Pocket Picking

Commentary, Crown Corporations, Frontier Centre

Manitoba’s provincial government has a spending problem, it habitually spends more than

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it brings in income taxes, federal transfers, retail and other fees. With a string of annual deficits on record and a spiraling provincial debt, the government looks to ‘other’ sources of income to fund its ‘wants’. It would be better if the government made a sincere effort to ‘live within its means”, recognize its limitations, prioritize, and stop pushing its costs for its objectives to its monopoly Crown corporations and their ratepayers.

A too often realized ‘other source’ of funds for government rests with government’s ability to access Crown corporation revenues. This access has provided the government a seemingly endless opportunity to meet some of its ‘wants’ without having to take full responsibility for its actions. Drawing on the revenues of government-controlled monopolies (such as Manitoba Hydro and Manitoba Public Insurance) allows the government to, in essence, ‘tax’ ratepayers through higher (than would otherwise be) rates and premiums.

One example of a past (and failed) major attempt to divert ratepayer funds to a government-ordained purpose was the government’s effort (of a decade or so ago) to have MPI’s retained earnings (policyholders’ money) meet university capital expenditure needs. Only vigorous opposition stopped that attempt.

While the most recent expression of the practice of diverting ratepayer money to government purposes (the proposed plan to have MPI fund road improvements) has yet to be ‘achieved’, there are several examples of past (and continuing) diversions of MPI premiums to ‘government use’ that may be instructive.

Three examples of an ongoing ‘diversion’ of MPI policyholder funds to fund government responsibilities follow:

Several years ago, the government transferred its administration of driver and vehicle licensing functions from ‘core government’ to MPI. The transfer allowed government to avoid having to incur the costs of computer upgrades and, as well, leave behind net annual operational costs that had been an ongoing drain on government funds. In essence, this left MPI and its policyholders ‘holding the bag”. (The move also took over 300 employees off the government’s personnel complement.)  Government should reimburse MPI for its losses on this account to-date, and ensure no further losses occur.

On an ongoing basis, government-supported legislation, policy and practices result in MPI’s policyholders subsidizing the long-haul trucking industry. The approach taken is of an economic development nature, not insurance. The result, higher premiums than otherwise required for policyholders. If government wants to subsidize the trucking industry, it should do it directly not through MPI policyholder premiums.

Also, government continues to ‘enjoy’ its legislated access to MPI’s investments (which arise from premiums paid by policyholders). Government, not the government appointed Board of Directors of MPI, controls MPI investments. Government not only determines the mix of assets held by MPI, but employs a significant percentage of the $2 billion or so ‘trust’ to purchase and hold provincial bonds and short-term securities. While the annual return on MPI’s investment portfolio is a major determinant of the premiums charged MPI’s policyholders, it is not MPI that is responsible for what its investment portfolio yields. Government has a conflict of interest in its management of MPI’s investment portfolio, the investments should be made solely to further the interests of MPI’s policyholders.

It should come as no surprise that once again government is looking to MPI and its policyholders to ‘shoulder’ government’s own responsibilities, this time with respect to providing safe and adequate roads. Government has legitimate forms of revenue support to meet its obligations and priorities, and these include general taxation and, with respect to road improvements, annual vehicle registration fees (which have increased significantly over the years).

It would be best to leave the responsibility for road construction and improvements to government (federal, provincial and municipal) and leave MPI to deal with matters of the insurance realm. MPI’s policyholders have no choice but to deal with MPI. It would be wise for both MPI’s Board of Directors and the provincial government that controls it (both MPI and its Board) to keep that in mind.

Accountability and responsibility should be made clear. The provincial government’s budget problems should not be, again, ‘pushed over’ to the Crowns to fix.