Stop the Hogs!

To: The Editor, Prairie Dog and Planet S
August 7, 2006
[To be published next issue]
RE: Column by John Conway on How to Save the NDP Government

Dear editor:
When the Romanow-Calvert NDP government was elected in 1991 they did not return to the progressive social democratic policies of the Allan Blakeney government. Instead, they followed the policy direction set by Grant Devine’s Tory government.
They cut the taxes on corporations and those in high income brackets. They finished the privatization of the Crown resource corporations and steadily reduced the royalties and taxes they pay. They cut provincial grants to municipalities and school boards and forced increases in property taxes.
In the rural economy they have consistently backed corporate agribusiness against family farmers. They supported the closing of profitable grain elevators and rail line abandonment. They closed 50 rural hospitals. They have supported the amalgamation of municipalities and school boards. In the north, they endorsed massive clear-cut logging and subsidize the forest giants with very low stumpage fees.
The NDP government strongly opposed the Kyoto Protocol on climate change and has backed the Bush Administration’s call for a new continental energy pact while our fossil fuel resources are depleting. They reduced the environmental protection service.
What have they done for the most disadvantaged? They allowed the minimum wage to fall from the highest in Canada to one of the lowest, basic social assistance rates fell well below the poverty and basic needs level, affordable housing has disappeared, and the child care system is the worst in Canada. Cuts to higher education created long waiting lists to get into job training programs. Instead, Saskatchewan has the highest incarceration rate in Canada.
If the Calvert government follows John Conway’s advice and moves to the left they would be admitting that the policy direction of the past fifteen years was wrong. If they promise a shift in that direction, who will believe them?

Sincerely,
John W. Warnock
Regina, SK

Property Taxes as an Election Issue

by John W. Warnock
Submitted to the Leader-Post
October 19, 2006

If you ask my neighbours what is the most important issue in the upcoming municipal election, they will reply “property taxes.” Many are seniors, like myself, who live on fixed incomes. Property taxes are regressive, falling heaviest on those least able to pay. They do not take into account the income or wealth of the family occupying the residence. As many studies show, it is not unusual for low income people and seniors to devote ten percent of their annual income to property taxes.

We know there are good reasons for the high property taxes in Saskatchewan. Over the past twenty years our provincial governments have reduced the provincial grants to local governments and school boards. Whereas these grants used to provide 60 percent of local financing, they now provide only around 40 percent. The Saskatchewan Local Government Financing Commission (1986), appointed by Premier Grant Devine, argued that we should not become over-reliant on property taxes and should set a goal of the province providing 75 percent of local financing. As the Commission concluded, this would provide “equity and fairness.”

Our recent provincial governments have off-loaded their deficits on local governments and school boards because they have cut many sources of revenues. They steadily reduced the rate of royalties paid by the trans-national corporations for the right to exploit our resources, they have cut provincial taxes on businesses, and they have cut the income taxes paid by those in the higher income brackets. One solution to the reduced revenues was to cut grants to local governments. The result has been higher property taxes, flat taxes on utilities and higher user fees on a wide range of public services.

The other reason for the increase in property taxes has been the elimination of the municipal business tax. All across North America and Europe it is the norm for businesses to pay some form of municipal business tax. This is different from a property tax on commercial property.

The present Mayor and City Council are enamoured with big box “power centres” which presently operate at the east end of Victoria avenue and in the Northwest corner of the city. Another is planned to be in the proposed Southwest development. When one of these big box stores or corporate chains arrives they are here to maximize their profit. They are not here to provide a public service. That is their obligation to their investors. But as we know from many studies, they drive out locally owned businesses. For every two jobs they create they eliminate three. The next time you drive through our big box power centres, take a good look. Very few of these businesses are owned or controlled in Saskatchewan. They each form a huge black hole which sucks our economic surplus out of the province.

When a new business establishes in a community it takes advantage of the existing infrastructure, the services, and the well-developed market for its products or services. It hires people trained by the local schools, technical institutes and universities. A business tax has always been seen as a way of meeting its obligation to support and financially contribute to the local community.

In 1997 Roy Romanow’s NDP government changed the Municipalities Act to make the local business tax optional. It was well understood that once one city abolished the tax, the others would follow. Grant Devine’s Local Government Finance Commission recommended that the business tax be retained and made uniform across the province to avoid municipalities competing against each other.

Business taxes assessed on square footage or as a percentage of the value of the commercial property occupied have been deemed unfair. They do not take into account the value of the business. A more equitable business tax is one based on the gross revenues of the business. This form of municipal business tax is widely used in the United States and has been used in Newfoundland.

Where this business tax is used in the United States it normally takes the form of a one or two percent tax on gross revenues. This is considered a cost of doing business and is not a tax on profits. For Regina, we could have a gross revenue tax that is progressive. For example, a gross revenue tax of one percent could only apply to business revenues over $1 million. This would exempt a great many locally owned businesses. It could rise to two percent or more for all revenues over $5 million. One advantage of a progressive gross revenue business tax is that it would fall heaviest on those large corporations which are owned outside the province. I have discussed this with several small Regina businessmen in the past, and they all thought it was a good idea. We need some new thinking at City Hall. It is time to make some changes there.

John W. Warnock
2156 Retallack St.
Regina, SK
S4T 2K4
(306) 352-5282
http://www.johnwarnock.ca

"It is easier to perceive error than to find truth, for error lies on the surface while truth lies in the depths, where few are willing to search for it." Goethe

Why are schools closing across Saskatchewan?

By John W. Warnock
August 14, 2007

http://www.actupinsask.org

Parents and citizens are angry and frustrated as they see their local and neighbourhood schools close. This past May we saw another round of closures in rural communities. The justification is always the same: falling enrollment, the need for economies of scale, the technological requirements of modern education, and a lack of funds. The Leader-Post proclaimed that this is “regrettable, but inevitable.” This is political nonsense.

It is true that the size of families is shrinking. In hinterland areas like the prairies, people are moving to urban and suburban areas. Many rural schools already have low enrollments. But there is little government recognition that small schools with low teacher-student ratios provide a high quality education and that kids do better in smaller schools.

Part of the problem today is that there is a low priority placed on “education,” historically described as “enlightenment,” acquiring insight and understanding, learning to think critically, and becoming free from prejudice and ignorance. Today’s emphasis is on “learning,” which is most identified with acquiring a skill or a trade. A high priority is placed on teaching students to conform to the status quo and follow orders in an employment world which is hierarchical and authoritarian. Thus, the learning process is best instilled in large, centralized schools. The ideal, it would seem by looking and schools in larger cities, is a school with 2,000 students. Columbine comes to mind.

Provincial government funding

The real reason for the closure of schools has been the cuts in provincial grants to municipalities and school boards. During the NDP government of Allan Blakeney (1978-82) provincial grants provided around 60% of the financing for local governments and school boards. This has been steadily reduced by the governments of Grant Devine, Roy Romanow and Lorne Calvert to only around 40% of local financing.

The cuts to grants to local governments and school boards was a way that the provincial government off-loaded its own fiscal problems. The provincial government lost enormous sources of revenues when it steadily cut the royalties and taxes on the resource extraction industries. Then there were the cuts to taxes on corporations, small business and the income taxes for those in the higher brackets. Adequate funding to schools and municipalities cannot be restored without going back to a more progressive taxation system. One always expects the parties of business and the rich to advocate lower and more regressive taxes. But the change here and elsewhere has been that social democratic governments have chosen to adopted classic conservative fiscal and taxation policies.


The rise in property taxes

The cuts in provincial grants leads schools and municipalities to resort to higher property taxes and increased users fees. In 1984 Grant Devine’s Tory government appointed the Local Government Finance Commission to provide guidelines for updating Saskatchewan’s system of local government taxation and property assessment. The Commission argued that the provincial government should provide grants which amounted to 75% of the financing for local school boards and municipalities. They also argued that the province should not depend on property taxes, for they are regressive, falling heaviest on those with low income. Property taxes do not take into account the ability of the home owner to pay or the income earned from a business property. The Commission also called for the retention of a business tax and that it be uniform across the province. All these proposals make good sense. But in the political atmosphere of the province today, dominated by the NDP and the Saskatchewan Party, they seem quite radical.

John W. Warnock is a Regina political economist and political activist.


John W. Warnock
2156 Retallack St.
Regina, SK
S4T 2K4
(306) 352-5282
http://www.johnwarnock.ca

"It is easier to perceive error than to find truth, for error lies on the surface while truth lies in the depths, where few are willing to search for it." Goethe

Making Privatization an Election Issue.

By John W. Warnock
October 31, 2007
http://www.actupinsask.org

Is privatization an election issue? Well if you watch TV you can’t avoid it. NDP advertisements insist that Brad Wall and the Saskatchewan Party have a secret agenda: they will privatize our Crown corporations if they are elected. This strategy worked for Lorne Calvert and the NDP in the 2003 election. But will it work again? Brad Wall has spent several years now trying to convince the electorate that they will not privatize our state-owned enterprises. But what about the NDP? What is their record on privatization?

Building our Crown corporations

Most people who live here know that we have had strong public ownership in the area of public utilities. These Crowns were built by the people of the province when private capital would not do the job. The private corporations had no interest in expanding services to people living in rural areas or the North. Today these Crowns are very successful, efficient corporations which give us great value. That is why private capital wants to take them over.
In the period between 1971 and 1982 the NDP government under Allan Blakeney built a series of Crown corporations in the resource extraction area. The goal was to gain greater control over the development of a major economic sector and to increase returns to the people of the province. Crown corporations were built in the areas of oil, potash and uranium. Sask Power already dominated natural gas and coal development.

Grant Devine’s privatization

When Grant Devine’s Conservative government took office they began the process of privatization. They sold most of Sask Oil, the Saskatchewan Mining and Development Corporation, and the Potash Corporation of Saskatchewan. They split the natural gas division from Sask Power and proposed its privatization. They sold controlling interest in the Prince Albert Pulp Mill to Weyerhaeuser Corporation. SaskMinerals was privatized. The Tories also began contracting out government services. These were not popular moves, and in 1991 the Tories were soundly defeated by the NDP. While in opposition the NDP promised to “buy back or expropriate any Crown corporations or government assets sold by the Tories.” The NDP has been in office for sixteen years. What is their record on privatization?

(1) The oil industry. The NDP sold the remaining government shares in Sask Oil; it is now part of Nexen. They did not re-establish the Heritage Fund. The Lloydminister Heavy Oil Upgrader had been created with 75% of the capital coming from Ottawa, Alberta and Saskatchewan and only 25% from Husky Oil. A 1994 agreement gave Saskatchewan 50% of the equity in this operation, a very good deal. However, the NDP government then turned around in 1998 and sold its shares in this $1.6 billion plant for $310 million.

(2) The potash industry. The NDP government completed the privatization of the Potash Corporation of Saskatchewan. It removed the requirements that limited the extent of individual ownership and that non-Canadians could not own more than 45% of the stock. The majority of the stock is now owned by Americans.

(3) The uranium industry. Cameco was created in 1988 by a merger of Saskatchewan Mining and Development Corporation and Eldorado Nuclear. In 1996 and 2002 the NDP government sold the government’s remaining shares in the corporation. Cameco is now majority owned by U.S. investors.

(4) The coal industry. Lignite coal is mined in Saskatchewan to fuel Sask Power’s generators. Originally coal was mined by Sask Power, seemingly a natural development. The Devine government privatized this operation. The NDP government has agreed with this decision. Since 2003 the coal industry has been sending profits to the owners of Sherritt International Corporation.

(5) Natural gas. Historically natural gas was under the control of Sask Power. It acted like a private corporation exploring and developing fields, creating storage facilities, developing pipelines and acquiring future supplies in Alberta. In 1985 the Tories deregulated the market. But the privatization of the industry came in 1998 when the NDP government abolished Sask Energy’s monopoly on selling gas, allowed big corporate users to buy from private suppliers, and then mandated that Sask Energy must allow the private companies the use of the pipeline system created by the Crown corporation.

(6) Forestry. The CCF government of Tommy Douglas created Sask Forest Products which build and operated a plywood plant and saw mill. This Crown corporation was “merged” with MacMillan Bloedel in 1995, completely privatized in 1999.

(7) Investment Saskatchewan. Over the years the Saskatchewan government had acquired major interests in private corporations, the result of subsidies and joint ventures. In 2006 the NDP government transferred these assets to Victoria Park Capital Inc., a private company, to manage and privatize. These assets included the taxpayers’ investment in the Meadow Lake OSB plant, Saskferco, and Big Sky Farms.

Recently I was in the General Hospital. There is no longer any cafeteria or food service there. You can get healthy foods at Robin’s Donuts. My neighbour used to work there as a cook. How many other such privatizations have occurred over the past sixteen years?

The Sask Party may have plans for privatization. They can find out how to do it by examining the record of the NDP government.

John W. Warnock is the author of Natural Resources and Government Revenues: Recent Trends in Saskatchewan, publishing by the Canadian Centre for Policy Alternatives - Saskatchewan in June 2005.


John W. Warnock
2156 Retallack St.
Regina, SK
S4T 2K4
(306) 352-5282
http://www.johnwarnock.ca

"It is easier to perceive error than to find truth, for error lies on the surface while truth lies in the depths, where few are willing to search for it." Goethe

Prescription Drugs and the Election

by John W. Warnock
November 5, 2007
http://www.actupinsask.org

The issue of the availability of prescriptions drugs has arisen in this election. The NDP has proposed a universal program where these drugs would be available to all for a cost of $15 per prescription. The Saskatchewan Party has countered with a proposal for a new drug program which would be targeted to those who would be less able to pay. For many years under the senior’s drug plan those with low incomes received subsidies.

Janice MacKinnon, the former NDP minister of finance, says we cannot afford the NDP plan and that all social programs should be shifted to only supporting those in real need. Universality is an outdated concept.
The NDP program has been endorsed by the Saskatchewan Federation of Labour and the Saskatchewan Health Coalition. But the NDP plan dodges a most important issue. What do we do about the high costs of drugs, the domination of the industry by large foreign-owned corporations which operate as a cartel, and the restrictions on generic drugs imposed on us by NAFTA?

This issue is addressed by economist Judith Maxwell in her column in the Globe and Mail Report on Business of this date. Maxwell is no radical, one of the Liberal elite around Ottawa. She points out that Canadian businesses who are responsible for providing drug coverage for their employees have done a much better job at getting lower cost drugs than have provincial governments. This issue was addressed by the Ministerial Task Force on the National Pharmaceutical Strategy which reported in 2006. But the provincial governments have taken no action.

Maxwell argues that “no government should expose itself to the financial risks of catastrophic drug insurance without a parallel strategy to control the costs of drugs.” She argues that the provinces should “work together to use their market power to negotiate better prices for drugs.” In doing so they “have to overcome their reluctance to extract full value from both the big international pharmaceutical companies and the Canadian-owned generic producers.” She suggests that the provinces join together and create a buying syndicate to bargain for volume discounts.

The Green Party of Saskatchewan proposed a different strategy in its briefs to the Romanow Commission and the provincial commission on health policy. They proposed the creation of a Crown corporation to buy prescription drugs from all sources, including countries like Brazil, India and Cuba, which have very good state programs for producing essential drugs and making them available to those in need. The Greens suggested that a provincial Crown corporation could negotiate an agreement with Cuba: in return for Saskatchewan exports, we would import cheap drugs. Twenty-five years ago this would not have been seen as a radical proposal, just common sense.

John W. Warnock is a Regina political economist and political activist.


John W. Warnock
2156 Retallack St.
Regina, SK
S4T 2K4
(306) 352-5282
http://www.johnwarnock.ca

"It is easier to perceive error than to find truth, for error lies on the surface while truth lies in the depths, where few are willing to search for it." Goethe