A winding path – but hey everyone else is doing it!

So, lots of talk around budgets and elections and balanced budgets lately.

Well, lets throw in the fiscal stabilization act and the sale of crown corporations. We’ll walk down this path, and you might be surprised to see where it leads.

So lets go back to Filmon gov’t and privatization of MTS, shall we? Back when the Conservatives were in gov’t in the 1990s, they privatized MTS. Now I’m not going to go into the debate of good or bad decision, but lets look at what happened.

The proceeds from the privatization went to two places: a) repayment of provincial debt. and b) fiscal stabilization fund.

Now, what happens when you pay down debt? Your future debt repayments decrease. No different than your household situation. And when you pay down debt, you have funds that can be used on other activities.  And if you have debt, you have to make the payments before you can spend on other items.

And putting money into the fiscal stabilization fund, well it lets you bridge finance when there are revenue issues to allow programs to continue without any cutting ( or even expand programming).

So what does all this mean….

It means that the NDP , who are demonizing the conservatives in their election ads for privatizing MTS, have been the prime beneficiary of the Privatization!

I think most would agree that had the conservatives been elected anytime in the last 12 years that they would not have spent at the level of the NDP, so the winner of the Privatization of MTS is the NDP!!

Wow – it’s a winding road, huh?

It gets better.

The fiscal stabilization act

http://web2.gov.mb.ca/laws/statutes/repealed/f085e.php?query=search

Note that it has been repealed. And note the date it was repealed – 2008

Look specifically at section 3(1.1):

Proceeds of sale of Crown corporation

3(1.1)      For greater certainty, the minister shall not deposit in the fund any revenue or other financial assets received by the government in a fiscal year ending after March 31, 2000 as a result of selling shares or assets of a Crown corporation in the course of a privatization of the Crown corporation.

So here’s an act passed by the Conservatives when in power. The act states that the proceeds from any sale of a Crown Corporation must go into the fiscal stabilization fund, which means they can’t be used to balance the budget or used to fund general gov’t operations.

Now, lets look at the Balanced Budget act that the NDP replaced the conservative Balanced budget Act with. Oh, you didn’t know they replaced the act with another before essentially scrapping it? Yeah, it’s interesting to see what they’ve passed, huh?

http://web2.gov.mb.ca/laws/statutes/ccsm/b005e.php

An interesting point is that they have enacted the act to apply to the summary balance – you already know how disgusting I think that is.

But, look at this:

Proceeds from sale of Crown corporation not included in determining balance

3(2)        Revenue or other financial assets received by the government as a result of selling shares or assets in the course of a privatization of Manitoba Hydro, The Manitoba Public Insurance Corporation, The Liquor Control Commission or The Manitoba Lotteries Corporation must not be included in determining whether there is a positive or negative balance for a fiscal year.

Okay, let’s do some hypothetical scenario planning here.

Let’s just hypothetically say that the Government of the time is going to privatize Manitoba Hydro.

  1. So for scenario 1, we’ll say we have a Conservative gov’t and the Conservative enacted fiscal stabilization act is in place. what happens with the proceeds of the sale? They go into the fiscal stabilization fund and can’t be used to for operating expenses or to balance the budget. Okay, that’s probably a wise course of action if you have a large one time revenue.
  2. For scenario 2, we’ll suggest that the current laws are in place and we have an NDP gov’t that privatizes Manitoba Hydro. Where do the proceeds go? Well there is no fiscal stabilization fund, so they don’t go there. And their balanced budget legislation says they can’t use it to determine if the budget is balanced. So you determine if the budget is balanced on the numbers before the proceeds of privatization ( kind of contrary to the position the NDP and AG have taken with regards to what numbers should be used- but  I digress. So where does it go? Well, it shows as a extraordinary item in the financial statements.

Okay, but then what? Well, under the fiscal stabilization act, the funds would remain there. But since that is gone what? Answer is nothing. NDP could privatize Manitoba Hydro and while not using the funds to balance the operating fund, there is nothing stopping them from using those funds in future years to fund government operations, or major capital expenditures.

Does it seem strange to anyone else that the party that is accusing another party of planning on privatizing Manitoba Hydro actually weakened the laws to protect the proceeds of any possible future privatization of a crown corporation? And that this same party actually benefitted more from the privatization of MTS than the party that did it?

Hmmm….

 

Oh, and here’s another juicy tidbit from the NDP balanced budget act:

Other adjustments in determining balance

3(3)        For the purpose of subsection (1), the net income or loss for a fiscal year may be adjusted by excluding a revenue shortfall or increase in expenses for the fiscal year that occurred because of

(a) an unanticipated natural or other disaster that affects the province or a region of the province in a manner that is of urgent public concern;

(b) Canada being at war or under the apprehension of war;

(c) unusual weather or climate conditions the fiscal impact of which was not anticipated in the budget; or

(d) a decision of another level of government or of a regulatory body that took effect after the budget for the fiscal year was tabled in the Legislative Assembly or within 30 days before it was tabled, the fiscal impact of which was not anticipated in the budget.

Anybody wanna bet that any costs related to this year’s flooding will be removed from their surplus/deficit position number?

 

 

 

 

 

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