Nfld. & Labrador

N.L.'s financial crisis is clear. The path out of it isn't

As the staggering numbers revealed in Friday's fiscal update sink in, groups representing public and private interests have different thoughts on the way forward.

St. John's Board of Trade advocates for spending cuts, while public sector defends its pandemic contribution

The province is forecasting a near-record $2.1-billion deficit for 2020-21. (Sherry Vivian/CBC)

As the staggering numbers from Friday's fiscal update sink in, Newfoundland and Labrador finds itself facing one of its gravest financial challenges — no small feat for a province that has been rocked by economic upheaval in the recent past more than once.

As Finance Minister Tom Osborne revealed, the province is expected to shoulder a near-record deficit of $2.1 billion for the 2020-21 fiscal year, $1.35 billion more than originally projected in a pre-pandemic, pre-oil price crisis world. 

Revenue is expected to be down by $631 million. Expenses are set to rise by $720 million. 

Amid that gloom, those representing private and public sectors have some advice for the governing powers that be. And while much of it differs, there is a common thread between the two sides, so often in stark opposition, of urging caution and care.

"Don't just start cutting where it doesn't make sense," said St. John's Board of Trade CEO AnnMarie Boudreau.

"The last thing we need is a knee-jerk reaction," said Jerry Earle, the president of the province's largest union, the Newfoundland and Labrador Association of Public and Private Employees.

AnnMarie Boudreau, the CEO of the St. John's Board of Trade, says her organization has advocated for the government to rein in spending for years. (Garrett Barry/CBC)

Opposition Leader Ches Crosbie said the deficit came as a surprise but also could have been largely avoided "if we had a competent economic management government in place."

"What we need here is fewer Liberals talking to Liberals," he said. "We would have much more ability, much more resilience, to deal with the crisis caused by the pandemic if we had a fair deal with Ottawa. The local Liberals have been complaining about that since they first took office five years ago but they've done nothing about it."

Crosbie said Canada cannot afford to have a province fail, adding Newfoundland and Labrador needs a government in place that knows how to get the attention of Ottawa by being adversaries.

"What we really need, we need to talk turkey with Ottawa and to see signs that Ottawa sees how desperate our plight is, and that they're getting serious about a hand up here. They can start with giving us what the entire offshore industry has been asking us for, which is incentives for further exploration," he said.  

"You have to argue the case, forcibly make the case, make the case as an adversary, fight for your rights. It's not going to be an immediate cure, but over a three- to five-year period we can get back on our feet, we can again be a have province and we can again contribute to confederation."

Taking cues from COVID-19

Boudreau urges a close examination of how to turn around the province's economic fortunes, and says the government could take its cues from recent pandemic experiences.

"If we look at people who lost their jobs over COVID, or businesses that underwent a really tough time during COVID, the first thing that they did as individuals or as entities is go back and look at their spending," she said.

The reality of our world is tough, and it's hard to hear.- AnnMarie Boudreau

Provincial spending has ballooned, with more than $300 million of projected expenses for the current fiscal year directly tied to the pandemic, through health-care spending like the purchase of personal protective equipment purchases, or economic support and stimulus programs such as home renovation rebates.

Boudreau said balance and discipline are needed to pare down the province's bills.

"We very much need the government to have the political courage to look at how they're spending money, and where they're spending money," she told CBC News.

As for what needs to be cut, she said that was a question best posed to the politicians.

"The reality that we are facing right now is going to mean that everything is on the table."

NDP Leader Alison Coffin said, in a media release, that the provincial government is "big on excuses and short on ideas" for restarting the economy.

Coffin said the province was facing financial troubles before the pandemic hit the globe.

"The people of the province deserve some certainty, so they can plan for the future: Should I buy a house, have a baby, move out of the province, will I be able to afford my light bill? Will there be adequate health care when and where I need it? Will I find a family doctor?" Coffin wrote.

Protect the public sector

For Earle, some areas of spending should be sacred.

"The answer can't be cutting essential services. We've just seen what got us through this pandemic was front-line workers, working diligently every day," he said.

Public sector workers have been vital to seeing Newfoundland and Labrador through the virus's first wave, said Earle, and will be crucial in the event of a second wave.

"The public service is more important than ever," he told CBC News.

While Earle acknowledged that changes will have to happen in order to turn around the province's fiscal fortunes, he hopes for a collaborative approach among the provincial government, unions, the private sector and ordinary citizens. He warned that cutting jobs disproportionately affects young people, the demographic most likely to leave the province.

In Friday's update, the province predicted outmigration would continue its upward trend, with 3,700 people expected to leave Newfoundland and Labrador this year.

NAPE president Jerry Earle says cuts shouldn't come to essential service workers, who have carried the province through the pandemic's first wave. (Mark Quinn/CBC)

Glimpses of hope

Earle and Boudreau agree the federal government — which already has $146 million in aid earmarked for Newfoundland and Labrador — must play a larger role in the recovery.

"I believe the federal government has to step up," Earle said. "We're just asking for our fair share."

Boudreau would like to see some targeted requests from Ottawa, focusing on extending a helping hand to the oil and gas sector, which has been battered by a global price war and offshore shutdowns.

"I don't think you blindly need to hand out money to people who ask. I think you need to assess real opportunities that bring significant potential, and they're the things you need to support," she said.

While a lobbying effort from the province's oil industry for federal cash appears to have fallen short, Osborne said Friday the offshore sector is vital to the provincial economy.

"We are going to do what we need to do to protect that industry," Osborne told reporters.

Earle and Boudreau also found it refreshing that Osborne laid out the province's books for a public look, no matter how sobering the revelation was.

"The reality of our world is tough, and it's hard to hear. But we need to adjust and accept that this is where we are right now," said Boudreau.

Premier Dwight Ball had promised such an update before his term of office is up, with a new leader of the Liberal Party set to be elected on Aug. 3.

On Friday, Osborne said some of the numbers presented could change, with the provincial government planning to release a budget in September.

Read more from CBC Newfoundland and Labrador

With files from Garrett Barry

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