Cuts unlikely in Crown corporation review
B.C.’s finance minister is taking a deep dive into the books of Crown corporations, schools and health authorities to see if they’re accurately forecasting revenues, as the NDP looks to scrape together every penny possible for its first full budget next year.
Finance Minister Carole James has hired a former deputy finance minister, Chris Trumpy, to analyze the books of B.C. Hydro, the Insurance Corp. of B.C., B.C. Housing, the B.C. Lottery Corporation, the Liquor Distribution Branch, and a sampling of universities, colleges, school districts and health authorities.
The goal of the “fiscal sustainability review” is to double-check the budgeting in those public agencies — in short, can the government trust the way they estimate revenue, expenses, risks, debt and, ultimately, how much they forecast annually to give the treasury for the new NDP government to spend on its programs and services.
“You want to be as accurate as you can, so that you are utilizing the money on the kinds of priorities government has,” James said in an interview. “That’s why I felt it was important to do this analysis.”
Despite the fancy title, don’t expect the “fiscal sustainability review” to lead to major changes on your car insurance rate, Hydro bill, local school classroom size or hospital ER waiting times. It’s all a rather boring accounting exercise.
But it’s also interesting for several other reasons.
The first is that it’s a sign of how tight the NDP government’s first full provincial budget will be in February that it has to check under the couch cushions of public sector organizations to make sure they’re being honest about their cash flow.
For much of the election, NDP Leader John Horgan responded to questions about how his party would pay for its campaign promises — $10-a-day child care, eliminating bridge tolls, scrapping Medical Services Plan premiums, raising welfare rates and providing a $400 annual renters’ rebate — by pointing to promised tax hikes on the wealthy and corporations.
But James pulled that lever in her September budget update, and it only covered half of the spending promises. Child care, MSP and the renters’ rebate are expected to cost billions more and haven’t even been budgeted. The NDP is going to have to raise taxes elsewhere to afford those promises in February.
So it’s no surprise James is worried about budgeting by Crown corporations and public sector agencies. Her government can’t afford any of their revenue projections to be off by even a bit given the next budget is likely to be balanced on a razor’s edge, requiring every dollar possible to keep things in the black.
Another reason the accounting review is interesting is because of what it does not do: Take a hatchet to the organizations to scoop out savings.
That’s what Christy Clark’s Liberals did after she became premier in 2011, when she promised “a hard look at all Crown corporations” followed by a “core review” across government to find efficiencies.
Clark unleashed auditors upon B.C. Hydro, resulting in $800 million in internal savings, 1,000 staff cuts, delays to major capital projects and relaxation of sustainable power targets. The Hydro review found much waste, including that 99 per cent of staff got bonuses, the agency had 142 communications people and the organization had more people earning six-figure salaries than any other public sector agency in the province. Within two months, CEO Jim Cobb quit.
Then Clark hit ICBC, finding an overabundance of perks, executive pay hikes and “unacceptable” spending practices during a time of governmentwide austerity. CEO Jon Schubert resigned, and ICBC cut more than 250 staff, including numerous vicepresidents.
The B.C. Lottery Corporation would also go under the microscope, identifying its own lucrative bonus schemes and botched severance packages. CEO Michael Graydon quit to join a private gambling company.
The public largely celebrated the Liberals’ ruthless audits because they reduced rate hikes, eliminated wasteful spending and cracked down on fat cat executives. But ensuing years have shown they did little for the long-term health of ICBC and Hydro. Both agencies are a financial mess today: ICBC because of rising claims costs and Hydro because of the cost of massive power projects.
The NDP review isn’t an audit like that of the Liberals and won’t produce the same results.
“There’s no intent in this review to look at whether money is being spent efficiently,” said James. “Those are bigger policy questions to be taken on by ministers and Crown corporations themselves.”
Attorney General David Eby is already wrestling with the future of ICBC, but only because the corporation is teetering on the brink of insolvency.
But outside of that, for now, the NDP has chosen a softer approach on public organizations than the previous Liberals. Whether that continues will depend on how desperately the new government needs to find money, as it puts together its February budget.
You want to be as accurate as you can, so that you are utilizing the money on the kinds of priorities government has.