We’ve been having fun for the last few weeks, at least by economist standards, talking about the platform of a mythical Fireweed Party that wants to make the Yukon the best choice in Canada to live, work, start a business and raise a family.
This week, let’s talk about the Yukon’s capital budget. Capital projects have always been a big deal in the Yukon, thanks to its distance from major population centres and lack of legacy infrastructure compared to places that have had large populations for a long time.
Indeed, much of our lifestyle today is made possible by previous mega projects such as the White Pass railway and the Alaska Highway. More recent examples include our relatively cheap and plentiful (until recently) hydro power from Schwatka and Aishihik, or our superb air links made possible by Erik Nielsen airport.
We often just assume these things exist as part of the natural order of being. But someone had to plan, budget and build them. If you’ve tried to fly into Greenland’s capital Nuuk – which cannot handle jets and requires a 320-kilometre connecting flight to the larger airport at Kangerlussuaq – you’ll be grateful to the folks who built our lovely 9,500-foot runway. They were probably more worried about geopolitics than your vacation to Hawaii when they did it, but it’s still a wonderful facility to have.
Over the past five budgets, the Yukon government has spent almost $1.4 billion – yes, billion – in its capital budgets. That’s about $37,000 per Yukoner. And that doesn’t count the hundreds of millions in parallel contributions by various federal capital programs.
The next government, of whatever stripe, will probably spend a similar amount. The Yukon government’s cash surplus is expected to be $57 million at the end of the current fiscal year, down from over $200 million as recently as March 2015. So the Yukon government’s capital budget may be under pressure. But at the same time the new federal government has boosted its infrastructure funds significantly.
In any case, the Yukon government is likely to spend well over a billion dollars on infrastructure over the term of the next legislature (assuming it lasts five years). The question is whether, at the end of it, we will have frittered it away or invested it in projects that future generations will thank us for.
So how would the Fireweed Party, assuming it actually existed, do things?
Promise one: Move the capital budget to the fall, so it gets the attention it deserves and so that the people who run projects can plan over the winter and build in the summer. Building things in forty below is not just a hassle, it can also double costs or worse.
We have had fall capital budgets before. It’s a good idea, but not enough on its own.
Promise two: Force each project’s sponsoring territorial department to write a business case for the project, get an opinion on it from the independent Legislative Budget Officer (see the original Fireweed column three weeks ago), and publish it for Yukoners to examine.
These business cases would have to be published before the fall sitting of the Legislature so everyone had time to read them. They would also have to have clear descriptions of the benefits the project would bring to citizens, including future revenue streams, cost savings and jobs enabled.
The point is to surface the differences between projects and allocate our capital budget to the ones with the most long-term benefits. Governments will still be able to choose projects with intangible societal – or political – benefits if they think these are important, but they will have to be transparent about it.
Consider this example: we have to choose between widening the Alaska Highway, building one new renewable energy project a year and funding the installation of a back-up fibre-optic internet cable.
The renewable energy projects will bring in cash for decades by selling power to the grid. The back-up fibre-optic cable will enable a new generation of economic activity by allowing internet-dependent workers and businesses to locate in the Yukon. Widening the Alaska Highway brings in no revenue, and doesn’t enable any new long-term jobs, although it would reduce commute times for workers in some sub-divisions.
Before ministers pick among such projects, they should know that the Legislative Budget Officer will be casting a critical eye on their business cases and sharing his or her thoughts with constituents.
Business cases would apply to the construction of things like the new Economic Development headquarters or the new F.H. Collins school. Such projects should have an independently vetted business case outlining how much the government will save in rent or heat by building a fancy new building. And they should have to articulate, if they can, how the new building will make the officials more effective or help students achieve better educational outcomes.
A Fireweed Party premier would also ask the Legislative Budget Officer to publish an opinion on the overall composition of the capital budget. Were we spending too much on small projects and not enough on big ones that would make a difference in the long run? Perhaps too much on traditional activities such as paving roads, and not enough on information technology? Or too much on the shiny new projects politicians love to announce and not enough maintaining the old stuff?
Promise three: Post-project assessments a year or two after the project is completed should be compiled, reviewed by the Legislative Budget Officer and made public. It is important to know if the revenues, cost savings or other promised benefits actually were realized. The knowledge that such assessments will be made will encourage officials to be accurate in their original proposals, and will also help the Yukon government learn from past mistakes.
The Yukon government has a lot of large, complex projects on the go so some mistakes are to be expected. But it is important they be observed, learned from and not swept under the carpet or drowned in Question Period talking points.
Tune in next week for the final instalment: what’s not in the Fireweed Party platform.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won last year’s Ma Murray award for best columnist.