Newfoundland and Labrador legislators authorized a borrowing capacity of $2 billion during an emergency session Thursday, among other legislative responses to social and economic upheaval from the COVID-19 pandemic.
The legislation will permit the cash-strapped province to increase its borrowing and set aside funds to respond to the pandemic.
During the sitting that included just 10 members including the house Speaker, elected officials across party lines expressed consensus on the necessity of the measures, while cautioning about the considerable financial challenges the province faces.
In December, the province’s auditor general reported on the government’s deficit of more than half a billion dollars in the 2018-2019 year, and noted annual deficits totalling $6.4 billion over the last seven years.
With the $12.7 billion Muskrat Falls hydroelectric project already representing about one-third of the province’s debt, dropping oil prices in the midst of the pandemic have further complicated the province’s money woes.
Liberal Premier Dwight Ball acknowledged last week the province is experiencing “tough times,” referencing deferred investment in a major offshore development project and historic lows in oil prices.
On Thursday, a bill passed authorizing borrowing capacity of $2 billion to respond to revenue volatility during the pandemic, though some legislators cautioned that years of extensive borrowing would hurt the province in the long term.
“At any day the oil companies may decide to suspend production based on where COVID-19 is going,” Finance Minister Tom Osborne said during the session.
“The loan bill is higher this year that what we would normally expect, but that’s to deal essentially with the unknown.”
Independent member Paul Lane supported the borrowing bill to ensure services continue during uncertain times. But he also raised concerns about the province’s pattern of borrowing money while continuing to spend.
“Once this is all over and we get through this, we’ve got to really start realizing and buckle down to deal with the huge year-over-year deficits and our huge debt,” Lane said.
Lane referenced the report from the province’s auditor general last December, which cautioned that the government is “not living within its means” and reported the province’s net debt as higher than it’s ever been.
“I’ve got to be honest with you, it concerns me. I know we’re focusing on this virus right now … but in the back of our minds this is something that we’ve got to be thinking about as we continue to borrow more and more money.”
At a news conference after the session, Ball said he’s confident that the high borrowing limit is feasible after the bill passed in the House of Assembly and the Bank of Canada announced further measures to support provinces this week.
He said it’s hard to determine what the full the pandemic will cost the province, but noted that “there’s no question, it’s mounting up.”
Ball said the pandemic is not expected to affect the budget of the Muskrat Falls project but it might further delay its construction schedule.
Another bill that passed Thursday put aside $200 million in contingency funds to cover impacts of lost tax revenue due to reduced oil prices, and to help pay for unanticipated costs from the pandemic.
An interim supply bill passed in lieu of a budget earlier this year was extended for three more months, with Osborne saying it’s unknown when the House of Assembly will be able to meet again to pass a budget.
An omnibus bill also passed Thursday that addressed a wide range of pandemic responses, including amendments to the Labour Standards Act and Residential Tenancies Act, and adjusted deadlines for annual reports and audit reviews.
It also increases Newfoundland and Labrador Hydro’s debt limit by $500,000.
The amendments include protections for employees’ jobs if they must take time away from work as a result of COVID-19 and ensure renters cannot be evicted if they are unable to pay rent because of the pandemic.
Amendments to the Labour Standards Act provide leaves of absence and job protection for employees unable to work if they are ordered to self-isolate, are under medical investigation or are being treated for COVID-19.
Leaders from all three parties represented in the House of Assembly worked together on the emergency legislation.
Progressive Conservative Leader Ches Crosbie, who leads the official Opposition and last month hinted that talks were underway to bring down the government, said the public should be reassured by the co-operation among all political parties in working to address to the public health crisis.
“I couldn’t have seen myself standing here two weeks ago and praising Mr. Ball for the way in which he has shown leadership through the crisis, but we managed to work collaboratively,” Crosbie said.
“All of those hatchets that you might have been aware of from several weeks ago are now firmly buried and we’re focused on the public interest.”
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