Some discouraged it, pointing out that only Brazil, a few US southern states, and a few tyrant nation in the world still practiced public flogging, so the PM never got his way on that.
    Maybe we should have a referendum to see if we should reintroduce it, I nominate UG as a member of the Oversight Committee for public floggings. What do other readers think of that. I mean Churchill could not be so bad........or was he!
    WA

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    1. Smallwood revered Churchill, named the bloody river and falls after him. I don't think that either would bring back flogging. They had more devious means. Churchill was a racist as far as the Arab world was concerned, an Imperialist who thought middle East oil was to run the British Navy, to keep the Empire, India, South Africa, etc. for the chosen. Colonization of Labrador by a few Water St. families was along the same lines.

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  12. More bad news on Muskrat. Where were the Construction Managers?

    http://www.cbc.ca/news/canada/newfoundland-labrador/nalcor-muskrat-falls-tce-court-case-1.4086644

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    1. Good question Robert. Nalcor continues to believe that they are a law unto themselves. Contracts be damned. Concern for the rate/taxpayer be damned.

      When incompetence or worse goes unchallenged Nalcor rightly feels they are above the law or any public scrutiny. With the faux oversight the bumbling incompetence accelerates.

      Who will track own Stan and Gil and ask appropriate questions?

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    2. Let's start with a Change orders list, amount, cause, signed off authority. Then list RFI's, (Requests for Information), on the trail to contemplated COs. Very basic contract admin reports. Finally, contract disputes registered, going to court, etc. What is current contingency allowance for changes? Cost to complete estimate? projected cost? Stan, let's have some news on the project status.

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  13. Robert, you seem to have a good knowledge of how well run projects are suppose to operate. you are an engineer,,,,can you advise you area of work , experience, projects.......what part of Nfld are you from , and you are now retired in BC I beleive, with a keen concern in your home province and the incompetence of operations here.
    WA

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    1. Bayman; Trinity, Fortune, BE civil NSTC 60. Industrial/Buildings Engineering, NL, 70's, Toronto, Calgary. Short recall to Northern Alberta. Cost Engineering, MUN. primarily a construction contracts manager, small, (Cheap and cheerful) projects.

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    2. We have much in common, including this UG blog. Do you still get to visit here. You were 11 years ahead of me at NSTC.
      WA

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    3. Sadly, no. But we retain friendships and an interest in the current situation. Near the end stage of my work, I saw the decline in the professions, Architectural/Engineering practice. "Directors of projects/Accounting/Financial officers, etc." were given control of site construction activities, thus rendering the PM/CM to clerical roles. Project certifiers were limited to paper pushers, and the quality and effect of contract administration subverted. Muskrat seems to be but one example where the goals of high quality technical achievement, schedule, cost management, (AACE/PMI/QS standards), have been diverted and replaced with less altruistic objectives.

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    4. Robert is corruption a synonym for "less altruistic objectives"?

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    5. You may say that. The preferred project structure for optimum project control used to look for balance between the Owner, Designer and the Contractor. Quite often, in recent years this balance has been manipulated to move risk exposure from one part to the other. This has produced unsatisfactory results in many cases. Consider Muskrat for example, What and who is the beneficial Owner? Where is project control represented?

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  14. Russell had a piece at the Tely sying that Manitoba Hydro had a problem like Nfld, and they are likely to be increasing power rates. He said rates there may increase by DOUBLE digit.
    Now double digit means 2 digits, so more that 1 digit. So it may be 10, 11, 12 , 13 percent increase etc......he never said.
    Now here we may be faced with triple digit increases. That is triple means 3 digits, so 100, 105, 110 percent etc. According to Stan last year, a rate of 21.4 cents, as compared to now 9.7 suggest triple digit rate increase.
    So is Manitoba a fair comparison with the boondoggle here......or just that Russell just avoids a comprehensive analysis of MF, and so he talks about mice instead of elephants. Mice and Men ........yes, that`s it.
    PF

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  15. "A CASE OF THE FINANCE MINISTER BUSY BEING BUSY" - well its seems not just the Finance Minister being busy but the Clerk of the Executive Council, Mr Bern Coffey, is doing some moonlighting by representing a client suing Nalcor. This is presented as being done in his spare time. Well he shouldn't have enough spare time to undertake jobs on the side - positions at this level are not 9-5 and that is part of the argument, with at least some degree of validity, why the salaries are elevated. When time commitments come into conflict who suffers- the province or Mr Coffey's client?
    People at this level need not only to be above reproach they need to be seen to be above reproach- this Government just doesn't get it.

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  16. Emera is laying the cables between Nova Scotia and Newfoundland to bring Muscrat power to power to Nova Scotia. NL Hydro/Emera is running cable from Muscrat Falls to Soldiers Pond on the Avalon. My question is how does MF power get from the East Coast to the West coast? Just kidding, but do the NL taxpayers/ratepayers know that we will be sending low cost power from Bay d Spier and paying at least four times as much for Muscrat power in 2021?
    Gerry Goodman

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