The testimony of garry steski

As we are waiting for Mr. Steski to take the stand, Kevin Rebeck has snacks and he’s feeding his lawyers! I want to be on his team. Of course, he’s also sharing with everyone anywhere near him, so I’m sure that if I had wandered into his vicinity, he would have included me.

Direct Examination – by heather leonoff

Garry Steski is currently the Assistant Deputy Minister – Finance (Treasury Division), which for some reason is in the Finance Division of the Ministry of Finance, and not the Treasury Board Secretariat. (Why? Steski explained it, but I didn’t listen because I don’t really care.)

I did hear, however, that the Treasury Division of Finance manages and administers the cash resources, borrowing programs, and all investment and debt management activities of the government, and that Garry Steski has managed this all since 2009.

I’m not about to pretend that I even want to have any clue about how bond markets work, but even with that admittedly bad attitude, I keep thinking – man does this guy ever know his stuff. Those numbers and ratios and percentages just fly out of his mouth with exceptional authority, and I assume with great accuracy, since no one corrects him.

Again, a lot if Steski’s testimony will be dealt with by the financial experts, but I gather that Heather Leonoff wanted him here to explain a little bit about why government debt is a bad thing. (It’s definitely a boring thing, but I guess it’s bad too.)

With apologies to Garry Steski, and all other financial experts, this is what I understood about how government bonds work.

If the Government of Manitoba wants to borrow money, it does so by issuing bonds. Banks buy these bonds and sell them to customers as investments. 85% of Manitoba’s bonds are sold in Canada, but some are sold to international investors because you can get cheaper rates. Maturity dates are staggered so that every year you have some bonds coming due and perhaps some more borrowing. For the most part, if you are in deficit for a year, you will have to borrow more.

Like the rest of us, Manitoba’s borrowing ability is tied to its credit rating, which is monitored by three agencies – Moody’s, Standard & Poor’s, and DBRS. As a general rule, you need good credit ratings in order to get good rates when you issue your bonds. And if your credit rating starts going down, you end up having to pay more.

One of the things that can get you into trouble is having your debt load be too high. Steski recounts that for a few months “last fall” (2018), they were unable to borrow money at a price the Province could live with because their credit ratings were down, and the price was too high.

CROSS-EXAMINATION – BY garth smorang

When Smorang-the-Smasher gets up, he goes straight to the question of the Treasury Division’s input on the content of the Province’s budgets:

No. says Steski, we have nothing to do with deciding what goes into the budget, and we do not have anything to do with reducing the deficit nor deciding about the level of tax revenue.

And, no, Steski doesn’t pay any attention to what the government says in its budgets, nor does he worry about what reducing the PST would do, because he can’t do anything about it. He looks only at our credit ratings.

And, yes, about those credit ratings, it seems that the Province has been getting downgraded recently. And why? Because every year, Manitoba’s projected deficit is substantially higher than it turns out to actually be. Although in real terms this is good for us financially, apparently the credit ratings agencies think it is an indication of poor financial planning (or perhaps a lack of competence or understanding).

Then it gets a little amusing, at least for me, because Garth takes Garry through a series of downgrades in the credit ratings for the Province. There are a couple of extraneous reasons – like how to count or not count $31 billion of debt from Manitoba Hydro, but one repeating theme is – why are you, Manitoba, lowering taxes when you have deficit budgets and with this level of debt?

Hey, that’s exactly what I said – why would you cut taxes when you need money to cover your expenses and pay off a debt that you say is way too high?

Garry Steski has no answer to these questions. His job is to try to borrow money for the Province when it needs it, and at the best rates. It is not up to him to decide or comment on the wisdom of the policies or decisions that cause the Province’s credit ratings to rise or sink.

more questions in conclusion

As with Richard Groen, this seemed to be a little light on specifics – yes debt is bad, yes you can have trouble borrowing, but I didn’t hear details about serious troubles that were happening in 2016, or how our financial position was so-o-o dangerous that they just had to do something to reign in expenditures. I’m getting the impression that this is because those specifics aren’t there.

Steski did mention the problems in the fall of 2018, and also something about having to borrowing at higher basis points  “just last week” (which would have been mid-November of 2019). I assume these are bad things, they certainly don’t sound that good. But these are problems of very recent history.

Where’s the beef that would prove that the financial disaster the government says it inherited in April of 2016 was causing us so much grief?

Come on, Manitoba, is this a bison or is it just bull?