No to appear smug, but when the government announced a few weeks ago that the Port Mann bridge cost had doubled to $3.3 billion and that taxpayers would loan more than $1 billion to the public-private partnership because no private lender would take the risk, I raised some concerns. One was that the numbers no longer made sense - that the $3 tolls, rising with inflation, would not be enough to cover construction and operating costs and taxpayers would end up subsidizing the private partners.
No way, said the enthusiastic Transportation Minister Kevin Falcon. Full speed ahead.
Now the public-private partnership has fallen apart, because - in large measure - the companies didn't think the future tolls would cover their cost. (Which raises the question of how I could do the numbers and Falcon couldn't.) Either tolls wil be higher, or taxpayers will be paying for the bridge, contrary to Falcon's repeated commitments.
Public-private partnerships can be a sound choice. The costs are potentially higher, but the risks of overruns and delays - the norm in megaprojects - can be largely transferred to the private partners.
But if the private sector walks away from the projects with too much risk, questions can be asked about whether government should be looking harder at traditional approaches for projects - even large ones - where risks are manageable.
One area of debate about public-private partnerships has been the extra cost of corporate borrowing compared to the government's low rate. Jeff Nagel nailed down the premium in this case and learned interest costs will be reduced by $200 million now that the Port Mann is not a P3. Again, that could be a worthwhile investment in risk reduction in some cases, but not for every project.
Saturday, February 28, 2009
Friday, February 27, 2009
Child care "system in crisis" starved in budget
Let us begin with four realities.
It's bad to be a kid in the government's care - in foster care or group homes. No matter how well it goes - and statistically, it likely won't - the care of the state is not the same as a family home.
It's challenging to give kids in care a real chance. When parents can't care for a child, things have usually already gone wrong. Children born into neglect, abuse, poverty, illness, disability - or simply unlucky - wear some scars.
It's certain that things will go wrong, sometimes with terrible consequences. Child protection workers, for example, make huge decisions based on their best professional judgments. Leave a child with a struggling family or send her off, with a little suitcase, to a home of strangers? Either way, the outcome can be bad.
And how we do in helping these children is one of those fundamental tests of whether we are a successful society, or a collection of self-interested individuals. There is no moral difference between walking past a lost toddler in the street and failing to pay attention to the life of a four-year-old in care.
The NDP had a leaked government report this week that suggested that, in some form, that's what we're doing.
The ministry of children and families had noticed that residential costs for the some 9,000 children in care were rising, even though the number of children being raised was stable and they weren't doing any better.
So it set up a group to look at why costs were going up.
They did good work, although the recommendations focus heavily on process and more study.
The report, completed last summer, found costs were rising for a lot of reasons.
The level of support required for children in care has risen. They are more likely to have serious health and behavioural problems. That could be seen as a positive, of course, because it might mean children with fewer problems are being supported with their homes.
Compensation, for foster parents and care home workers, has fallen behind. The ministry report noted that the pays is the same for hosting an international student, with few responsibilities, or a troubled 14-year-old foster child with attitude to burn.
Foster parents were either aging, or inexperienced. (About 12 per cent per cent were over 60.) Either way, they really weren't able to foster the more challenging children.
And schools, facing their own pressures, have become more inclined to expel or suspend students, the report found. That's obviously bad for the children and also increases the costs of providing care.
The results of all this compound the problems. The report found social workers were scrambling to deal with the lack of resources. That means less attention to the needs of the children - barely one in four children in care have the required plans for their development. And it means more foster parents give up in frustration.
The number of foster homes fell by eight per cent across B.C. in the 18 months prior to the report. In the North and on Vancouver Island about 15 per cent fewer homes were available; in the Interior, about 11 per cent.
As a result, foster homes often had more children than ministry guidelines called for and costly alternative placements became more common.
The report, done by the ministry's own staff, highlights real problems. It concludes that the review "revealed a system in crisis and in need of innovation."
You would expect some specific actions in response, starting with the most obvious - additional funding to deal with the problems.
But the provincial budget for child and family development is effectively frozen for the coming year - it will increase less than one-quarter of one per cent. The budget increases for the following two years are about the same.
It's no response to a "system in crisis."
Footnote: Child and Youth Representative Mary Ellen Turpel-Lafond, the legislative officer tasked with monitoring the ministry as a result of the Hughes report, said she had asked for any reports dealing with financial pressures. This report had not been provided by the ministry. Christensen could not say why.
It's bad to be a kid in the government's care - in foster care or group homes. No matter how well it goes - and statistically, it likely won't - the care of the state is not the same as a family home.
It's challenging to give kids in care a real chance. When parents can't care for a child, things have usually already gone wrong. Children born into neglect, abuse, poverty, illness, disability - or simply unlucky - wear some scars.
It's certain that things will go wrong, sometimes with terrible consequences. Child protection workers, for example, make huge decisions based on their best professional judgments. Leave a child with a struggling family or send her off, with a little suitcase, to a home of strangers? Either way, the outcome can be bad.
And how we do in helping these children is one of those fundamental tests of whether we are a successful society, or a collection of self-interested individuals. There is no moral difference between walking past a lost toddler in the street and failing to pay attention to the life of a four-year-old in care.
The NDP had a leaked government report this week that suggested that, in some form, that's what we're doing.
The ministry of children and families had noticed that residential costs for the some 9,000 children in care were rising, even though the number of children being raised was stable and they weren't doing any better.
So it set up a group to look at why costs were going up.
They did good work, although the recommendations focus heavily on process and more study.
The report, completed last summer, found costs were rising for a lot of reasons.
The level of support required for children in care has risen. They are more likely to have serious health and behavioural problems. That could be seen as a positive, of course, because it might mean children with fewer problems are being supported with their homes.
Compensation, for foster parents and care home workers, has fallen behind. The ministry report noted that the pays is the same for hosting an international student, with few responsibilities, or a troubled 14-year-old foster child with attitude to burn.
Foster parents were either aging, or inexperienced. (About 12 per cent per cent were over 60.) Either way, they really weren't able to foster the more challenging children.
And schools, facing their own pressures, have become more inclined to expel or suspend students, the report found. That's obviously bad for the children and also increases the costs of providing care.
The results of all this compound the problems. The report found social workers were scrambling to deal with the lack of resources. That means less attention to the needs of the children - barely one in four children in care have the required plans for their development. And it means more foster parents give up in frustration.
The number of foster homes fell by eight per cent across B.C. in the 18 months prior to the report. In the North and on Vancouver Island about 15 per cent fewer homes were available; in the Interior, about 11 per cent.
As a result, foster homes often had more children than ministry guidelines called for and costly alternative placements became more common.
The report, done by the ministry's own staff, highlights real problems. It concludes that the review "revealed a system in crisis and in need of innovation."
You would expect some specific actions in response, starting with the most obvious - additional funding to deal with the problems.
But the provincial budget for child and family development is effectively frozen for the coming year - it will increase less than one-quarter of one per cent. The budget increases for the following two years are about the same.
It's no response to a "system in crisis."
Footnote: Child and Youth Representative Mary Ellen Turpel-Lafond, the legislative officer tasked with monitoring the ministry as a result of the Hughes report, said she had asked for any reports dealing with financial pressures. This report had not been provided by the ministry. Christensen could not say why.
Thursday, February 26, 2009
Balancing the budget at the expense of kids in care
The budget for child and family services is neffectively frozen in the budget, with token increases averaging less tahn 0ne-half per cent per year.
Yet a ministry working group reported last year that children are already being hurt - and social workers swamped - because of inadequate residential care for many of the more than 9,000 children in care. A Times Colonist editorial looks at the betrayal.
Yet a ministry working group reported last year that children are already being hurt - and social workers swamped - because of inadequate residential care for many of the more than 9,000 children in care. A Times Colonist editorial looks at the betrayal.
Wednesday, February 25, 2009
Bleak moments in the legislature
A video from Hansard of so-called debate in the legislature that is worth viewing. The dispute came as Kevn Krueger, always a loyal foot soldier, refused to answer even the most simple questions about spending in his ministry, looking increasing a person who had lost all contact with reality. It ends with a spectator getting kicked out for an outburst about Krueher's bizarre performance. The only wonder is that people aren't moved to shouted protests more often.
Tuesday, February 24, 2009
Games security secrecy, overruns and taxpayer abuse
One of the surreal moments in last week's budget lock-up came when Finance Minister Colin Hansen was asked about Olympic security costs.
Yes, there was extra money in the budget for Games security, he said.
But the amount was secret.
So was where it had been hidden in the hundreds of pages of budget documents. The federal government wanted the costs to be kept from the public for now, Hansen said.
Two days later - on the day Barack Obama visited Ottawa and grabbed all the media attention - the federal government came clean.
Games security, which was to cost $175 million, is now forecast at $900 million. The cost might go higher and the figure doesn't cover all the Games-related security costs.
It's the kind of trick governments play when they hope to get away with something. If there's bad news - and a 500-per-cent increase in security costs is bad news - they try and release it on a day when there's a bigger story, or late on a Friday afternoon before a long weekend.
Hansen then came clean on the province's contribution. It's the kind of deal that would make most corporate CFOs nervous.
This gets a little hard to follow - always a bad sign when it comes to organizations' financial wheeling and dealing.
The original agreement was that the federal and provincial governments would each pay half of the $175 million.
As the real costs rose higher and higher, the governments secretly wrangled about how much the province should pay. B.C. feared being stuck with paying for new equipment or training exercises that weren't really needed for the Games.
Everyone played nice and B.C. agreed to pay about 22 per cent of the excess costs, instead of half - about $163 million on top of the already committed $87.5 million.
That was still bad news, since both Hansen and Premier Gordon Campbell had insisted the security budget was adequate.
The promised cap of $600 million on provincial Olympic spending - a total misrepresentation itself - had also been broken.
The Games are now, even by Campbell's accounting, more than 25 per cent over budget.
But here it gets weirder. The deal won't see the province actually write a cheque to Ottawa for the extra costs.
Instead, it cut a side deal. The federal government and B.C. have about $2 billion worth of cost-shared infrastructure projects in the works. The province will increase its contribution to those by $163 million; the federal share will be reduced.
On the plus side, it lets the province spread the spending over the next three years.
But the deal also distorts the province's budgets. You're supposed to record expenses as they occur. The Games security costs would have been included in the budget that Hansen just introduced. That would have pushed the projected deficit from $495 million to $650 million.
The whole Games security costs should be a significant scandal.
The $175-million security budget was part of the package used to sell the Games to British Columbians. The IOC said it was inadequate almost from the outset of the process. The auditor general warned six years ago that more money would likely be needed. The RCMP sounded the alarm.
But Hansen and Campbell continued to insist the funding was adequate. Even last year Hansen told the legislature he didn't expect the province to contribute more than $87.5 million for security.
So either the costs increased 500 per cent in the last few months, the government wasn't paying adequate attention or it wasn't being open and straightforward with the public. Or perhaps some combination of the three.
The big political problem is the secrecy and evasions. The Games' costs have actually been well-managed, particularly venue construction.
An early admission of problems with the security budget, along with a straightforward willingness to acknowledge all the real Games costs, would have headed off the scandal.
Footnote: How ridiculous was it to keep defending the original $175-million security budget? Consider that security in Salt Lake City for the 2002 Games cost twice that amount. By the Turin Games four years ago, the security budget had reached $1.4 billion. Yet B.C. still claimed that protecting the scattered sites in Vancouver and Whistler would cost far less.
Yes, there was extra money in the budget for Games security, he said.
But the amount was secret.
So was where it had been hidden in the hundreds of pages of budget documents. The federal government wanted the costs to be kept from the public for now, Hansen said.
Two days later - on the day Barack Obama visited Ottawa and grabbed all the media attention - the federal government came clean.
Games security, which was to cost $175 million, is now forecast at $900 million. The cost might go higher and the figure doesn't cover all the Games-related security costs.
It's the kind of trick governments play when they hope to get away with something. If there's bad news - and a 500-per-cent increase in security costs is bad news - they try and release it on a day when there's a bigger story, or late on a Friday afternoon before a long weekend.
Hansen then came clean on the province's contribution. It's the kind of deal that would make most corporate CFOs nervous.
This gets a little hard to follow - always a bad sign when it comes to organizations' financial wheeling and dealing.
The original agreement was that the federal and provincial governments would each pay half of the $175 million.
As the real costs rose higher and higher, the governments secretly wrangled about how much the province should pay. B.C. feared being stuck with paying for new equipment or training exercises that weren't really needed for the Games.
Everyone played nice and B.C. agreed to pay about 22 per cent of the excess costs, instead of half - about $163 million on top of the already committed $87.5 million.
That was still bad news, since both Hansen and Premier Gordon Campbell had insisted the security budget was adequate.
The promised cap of $600 million on provincial Olympic spending - a total misrepresentation itself - had also been broken.
The Games are now, even by Campbell's accounting, more than 25 per cent over budget.
But here it gets weirder. The deal won't see the province actually write a cheque to Ottawa for the extra costs.
Instead, it cut a side deal. The federal government and B.C. have about $2 billion worth of cost-shared infrastructure projects in the works. The province will increase its contribution to those by $163 million; the federal share will be reduced.
On the plus side, it lets the province spread the spending over the next three years.
But the deal also distorts the province's budgets. You're supposed to record expenses as they occur. The Games security costs would have been included in the budget that Hansen just introduced. That would have pushed the projected deficit from $495 million to $650 million.
The whole Games security costs should be a significant scandal.
The $175-million security budget was part of the package used to sell the Games to British Columbians. The IOC said it was inadequate almost from the outset of the process. The auditor general warned six years ago that more money would likely be needed. The RCMP sounded the alarm.
But Hansen and Campbell continued to insist the funding was adequate. Even last year Hansen told the legislature he didn't expect the province to contribute more than $87.5 million for security.
So either the costs increased 500 per cent in the last few months, the government wasn't paying adequate attention or it wasn't being open and straightforward with the public. Or perhaps some combination of the three.
The big political problem is the secrecy and evasions. The Games' costs have actually been well-managed, particularly venue construction.
An early admission of problems with the security budget, along with a straightforward willingness to acknowledge all the real Games costs, would have headed off the scandal.
Footnote: How ridiculous was it to keep defending the original $175-million security budget? Consider that security in Salt Lake City for the 2002 Games cost twice that amount. By the Turin Games four years ago, the security budget had reached $1.4 billion. Yet B.C. still claimed that protecting the scattered sites in Vancouver and Whistler would cost far less.
Monday, February 23, 2009
Truth in budgeting
I did not think the Liberals would stumble like this . The government has earned good marks for financial transparency and - except for the excessive conservatism that produced excessive surpluses - reasonable projections.
But last week's budget underestimates expenses and, according to at least one respected economist, inflates revenues.
What's particularly strange is that this is all unnecessary. As Stephen Harper showed, deficits are considered OK in the face of the economic slide. (As they should be.)
But last week's budget underestimates expenses and, according to at least one respected economist, inflates revenues.
What's particularly strange is that this is all unnecessary. As Stephen Harper showed, deficits are considered OK in the face of the economic slide. (As they should be.)
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