Aside: bean counters, businessmen, and the business of government

If businessmen go into government to bring the principles of good business to government, then shouldn’t they act like good businessmen when they get there?

the practice of good business

Patent and trade mark lawyers tend to deal with businessmen and business strategy at a fairly high level (R.I.P. Ted Rogers)It’s not because these nerd-lawyers are anything special. It’s just because that’s where this intellectual property usually fits in. I kept wondering what my old client, the Canadian President of one of the largest oil equipment manufacturers in the world, would have said if I told him:

Hey, I know this business that has a great idea for saving money – they’ll limit the wages of all their employees for four years so that their shareholders can maintain the same return on investment. What do you think?

I can already hear him laughing – What do I think? That’s [expletive] nuts. And then the Texans would chime in with – You crazy Canadians, y’all smoke too much weed.

Everyone knows the correlation between productivity and profit, so if you need labour to be productive, you don’t make your employees mad. Besides, businessmen, at least the ones I’ve dealt with, don’t focus solely on expenditures. It’s not just about how much something costs, it’s about how much it pays off.

I can’t think of any business that would just chop it’s biggest cost just because it’s the biggest. There’s generally a lot more thought that goes into it than that. Hey I make salt (NaCl). And guess what my biggest costs are? Sodium (Na) and Clorine (Cl). Guess I better do something about that. (Like what?)

business by the numbers

I’m not going to hold any of my former clients to it, but most of them didn’t like the bean counters much. They’d complain that the accountants spent too much time on worrying about what the numbers were, instead thinking about what those numbers might mean, and how that they can be useful.

I’m sure that there is a plethora of management textbooks that explain this in thoroughly reasoned detail, but the short version of this “I’m not a businessman I just worked with them” wisdom is that you can’t run a business by the numbers. Don’t get me wrong, you need the numbers, and accurate accounting is an unskippable essential. But you use the numbers to tell you how your business is doing; you don’t use them to tell your business what to do.

When I was working part-time in retail we had a new big boss who tried to run the business by the numbers. One day, our head of sales made the following plea during the morning announcements:

Our sales goal for today is $XXX,XXX and WE HAVE TO MAKE IT, as though all those sales would just magically happen simply due to how much force she used in saying the words.

Well, I’m not sure what you expect me to do to make these sales that we HAVE to make. Do you have a plan for how this is to come about? Or am I supposed to just make it happen because you want it to? By the way, you realize that we’re onto the store’s latest costs-savings scheme. You know, the one where you game all the schedules of the part-timers hours, so that if they need an average of 25 hours per week to meet the next highest benefits level, your new scheduling shysters are instructed to make sure that everyone close to that mark will come in at an average of 24.8. So, sorry that you are so concerned about our sales, sure sucks to be you. But, the sales numbers are your problem, and I’m not exactly motivated to help you.

Of course, its not that simple or straightforward, and ignoring bean counters and how many beans you are spending would be grossly irresponsible. But, as I understand it, when it comes to business strategy, beans are just part of a very big picture.

Incidentally, there is one area of business which is an exception to these general rules, and that is in the financial industry. You do run your business by the numbers here, because that’s all your business is – numbers, as in various piles of beans. But for any business that includes a high component of labour (such as the business of providing public services), you’re not talking about numbers. You are talking about people. And you are talking about how your labour policies fit with how well you perform in whatever business you happen to be in.

the business of government

So let’s return to the business of government, and the reason the Government of Manitoba went down the Public Services Sustainability Act path in the first place. As they said originally and continued repeating, the Government needed the PSSA to address the costs of public sector compensation. And why? Because public sector compensation is by far and away the largest line item on the Province’s budget (although they generally don’t separate labour costs out this way).

But let’s give that to them. No doubt it is true that of all the categories of costs that Manitoba spends money, paying the wages of public sector employees requires the biggest pile of beans. And yes, it is significantly higher than any other pile. I couldn’t find the numbers, but based on their – a 1% wage increase means a $100 million increase in spending, my calculations put the labour costs at around 63% of Manitoba’s total budget.

But, isn’t this to be expected? Of course the biggest proportion of your costs are spent on public sector labour; 95% of the business of government is providing public services and administering government programs. And all of those things require people to do. Given how labour-intensive the business of government is, I’m surprised that that labour isn’t an even higher share of your costs. In fact, why isn’t it higher? What are you spending the rest of our money on?

Bean-counter budgeting

Seems to me that the Public Services Sustainability Act was birthed under some heavy bean counter influence. The Compensation Services Section of the Labour Relations Division came up with the idea, apparently. And I guess it makes sense that from where they are sitting, they only see how much public sector compensation costs, not what it accomplishes.

The Treasury Board Secretariat then joined in. As the people in charge of managing all of the beans, they too would naturally focus solely on the high hill that labour costs means.

But I think the bean counter bias in this Government may go deeper than that.

When I was wondering about what businesspeople I knew would say about this costs-conscious tunnel-vision approach to budgeting, I took a gander at the backgrounds of various current and former cabinet ministers in this Government. For those who have business backgrounds, and there are quite a few, the most of them have run small, one-man shop businesses – like consulting firms, or in agriculture.

While there is nothing less sophisticated or complex about these sorts of businesses, they simply don’t raise the same business issues that corporations with a large and diverse labour force have to grapple with. Apart from Scott Fielding’s prior work experience as a pharmaceutical sales representative (and I don’t know where he worked), I couldn’t find any indication that any of them had even worked at a large corporation, much less managed one. And no one seemed to have ever had anything to do with collective bargaining in their past lives, except for perhaps the Premier, during his brief stint as a teacher over 40 years ago.

Even more so, I was struck by the most common thread of their businesses. The highest percentage of business experience in Manitoba’s cabinet ministers appears to have been in and/or related to the financial industry.

build your own bean-counter budget

I was intrigued when I first saw this BUILD-A-BUDGET on the Ministry of Finance’s website. Hey, with all the stuff I’ve been learning about governmental finances, this might be cool. So I built my own budget, and I go through in this video.

I was immediately disappointed, and it went down from there.

Why do I have a deficit of $360 million?

The first thing you find out is that you already have a deficit of $360 million. Where did that come from? Uhm, can you tell me, Government of Manitoba, why did you plan to spend all this money if you didn’t want a deficit?

Isn’t this the number you have projected with your plans? And weren’t those plans made by carefully considering whether the items you have budgeted to spend our money on are necessary and worth it?

And so, assuming you had good reasons to include whatever it is you have decided to include, what business is it of mine to now tell you – nope, cut this here and skip that there.

How do I know what to include and what not to include?

When you get to the planning page for building your own budget, the bean-counter budgeting really starts to set in. You are given a set of numbers in 8 or 9 very broad categories of revenues and expenditures, and then, well, add or subtract on whatever whimsy takes you until you get to a number that pleases you.

It’s kind of a meaningless exercise. Ok sure, let’s just increase personal income taxes. There’s money. Or why not just slash $50 million from a category or two of the expenses, even though we have no idea what they are or what those cuts might mean.

If you watch the video, you’ll see that I randomly increased corporate taxes, just because I felt like it, and put $320 million back from the PST. I was then already in a surplus, but that wasn’t high enough for me, so I then added another $16.6 million to the Sinking Funds and Other Earnings, even though I have no idea what they are or whether I even can.

Anyway, I got to a $28.3 million surplus without really trying, and without cutting anything. Ain’t that grand?

What about the Rainy Day Fund?

What bothered me the most about this exercise, was that there didn’t seem to be any place for me to take money out of the Rainy Day Fund to pay off the deficit.

I mean, hey Scott, since you put $407 million in it last year, we’ve got plenty there, and we don’t want to borrow any more because that would increase debt, so …

Forget all the addition and subtraction, and don’t bore me with your categories. My Budget 2020 is:

Take $360 million out of the Rainy Day Fund, pay off the deficit, leave everything else the same.

Problem solved. Except there isn’t even room for that kind of solution. It seems all that the bean counters want us to do is take 360 million beans and move them around. Ok guys, is that what you do?

A final thought

Regardless of my political leanings, and you can probably guess what they are, I tend to think that there might be some good to have good businessmen in government, provided, of course, that private sector business principles are appropriately adapted to accomodate for the many differences between the public and private sectors.

But I cannot see how it is good business to do what is being done with the PSSA.

The Trial Begins

Setting the scene in Courtroom #210 as the trial of MFL v. Manitoba begins. We get some background and meet the players.

Opening Statements

The proceedings begin with opening statements. Here, the lawyers for each side give us an outline of the course they are going to take (and why it is going to take 13 days to get there).

The Testimony of Kevin Rebeck

The President of the Manitoba Federation of Labour testifies about consultations between the government and some Labour leaders prior to the PSSA being passed. They weren’t very fruitful, and there seems to have been some question as to whether the government was being truthful.

Passed but Not Proclaimed?

Why is the government waiting to proclaim the PSSA? I thought there was a financial emergency, and dire warnings of our precarious fiscal position. But it has been 2 1/2 years. Don’t they need it yet?

The Testimony of Elizabeth Carlyle

Elizabeth Carlyle gets cross-examined about what happened in a negotiation between CUPE and the Winnipeg School Division. It wasn’t a lot, and it doesn’t sound as though it was very good.

The Testimony of Dr. Mark Hudson

Remember when the faculty at the University of Manitoba when on strike in November of 2016? Dr. Mark Hudson is here to tell us why it happened. And he fills us in on what was happening between the University and the Province behind the scenes.

The Testimony of Tom Paci

Tom Paci appears on behalf of the Manitoba Teachers Society. His story? A quest for justice for Manitoba’s 15,000 teachers and an appeal to the gods of justice – how can we be bound by the PSSA when it is not law?

Indirect Taxing & Discriminatory Taxation

If a tax by any other name would be as taxing, could wage freezes be indirect taxation? And if members of public sector unions are paying more in taxes to support public services, would this qualify as discriminatory taxation?

The Testimony of Michelle Gawronsky

The leader of the Manitoba Government and General Employees Union recounts her experiences since the advent of the PSSA. Everything she says about her automatic approach to understanding concerns and finding ways to solve problems makes me think ” leader, leader, this is a great leader.”

The Super Six Speak

Six experienced union negotiators come to tell us about what has been happening in their collective bargaining worlds. We learn more about what the PSSA means for public sector unions and their collective agreements.

Labour’s Collective Bargaining Expert

Dr. Robert Hebdon testifies about the impact of the PSSA on collective bargaining in Manitoba’s public sector. It isn’t good.

The Testimony of Sheila Gordon

We end the union tales of collective bargaining under the PSSA in passed-but-not-proclaimed limbo with MGEU’s GEMA. Sheila Gordon, MGEU’s senior negotiator was there. And she is here to tell us how those negotiations did not go anywhere.

Labour’s Read-ins and One Last Reveal

You never know what read-ins from discovery might reveal.

The Testimony of Richard Groen

Richard Groen, an Assistant Deputy Minister from the Ministry of Finance, testifies about the Province’s budgets and such.

I was expecting him to demonstrate what all the financial fuss in 2017 was about, you know, why our financial ship was sinking so much that we needed all hands on deck. But …

A No-Compete Treat for the Labour Market?

I don’t understand why the government doesn’t think it should have to compete in its own labour market. It does everywhere else.

The Testimony of Garry Steski

Is it wrong to admit that before this I didn’t really know what a bond market was? Well, I do now, and we learn a little about how Manitoba’s bonds were affected by the fiscal challenges in 2016. Or not.

Bean Counters, Businessmen & Business of Government

If businessmen go into government to bring the principles of good business to government, then shouldn’t they act like good businessmen when they get there?

The Government’s Collective Bargaining Expert

It is best to talk about what happened here as little as possible. So we’ll talk a bit about the importance of turkey instead.

The Testimony of Aurel Tess

How a short day of seemingly tedious technical testimony on Manitoba’s Summary Financial Statements turned into a most unpleasant surprise.

Politicizing the Provincial Comptroller

Ok, Manitoba. Politicizing the Office of the Provincial Comptroller?

That takes the poop-cake.

The Government’s Economics Expert

The government’s economics expert, Dr. Livio Di Matteo, has a motto he lives by: Agimus Meliora – Let us do better.

It makes me wonder, Manitoba, can’t we do better than the PSSA?

Labour’s Economics Expert

Dr. Eugene “the Earnest” Beaulieu testifies that the PSSA is not only not necessary, it is a harsh measure that puts an unfair burden on public employees.

Bye Bye, Dumbo

Let’s take one last look at the Elephant in the Room, and then say goodbye.

The Mandamus Application

A day of argument about whether a statute that says “the Minister SHALL FORTHWITH” means that the Minister can decide not to do something and make up his own reasons for why he shouldn’t.

Decision on the Mandamus Application

Justice Keyser, the judge on the Mandamus Application, has spoken. Here’s a hint – MGEU wins.

Bill 9: We’re Gaming Again …

Before we begin all the good stuff, Garth Smorang has some objections to yet another litigation game the Government of Manitoba is playing.

Labour’s Final Argument

Labour’s last stand. Shannon-the-Hammer and Smorang-the-Smasher pull it all together and wrap it all up.

There is an awful lot of it, so Labour’s final arguments have been separated into four separate posts, which start here …

Butt-First Buffoonery

How did the Government of Manitoba get to such an embarrassing PSSA place? They backed into it.

The Government’s Final Argument

Forget the Elephant-in-the-Room.The Government of Manitoba has got many other ways to try to move the goalposts, as they try to change the game.

Kind of seems like they know they are losing.

Labour Replies

The Finale of the Finale. Labour replies.

(This means we are finally done. At least with the evidence and arguments.)

The Onion of Outrage

Why am I here? Why spend so much watching lawyers and judges and reading endless cases? It’s a pretty simple answer.

I was mad.

The Decision is In!!!

The Honourable Justice Joan McKelvey has ruled. Labour won. The PSSA is unconstitutional.

This is what she decided and why.

What Have We Learned?

There’s lots to discover from considering Justice McKelvey’s decision, and not just for labour lawyers. Let’s take a look at what we have learned.