Insolvent within 10 years: Dire warnings continue for N.L.'s fragile economy
A professor at Ottawa's Carleton University is again predicting a tsunami of financial calamity will push Newfoundland and Labrador into insolvency within the next decade.
Ian Lee recently brought his message to the federal Standing Committee on Human Resources, Skills and Social Development, saying the province is going to be increasingly squeezed to the breaking point.
"I can't see this ending (in) anything but an urgent request at some point by the government of the day of Newfoundland and Labrador to the federal government saying, 'Look, you've got to step in and help us,'" Lee told CBC News.
It's not the first time Lee has forecast financial Armageddon, and it's not the only eastern province that he is painting with such a dim-coloured brush.
"I'm predicting within 10 years a couple of provinces will have to be bailed out. And I'm referring to New Brunswick. And I'm referring to Newfoundland and Labrador." he said.
An aging and shrinking population, a financial picture that would stagger even much larger provinces, and a "disaster" hydroelectric megaproject in Labrador will push the province over the fiscal cliff , said Lee, an associate professor at the Sprott School of Business.
It's yet another prediction of economic doom for a province struggling to escape from a financial quicksand stirred up by a succession of big-spending governments and a risky reliance on oil revenue.
"In the near future we could be having a debate in Parliament over this very issue," said Lee, who teaches strategic management at the Ottawa university.
He said one option might be for the federal government to nationalize Newfoundland and Labrador's immense debt, but added that would be a risk because of the precedent it might set for other struggling provinces.
- N.L. auditor general warns unsustainable deficits threaten public services
- Labrador's Muskrat Falls price tag now $12.7B: Worse than 1969 Quebec deal, CEO says
Lee has studied budgets and the economic impacts of aging for many years. Calling himself an "evidence-based guy," he said the situation for Newfoundland and Labrador is simply not sustainable.
It's a warning similar to those made by the Parliamentary Budget Office in Ottawa, and Terry Paddon, Newfoundland and Labrador's former auditor general.
'The tipping point'
The province — with just over half a million citizens — is aging faster than any other province, with many young people looking elsewhere for opportunities.
It has also posted record deficits with no plans to return to a balanced budget for nearly four years, and has a crushing net debt that's now more than $15.5 billion.
As bad as that all sounds, Lee says it's Muskrat Falls that will be the tipping point. The massive construction project on the Churchill River has now reached an estimated price tag of $12.7 billion, almost double the original estimate.
And footing much of the bill? Ratepayers in Newfoundland and Labrador, who have been told to brace for a doubling of their energy bills.
Lee has long been a critic of the project, saying that instead of going it alone, the province should have built a transmission line from Quebec to meet its energy needs.
"I think it's going to constrain Newfoundland literally for generations to come," he said of Muskrat Falls.
I'm saying you just don't have the resource base to sustain the huge increase that's going to come with heath care, as well as absorbing the full cost that's going to come with Muskrat Falls.- Ian Lee
"I'm saying you just don't have the resource base to sustain the huge increase that's going to come with heath care, as well as absorbing the full cost that's going to come with Muskrat Falls."
The one factor that could help the province avoid this bottomless pit, Lee explained, is the offshore oil and gas industry.
He says the long-term demand for oil will be strong, but cautions that energy development is now "extremely political."
He said the Liberal government of Prime Minister Justin Trudeau is strongly committed to environmental protection and to dramatically reduce greenhouse gas emissions in order to combat climate change.
Lee said there are strong signs that environmental approval for energy projects will only get more difficult, and this could dissuade some oil companies from investing in the offshore.
"It just depends on which government is in power," he said.