The new Yukon budget will release a spring flood of transfer payments onto our economy. Just operations and maintenance spending will be over $1 billion, a record, while the $293 million capital budget will be the biggest in history. The government will still have $140 million in the bank at the end of the splurge, enabling another wave of record pre-election spending next year too.
As a citizen, however, I want the spending to be smart and not just big. It takes no particular skill to receive record transfer payments from Ottawa and then spend record amounts.
A free-spending government is often a careless and wasteful government, and we should ask some tough questions about the proposed spending plans. I don’t just mean citizens and pesky opposition MLAs, but also the cabinet and the officials in the management board secretariat.
Having a budget this big permits some once-in-a-lifetime investments that pay dividends for generations. It also presents an opportunity for the Yukon to join the Montreal Olympics on the list of tax dollar black holes.
There are a couple of key questions that should be asked of every big ticket item. First, is it really an “investment?” Politicians love this term, since it sounds better than “spending spree,” but a real investment is actually something that delivers a future stream of benefits that outweighs the money spent up-front.
The benefits don’t have to be financial, but they do have to actually exist. For example, it would be quite sensible for a government to spend big bucks on a new subway if it reduced congestion and saved thousands of people an hour stuck uselessly in traffic every day.
The second thing we should look at is how risky the return on the investment is. When they built the Whitehorse airport back in the day, they could be pretty certain that it would be heavily used for years to come.
Spending $700,000 on an “investment attraction strategy” to encourage future investment in the resource industry has a much less certain payoff.
Even in retrospect it’s hard to tell if investments like this made sense, since if a Chinese mining company invests in the Yukon in 2015 you can’t tell if they did so because they were lobbied by the investment strategy people or if they just found a good deposit.
So let’s have a look at some of the big ticket items.
Perhaps the biggest is a new hydro dam, although so far the budget has just $2 million set aside for planning. This is a very big ticket item and could potentially deliver huge amounts of cheap and low-carbon power for a generation of Yukon growth. If poorly done, however, it could also saddle us with a huge debt and high power prices. The business case, and the plan to share risk with the private sector, needs to have the tires kicked very hard.
The same caution applies to the 300-bed continuing care facility, whose sudden elevation to a top priority has surprised many YTG-watchers around town. A friend joked that maybe the old F.H. Collins building could be more cheaply repurposed to house the 1960s graduating classes as they retire.
Whistle Bend subdivision is marked down for $74 million over several years, a huge sum. Planners should probably spend part of the money on a time machine so they can go back several years and build lots before the 2009-11 housing shortage. I’d like to know how many people have to move into Whistle Bend by when to pay property taxes and justify this investment. A beady-eyed private sector CFO would be asking questions about “re-profiling” this project to stretch it out over a longer period to match expected population growth better.
The new F.H. Collins has $51 million in the multi-year capital plan, not counting the millions already spent. I just checked the project website and it still has nothing resembling a business case identifying the future improvements in drop-out rates or academic achievements such a large investment would be expected to create.
Either such a business case doesn’t exist, or they’re not sharing it with voters. Neither inspires confidence in the quality of management at the Department of Education.
Government office building projects always require extra scrutiny. Line items with names like “main administration building upgrade” send shivers down taxpayer spines, especially when they cost $10.5 million. I walk past the mothership regularly and it looks fine. I suggest the cabinet try saying “no” to this project, and see if officials can convincingly describe anything bad that would actually happen.
The list of projects goes on for pages, and more than a few provoke the question, “Do we really need that?” An exception, of course, is the $1.2 million earmarked to widen the Robert Campbell bridge so
Riverdale-based economics columnists can ride their bikes to have coffee downtown with their sources. That one is clearly critical nation-building infrastructure.
One also wonders if too many of the projects are for internal government purposes, rather than directly serving the public. Do we really need a new $2-million government office in Watson Lake or a million-dollar expansion of the archives vault compared to, for example, facilities that sports and non-profit groups around the Yukon would like to build?
The same discussion about quality instead of quantity applies to operations and maintenance spending. Doug Bell, former commissioner and veteran Yukon newsman, pointed out the other day that by his count the Yukon government has 48 public relations advisors, analysts and managers. At a cost including benefits of $100,000 each, which might be conservative, this would be around $5 million a year.
Could it make sense to have a few more health-care professionals in Watson Lake or math tutors in your local school instead?
Perhaps all these projects will turn out fine. But, after witnessing the new F.H. Collins debacle from fairly close range, I think we need to step up our scrutiny of big government projects.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s Yukonomist show or Twitter @hallidaykeith