Let's have a frank conversation

As I listened to Premier Allison Redford’s address on Alberta’s fiscal situation, I began to think whether I was living on another planet. What I heard was that we have a revenue problem and not a spending problem that can be fixed by continuing to invest and not cut spending and not raise taxes.

The problem as the Premier saw it was that we had a ‘bitumen bubble’ caused primarily by a $50 per barrel for our oil and not the higher price we forecasted in the budget. Result a possible $6 billion shortfall in revenue. In summary it was not the government’s fault.

Promising Albertans that we shall have to make some tough choices, the Premier did not mention which one they will be. Instead we heard the same rhetoric uttered by most politicians when they are in trouble for not balancing the books: “You gave our government a clear mandate to keep investing in services that support our families and our communities — the communities where we live. You told us to continue building the new roads, schools and health facilities we need.”

This statement casually puts the onus on Albertans for wanting things that they cannot afford.  Things that politicians promised to win elections, but that in the longer term still remains to be paid for by taxpayers. We cannot cut the costs of education, health or infrastructure, and yet we do not want to cut the costs of public sector labor and politicians salaries.

The Premier also stated :” Last year, we initiated a Results Based Budgeting process — a process that challenges every dollar the government spends, while making sure the programs and services we provide are getting results for Albertans.” While this form of budgeting may be a departure from previous budgeting concept, like Calgary’s ‘zero base reviews’ it is nowhere near the zero base budget that the Institute asked for.

Results based Budgeting process is an effort to make government more accountable to its citizens for promises made. However to be truly accountable the taxpayer must have available clear, easily accessible and up-to date- information about the success and failures of programs and services. Currently, as we have seen information has been at best sparse. Results based Budgeting is not bad but does not address Alberta’s spending problems in its entirety.. IPSA still maintains that zero-base budgets that demands that all activities be examined fully as if they were starting at zero, would be a better process to identify and eliminate redundancies and inefficiencies in the system.

I was glad to hear that Premier  Redford wants to start a conversation. To that effect the Alberta Economic Summit is planned. We believe that among the more esoteric discussions the following should be put on the table:

·         An open discussion about  Health Services, including private delivery

·         A discussion about education and its growing costs

·         A consumption tax

·         A complete revamp of the education tax based on property values

·         That debt not be raised for purposes other than long term infrastructure

·         A mechanism by which automatic cuts will be made when revenues fall by 10%

·         The establishment of zero base budgets and managed competition for services

It is clear that in the past 10 years Alberta has lost its ‘advantage’ through poor fiscal management. Now that we have a crisis, it is time to look at things differently. Albertans are prepared to venture into new territory, but they also want accountability and see more value for their money. We must continue to invest in the Heritage Fund, and at the same time provide services differently to maintain the quality of life that we are accustomed to.

Sacrifices may have to be made, but it must start with the government and the public sector. I hope that the conversation that the Premier wants to have include a frank discussion about how Alberta will regain its place as the  best  province in Canada

Marcel Latouche

‘Enough’, once and for all

For weeks the Canadian public has been bombarded with the plight of Chief Spence’s hunger strike; after many demands to meet with the Prime Minister and the Governor General, it seems that nothing has been resolved or can be resolved under the current blackmail environment.

Not being a lawyer I will not try to interpret the contents of The Treaty between  Queen Victoria and the First Nation. However as a Canadian with a financial background I will provide my point of view of the current conflict, which it seems, is always about money, either in dollars or resources.

First let us start with the ‘Idle no More’ movement, which is threatening to create havoc with the economy through blockades and civil disobedience if their demands are not met. The problem is that very few, even members of the Assembly of First Nation (AFN) really understand the contents of the demands. At first sight the protest is very reminiscent of the ‘Occupy’ movement. Both these movements seem to be made up of a bunch of left anarchist who has no coordination and leadership. Under these conditions it is very unlikely that anything will be achieved.

As for Chief Spence hunger strike and demands, her latest refusal to meet with the Prime Minister and just attend, for a short time, the meeting with the Governor General shows that even the poster child for the protest has no clear idea of her demands.

Chief Spence of the Attawapiskat reserve has been under public scrutiny since the demise of the reserve was reported and an independent audit was called to examine the financial affairs of the reserve. As it turns out expenditure for millions of dollars do not have any paper trail. Over the past six years the reserve received some $100 million from the government. While the Chief and her spouse/partner received hundreds of thousands of dollars many resident still live in virtual squalor.  The release of the audit was immediately branded as a ploy by the government to embarrass the Chief. Could we also say that the Chief’s hunger strike may have been a ploy to pre-empt the findings of the audit?

Most Canadians are sympathetic to the problems of the First Nation, but by the same token, they are also aware of the amount of money being allocated by the government and yet there is no accountability in many cases. Let’s be clear; not all reserves have the same problems and are not managed the same way. However since it is taxpayers’ money it would be nice to have greater accountability. In my view, First Nations should be viewed as another form of local government. They may be independent, yet they require funds from the federal government. In this case they should be subject to the same accounting rules as any other recipient of government funds. Financial reports under current accounting standards should apply. The public deserves more transparency and accountability.

As for the latest demands, whatever the Prime Minister does will not be enough. Since many Chiefs do not want to be at the table, the Prime Minister who has agreed to meet again should come to a new agreement which addresses the issues put forward by those who are willing to attend. Chief Atleo should be given credit for coming to the table. To acquiesce to the request to meet with Governor General or the Queen for that matter shows that the ‘Idle no More’ movement have no intention to ever come to a final solution. The treaty may have been signed by Queen Victoria, but times have changed, The Queen of England has also been stripped of many of its royal powers. Decisions of importance are made by elected officials and not the monarchy. So let us get off this horse and move on.  For sure there are grievances to be addressed, but it should be done in a more consensual manner and with more respect for the First Nations and acknowledgement of a new era. Most of all the media has a role to play in reporting the facts and not just the sensational and political issues. Former or current political figures have used this conflict to further their agenda or undermine the current government. Former Prime Ministers who have made their views public are equally guilty, since they did not solve the problem when they had the chance; to come out now and critique, is purely hypocritical.

Not all members of First Nations are destitute. Many of their members thrive in the current economy.. Most First Nation members who live off the reserves are better off. Staying on the reserve under the rule of Chiefs who exploit them may be the real cause of the problem.  It is said that to give a man a fish, feeds him for one day. Teach him how to fish, feeds him for a lifetime. The new agreement, while addressing land and resources sharing, should help to create viable independent First Nation communities through education, proper housing and proper utilities with greater transparency. The AFN must also take responsibility for the current failures. Welfare without proper accountability is no longer the solution.

Marcel Latouche

No plan 'B,' or no plan at all?

In his December monthly column Mayor Nenshi touted his accomplishments and budgeting prowess.  Among other things he explained how the three year budget works, how Council was able to invest in the community, and transit; all of this supported by his ability to provide Calgarians with the lowest property taxes.

On Wednesday 19 of December, amid a flow of bad news concerning transfers from other levels of government, he acknowledged that there is no civic do-it yourself plan or any plan’B’.

Calgarians should not be surprised by all this rhetoric. The Institute for Public Sector Accountability (IPSA) has been monitoring city hall for over 15 years. It is no surprise that there is no plan ‘B’, in fact the only plan that exist at city hall is – more taxes. Over the years Calgarians have been served a number of whoppers that need to be clarified.

The three year budget is computed with the help of The Municipal Price Index (MPI), which is made up of the largest operating expense- wages. Instead of using the Consumer Price index the city persist to use the MPI which never goes down because of ever increasing labor costs. As for the lowest property taxes, the Mayor does not state that his higher than expected revenues is made up of ever increasing fees and utility rates. Many Herald readers have properly stated that the tax increases were much larger that the Mayor portrays. Last year the rate was closer to 10% because when the province vacated the education portion he very quickly appropriated it. This year with a package of fee and rates increases, most Calgarians will see another $100 disappear from their pockets into the municipal coffers

While IPSA maintains that education should not be financed by property taxes, we cannot condone the appropriation of the education tax collected by the city. If the province decides to vacate the education raised through property taxes, they will have to raise taxes from somewhere else otherwise there will be a gap in education funding. Alternatively this could mean that the city will now have a larger tax base made up of property and education taxes. In addition the province will charge us another tax to cover the decrease in revenues. Vacating the education portion of the tax by the province is not a solution, In fact if there is no proper reform of the entire municipal tax collection Albertans will once again be fleeced by both levels of government.

The Mayor’s comments are frustrating because you would have thought that as a former finance lecturer he would be less gullible to the administration’s rhetoric. Before telling us how great 2012 has been, perhaps he should explain how his zero-based review process differs from zero base budgeting and how and where the efficiencies have been found. More importantly Calgarians deserve to know how much these savings were in traceable dollars. This semantic game has been played before under Mayor Al Duerr who promised millions in savings through an administration restructuring. Calgarians never saw any tax reduction, but we had the creation of a new large pension funds for executives. Today the mayor tells us that he is investing (sic. Spending) the savings without telling us how much they were.

Watch for his next move in the New Year.  He will need to increase utility rates to fund maintenance and replacements. However he will not tell Calgarians that until a motion in 2005 by Alderman McIver based on a report called ‘A case for controlling utility rates’, the water and wastewater utilities were being fleeced by at least $50 million, if not more, each annually. Mc Iver’s motion put a cap on this vicarious tax. Had the utilities kept their revenues they would now have reserves in the hundreds of millions to use for replacement and maintenance. Or better still there would have been no need for past rate increases.

Truth is nothing has changed at city hall. Transparency is still missing and Calgarians are sold a bill of goods. We are investing instead of spending. We blame other levels of government and raise taxes under the guise of giving the public what they want, while spending to create what the politicians want.

It seems that the promise of a different Mayor under the purple revolution has been greatly exaggerated.

Marcel Latouche

Taxpayer funded Unions

As a long-time advocate of fiscal restraint in the public sector, it is very comforting to see the sobering report by Kevin Page the Parliamentary Budget Officer. His latest report states that the federal public sector compensation is approximately $114.000 per employee. This figure which comprises wages and benefits outpaces inflation and of course the average compensation in the private sector.

What we must remember is that the reported figure is for federal employees. We must also look at compensation for provincial and local government employees to see how much of the taxpayers money is spent on public sector employees; given that in some cases the wages, salaries and benefits of public sector employees account for over 60% of operating costs.

In the past years there has been a movement towards the right-to-work (RTW) in the United States. Last fall Wisconsin saw a very acrimonious battle between Unions and the State Government. A recall of the Governor by Unions was soundly defeated at the ballot box.

On December 11, 2012 Michigan became the 24^th State to pass a right-to-work legislation. What is significant is that Michigan is the bastion of the union movement, the birth place of the Auto Workers Union, one of the most powerful unions, which also has a foothold in Canada.

Statistics show that unemployment is lower in most of the states that have adopted RTW policy. Union membership is dwindling in the United States where the huge settlements made through collective agreements in the public sector are the main cause of bankruptcies at the local and state levels. Governments can no longer sustain the costs of promised pensions in a changing economy.

In Canada, The Rand Formula (1946) which makes trade union dues mandatory regardless of the worker’s union status has legal force in certain province. While unions have contributed to the wellbeing of workers in the past, in the 21^st century their role has changed and the results of collective bargaining, especially in the public sector has clearly become a burden on the taxpayer.

In addition unions in many cases have not represented their membership very well. For example the Alberta Teachers Association did not support Lyndon Dorval in the ‘no zero’ policy. Unions oppose immigration of foreign workers in an environment of high levels of vacancies and change in  demography . They oppose any privatization of public sector services, and always maintain that any collective bargaining is ‘not about money’ and yet refuse to open their books.

Despite the fact that Brent Rathgeber Conservative MP opposes a bill that will force unions to publicly disclose how they spend the dues collected from members, it is important for this bill to pass and this is why: Unions derived the majority of their revenues from dues paid by their members. Under the Rand Formula workers are forced to pay union dues deducted from their wages. Once collected there are very few limitations as to how this money is spent by the unions. In many cases they fund political parties or agendas. In the public sector all wages are paid from taxes collected from Canadians, it therefore seems that the tax payer is the main provider of funds to Unions. Should we not have more disclosure on how our money is being spent?

Canada should follow the United States in the sea change in laws governing unions. At the very least we should amend the Rand Formula to give workers the right to choose where their dues are being spent, or as in some cases designate where the money collected should go ( e.g. to charities of their choice). The right-to- work, without joining a union should be encased into the Canadian Charter; alternatively those who want to join a union can do so freely.

Unions have a role to play in the private sector, but no longer in the public sector, where as a result of their size have become too powerful and less conciliatory. The cost of their existence has become too expensive and they have become a deterrent to change required to make the public sector more efficient. It is time for Canadian taxpayers to demand that their money is better spent on services and not Unions.

Marcel Latouche

The Wireless industry- an unfortunate oligopoly

Canadians are divided over the regulations to allow foreign owned companies to buy Canadian companies in the energy industry. However there is no outraged about regulations and operations of Canadian owned companies in the wireless and communication industry.

 The Canadian Radio-television and Telecommunications Commission ( CRTC ) seems to be blind to the way that companies in the wireless and cable industry operate. Increasingly politicians and consumers are getting restless about the contract terms and roaming fees. As for cable TV, the CRTC refused to allow the acquisition of Astral Media by BCE Inc., but will still consider the takeover if the bid is amended. If allowed this takeover will further shrink the number of companies. This $19.1 billion industry is an oligopoly tolerated by the government and the CRTC.

In the wireless industry, most if not all contracts demand that a consumer signs a three year contract. In the meantime as technology changes rapidly the consumer is boxed in and continuously pays more for the services. ‘Canadians look at consumers and services in other countries and are getting tired and frustrated with bigger bills, poorer service and limited choices. Data produced by the Organization for Economic Co-operation and Development shows that Canadians still pay higher prices than subscribers in the United States and Europe, While it may be a strategic move in his leadership campaign for the Liberal party, Marc Garneau, a former astronaut, has taken a stance regarding the wireless industry dominance, he said: , “I am doing what I think is important for Canada, important for the economy,” which he said was the “No. 1 priority” of his campaign

While The Hon. Marc Garneau advocates a more competitive industry by allowing multinationals to enter the Canadian market, it is unfortunate that a takeover by a foreign giant company is unlikely at this stage. The existing Canadian operators all own television distribution businesses. They are not only licensed by the CRTC but are also protected because of restrictions by foreign-investment laws under the Broadcasting Act.

The three year term contract is not the only complaints as almost 90 per cent of consumers want their wireless carriers to halt their data use abroad when they’ve spent a maximum of $50 on international data roaming fees. A recent survey found about 90 per cent of consumers had received a bill that was much higher than expected for international data roaming. , The Public Interest Advocacy Centre said that Canadians face cellphone bill shock while using their phones outside of Canada.

As for TV, Canadians are given very little choice. Often the same companies which provide them with their TV are also their internet and cellphone providers. The bundling of channels is full of programs which are duplicated and with several repeats during the day. Consumers are forced to buy certain channels as part of a bundle, yet these channels must carry a level of Canadian content. For example if you get BBC Canada, you now get a plethora of Canadian programs such as ‘Holmes this or that’ which has nothing to do with the BBC.  Mr. Holmes the construction guru already appears on other channels which are already offered through other bundles.  

While most American channels are offered as part of the mainstream, it is ironic that news channels are offered under different rules. For example CNN is widely accessible, yet Fox News must be bought as an additional channel not readily accessible by the masses. Therefore Canadian perception of U.S politics may be indirectly shaped, and influenced.

 The CRTC has a number of issues to look at in the new year; starting with the opening of the communication industry to foreign investors, followed by a revision of channel bundling by providers and the percentage of required Canadian content. They could include the limitation of long term contract and how customers are notified of international roaming rates in its new wireless code of conduct, .

The regulation of the industry is not and should not be one drawn on political ideology.   Rather the CRTC should look at how it can change this oligopoly into a more competitive industry to better serve the Canadian consumer.
Marcel Latouche