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Dollars and sense


Twelve-year-old Aaron Lacosta has learned recently that saving money definitely has its rewards.

"Seeing Red" was the headline, but the report by James McLeod should not have come as a big surprise to anyone. (http://www.thetelegram.com/News/Local/2015-02-14/article-4043420/Seeing-red/1)

Newfoundland and Labrador is going in hock.

With a budget that's been largely dependent on oil revenues based on $100 per barrel oil prices for the past decade, the "eggs in one basket" planning was bound to fail.

Now the province is facing a budget shortfall for the next five years, according to Finance Minister Ross Wiseman.

Essentially, in order to cover the cost of some of its obligations, the provincial government is going to have to borrow and do without.

Wiseman acknowledged, in the report by McLeod, that the province will probably have to pull back on infrastructure spending.

"We've been spending somewhere in the range of $600-700 million in infrastructure. That's not sustainable in the long term," Wiseman said.

The writing is on the wall.

If you were hoping to see potholes replaced by huge sections of fresh asphalt in your neighbourhood anytime soon, stock up on shock absorbers and leaf springs, because you're in for a rough ride.

If your fire department hoped to buy a new fire truck with help from provincial coffers, better start planning the cold plate supper sales now.

If your kids' school needs new gym equipment, you'd better start prepping the letters now asking corporate sponsors and wealthy benefactors to help out.

In this new reality of low oil prices, and years of "eggs in one basket" financial planning by the province, we'll be lucky to get the essentials, let alone the extras.

The reality is that if the provincial government can't afford the essentials, the trickle-down effect will begin and individual citizens may have to dig a little deeper via taxes taxes and service fees.

Could we have avoided this?

Probably not all of it. We are no different than any other provincial and national economies that have depended on revenues from oil.

Everyone is feeling the stress.

However, could we, should we, have been better prepared for the eventual rainy day scenario, based on the assumption that all commodity prices - even oil - can fall just as easily as they can rise?

It's been said before, but bears repeating. A wise man does not spend all he earns. He lives within his means or, even wiser still, below his means.

And he looks for ways to supplement his income.

The other question that begs an answer, given our current circumstance, is this: with the cost estimates for the Muskrat Falls hydro development now pegged at about $8 billion, can we really afford to carry on with it?

As the province pushed ahead on Muskrat - considered by some to be the Danny Williams legacy - many learned people were warning of the financial danger of tying the province's purse to a multi-billion-dollar project that would create a long-term debt for all taxpayers.

Even if oil prices had stayed above $100 a barrel, Muskrat Falls was pushing us beyond our financial means.

Now we've got the proverbial expensive racecar in the garage and not enough money to gas up the tank.

Who's the wiser now?

Our collective financial future will, without doubt, be challenging, and we will all be impacted, in some way, as the province builds its budgets over the next five years.

We don't envy this provincial government, or the next, the task of meeting the needs of its citizens as the wallet grows thinner.

Perhaps, then, it shouldn't be left to elected officials, deputy ministers and civil servants to build the financial plan.

Beyond the pre-budget consultations that allow citizens to have their say, and make their suggestions for government spending, perhaps what we really need is an arm's-length, non-elected, committee of financial experts - forensic and chartered accountants and economist - and academics with expertise in social sciences, health care and education, to examine the numbers and the needs, and offer up a plan based on cost-benefit analysis, with social health and well-being as the ultimate goal.

Strange idea?

Perhaps.

But since the tradition we've followed for so long for provincial financial planning doesn't appear to be serving us well, it might be worth our while to consider another means of calculating dollars and sense.

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