Introduction

The “transformational change” promised by the Saskatchewan government in early 2016 has not materialized. Instead, Saskatchewan has primarily witnessed a series of knee-jerk service cuts and austerity measures, driven by desperation to reduce costs by any means possible in the face of a massive budgetary deficit.

An important first step in achieving true transformational change is to recognize that the provincial government’s adversarial attitude towards its public services and public workers, and its increasingly privatized approach to public service delivery, are not benefitting Saskatchewan people. A change in attitude and approach is needed. The Saskatchewan government needs to dispense with the myth that the private sector is inherently more efficient and cost-effective; it needs to recognize that reactionary short-term budget cutbacks do more harm than good; and it needs to emphasize the economic well-being of the province as a whole over the gains of a few businesses.

To that end, following are recommendations for three policy decisions that the Saskatchewan government can make in the immediate term, in order to mitigate the dire economic circumstances facing Saskatchewan and begin reshaping its approach to public service delivery. Each of the points below could be elaborated on considerably (a discussion of the quality of privatized public services, or of the human impacts of layoffs and service cuts, could easily triple the size of this brief), but for the sake of brevity these points are limited to economic considerations.

1.) Keep needed workers on the government payroll, instead of depending on expensive consulting firms.

Over the past several years, the amount spent on consultants’ fees by the government of Saskatchewan has grown at a tremendous and unreasonable rate. From $31 million in 2008, spending on consultants by all government ministries reached $117 million in 2014 – a 276% increase.[1]

That rate of increase has far outstripped the growth of provincial expenditures as a whole. From 2008 to 2014, total government spending rose from $8.04 billion to $12.01 billion, a 49% increase – meaning that consultant spending grew 5.6 times faster than the budget overall.

The great majority of this spending – $101 million of the government-wide $117 million total – was spent by three ministries: Health, Central Services, and Highways and Infrastructure. Spending on consultants soared in these ministries between 2008 and 2014, rising 582% in Health and an astounding 780% in Highways. (Central Services increased its spending by “only” 69%, but as it was by far the biggest user of consultants at the outset, this still accounted for an increase of over $10 million.)

The hiring of consultants by government ministries is not, in and of itself, a problem. Consultants can and do serve a useful purpose. They provide temporary access to individuals with specialized knowledge and skills, in cases where it would be uneconomical to keep those individuals on government’s payroll.

The use of consultants on the scale practiced by the Saskatchewan government in recent years, however, is very problematic. Consultants come at a premium price compared to in-house government staff, so using them instead of hiring government workers is not cost-effective. In two of the most consultant-heavy ministries, however, replacing internal staff with consultants is exactly what happened.

In the Ministry of Highways, consulting costs are primarily directed towards private engineering firms, while the Ministry of Central Services makes extremely heavy use of information technology consultants. These are not occupations where demand is limited or unpredictable – even with the end of Saskatchewan’s nearly decade-long boom, there is no shortage of highway construction and repair projects in need of engineers, or of government computer systems to be maintained and upgraded.

Despite this, a deliberate choice was made to replace existing government engineers and IT professionals with private consultants, according to policies adopted and announced by the government. [2]

This was a costly move for the province. Highway engineering firms, for instance, typically charge between 1.9 and 4.3 times as much as it would cost to have an in- scope ministry employee do the same work, and all indications are that this cost imbalance exists for out-of-scope engineering staff as well. [3] IT consultants are similarly expensive: in a review of contracts that SGEU obtained via a freedom of information request, two major consulting firms billed the province between $100 and $310 per hour per employee.

Unlike in Highways and Central Services, it’s not clear in the Ministry of Health that consultants are taking work directly from in-house staff. It’s not readily apparent what Health receives in exchange for its hefty annual expenditure on consultants (which was nearly $20 million in both 2013 and 2014) – though its four-year, $33 million Lean contract with U.S.-based consultants likely accounts for much of it.

The Lean project raises the prospect that Saskatchewan’s runaway consulting budget isn’t just used to overpay for needed services – it may also be paying for work that Saskatchewan could simply do without. According to a study by the University of Saskatchewan’s School of Public Health, Saskatchewan spent $1,511 for every dollar saved through Lean.[4] The $33 million spent on the Lean consulting contract could clearly have returned better results for Saskatchewan people if it had been used to hire more frontline health workers.

For a government desperate to reduce a billion dollar deficit, cutting back on consultant use is an ideal move. Focusing government expenditure on in-house employees will save money, help avoid expensive mistakes such as Lean, and ensure that public spending ends up in the hands of local workers who will spend it locally – instead of going to the owners and shareholders of consulting firms.

The provincial government has already acknowledged the value in cutting back on consultants. In the provincial government’s 2016-17 mid-year financial update, the Ministry of Highways announced that it would save $700,000 through the “reduced use of consultants” – and notably, the Ministry included this reduction in a list of “initiatives with minimal impact.”

This is an excellent first step – but government can take it much further.

2.) Direct public expenditures towards Saskatchewan workers, not out-of- province corporations

The current Saskatchewan government has worked steadily to redistribute public spending away from local workers, and towards the profits of businesses that are often based outside Saskatchewan and even Canada. This has been accomplished by the contracting out of public services, and in at least one notable case, the partial shutdown of a highly profitable government business operation.

When publicly-run businesses and services are transferred to private-sector control, the first casualty is almost always compensation rates for workers. Especially in jobs requiring lower levels of education and expertise, government employment tends to offer wages and benefits significantly higher than private employers are willing to offer. Accordingly, the first step in the privatization of a government service or agency is usually the dismissal of the existing government workforce, to be replaced by a complement of private employees earning significantly lower wages and receiving greatly reduced benefits.

While the Saskatchewan government has always framed this change exclusively as a savings for the province, it is better understood as a three-party transfer of wealth: money that formerly flowed to workers instead accrues partly to government – in the form of reduced payroll costs – and partly to the new private operator of the service or business, in the form of fees it collects to deliver the service or profits it generates by running the business. The result is that, while government budgets may show some benefit, the province as a whole is left poorer as workers see their spending power drop.

Small-scale examples of this sort of wealth transfer have routinely occurred in Saskatchewan for at least the past decade. Over the past four years, however, the scale of privatization and contracting out – in terms of the dollar value involved and the number of employees affected – has increased greatly. This is evidenced by three major instances of contracting-out, and one major privatization, which have occurred since late 2013.

In December 2013, the provincial government announced that it was closing Saskatchewan’s five publicly-owned hospital laundry facilities, and contracting with Alberta-based K-Bro Linen Services to process the linens at a new private laundry facility in Regina. Shortly before receiving the contract, K-Bro approached a Saskatchewan union to offer a 10-year contract for local workers that would pay between $10.75 and $13.50, compared to the hourly rates of between $15.61and $19.99 then earned by public laundry workers.[5]

When the K-Bro deal was studied by University of Winnipeg economists, they concluded the privatization would result in “a redistribution of income from workers and other residents of the province in favour of a private corporation whose shareholders reside outside of the province,” and that the decision would “decrease income of the residents of Saskatchewan between $14 and $42 million over the next 10 years when compared to public options.”[6]

The privatization of laundry services was followed, in August 2015, by the announcement that a contract to provide food services in correctional facilities had been awarded to the U.K.-owned multinational corporation Compass Group. 62 correctional cooks were laid off, and replaced by a newly-hired group of Compass workers. While government-employed corrections cooks generally earned wages in the $20-$30 range dependent on experience, Compass posted ads for replacement jobs with wages starting at $13.03 or $14.25.

The Saskatchewan government’s next major privatization initiative was to shut down a large segment of the Crown corporation responsible for retail liquor sales, while inviting select private businesses to take the place of publicly-owned liquor stores (as well as allowing them to open 11 new greenfield private stores.) 39 public liquor stores are now slated to be shut down as soon as private replacements are up and running, a move that will cost 116 full-time equivalent jobs as store and head office staff are laid off.[7]

By far the largest beneficiary of liquor privatization has been Nova Scotia-based Sobeys Inc., which was given licences to open nine stores in Saskatchewan’s most profitable locations. Alberta-based Liquor Stores NA and B.C.-based Metro Liquor were also awarded highly-profitable locations in Regina and Saskatoon. While Sobeys, Metro, and Liquor Stores NA do not advertise their pay rates, it is a safe assumption to conclude that their Saskatchewan retail employees will earn far below the $18.99 per hour offered at the bottom of the public liquor retailer’s pay scale.

Less than two months after handing out the licenses for new private liquor stores, the Saskatchewan government announced a contracting-out plan that would cost even more public jobs. On January 12, the province posted a tender to provide janitorial services in 98 government buildings, a move that would put 251 government-employed cleaners out of work. While almost all of those workers occupy the lowest position on the public service pay scale, there is still plenty of room for their wages to fall in an industry that frequently pays minimum wage or just above.[8] Such a cut to pay for cleaning staff would, of course, be necessary in order to allow a private firm to turn a profit off of its contract with government.

There is a clear pattern in the examples above. When government decides to privatize or contract out, the immediate effect is always a sharp drop in the earnings of the workers providing the service, with a significant portion of the former wage costs absorbed as profits by the business now in control. What makes this especially regrettable is that, as shown in the examples above, often these profits do not even accrue to Saskatchewan companies. Money that formerly went to local workers instead leaves the province entirely – it flows to K-Bro and Liquor Stores NA in Alberta, to Metro Liquor in BC, to Sobeys in Nova Scotia, and to the Compass Group head offices in the U.K.

Throwing public employees out of decent-paying jobs, and replacing them with private- sector workers earning the lowest wages possible while businesses pocket the difference is not a sound plan for economic recovery. Local workers spend money locally; the decent wages paid by Saskatchewan’s public sector go towards supporting local business, and are partially returned to government through income and sales tax. When privatization forces workers to accept poverty-level wages, their economic loss is felt through reduced sales for business, reduced tax receipts for government, and increased costs for public support services such as social assistance payments.

Privatizing and contracting out the work of government employees will do nothing to improve Saskatchewan’s economy. Public sector employment is a bulwark of stable, decent-paying work that can offset the downturn in the resource sector by providing a continued revenue stream for local businesses and local governments. The best course of action for the province’s economy is to maintain or even increase public sector employment levels – a move that would benefit Saskatchewan as a whole, rather than a select few out-of-province corporations.

3.) Increase social investment, and realize greater savings in other areas of government.

As the extent of Saskatchewan’s financial trouble became apparent, some of the first government services targeted for cutbacks were those that support the vulnerable and disadvantaged.

In the 2016-17 budget, funding was cut for the Buffalo Narrows Community Correctional Centre, a low-security facility that helped offenders find work and reintegrate into the community. Soon after the budget came more funding cuts: to the Northern Teacher Education Program, which supports and educates northerners seeking to become teachers in local communities; to the SAID program, which provides funding to support disabled citizens; and to the Lighthouse, a Saskatoon homeless shelter, among others.

These cuts come on top of longstanding resource shortages in other government- funded agencies that support the disadvantaged. Understaffing in the Ministry of Social Services has created enormous difficulty in effectively delivering income support and child protection services. Community-based organizations (CBOs) that support people living with disabilities and other vulnerable groups are perpetually short of funding. A chronic shortage of space in correctional facilities has meant rehabilitation programs are cancelled, as classrooms and gymnasiums are turned into makeshift dormitories.

While each service cutback reduces government expenditure by a small amount, they are unlikely to deliver savings in anything but the extremely short term. The same applies to chronic under-resourcing of support agencies like the CBOs and the Ministry of Social Services – while it may help keep individual Ministry budgets low, the service gaps it creates cause problems that government will ultimately be on the hook to address by other means.

The effects of this refusal to invest in the disadvantaged and vulnerable are apparent throughout Saskatchewan. Homeless individuals – who are denied access to shelters that no longer have the funding to accommodate them – instead spend their nights in police holding cells or end up in emergency rooms suffering from the effects of exposure to harsh weather. Lacking access to any meaningful rehabilitation programs, inmates who have completed their sentences quickly re-offend and return to the correctional system. In the North, poverty and a sense of hopelessness are exacerbated by a shortage of local teachers to serve as role models in elementary and secondary schools, and by a lack of higher education opportunities for those who do graduate.

The bottom line is that there is no financial logic in cutting funding for services that support those most in need of support. Disadvantaged and vulnerable individuals will eventually present a cost to government in some fashion – the only questions are what the extent of that cost is, and what form it comes in. If government wants to limit the costs of medical treatments, legal proceedings, and incarceration, then it needs to commit to funding supports that help people avoid contact with the medical, legal, and correctional systems – such as education, inmate rehabilitation, support payments subsidized housing, or assistance finding employment.

Taken as a whole, the costs of preventing harm are inevitably lower than attempting to address harm after the fact. The Saskatchewan government needs to accept this fact, and adjust its budgetary decisions accordingly – by increasing, rather than cutting, funding for the most vulnerable and disadvantaged people in our province, and realizing savings in other, costlier, areas of government.

[1] Calculated from the government’s answers to Written Question 585 from the 4th Session, 27th Legislature. The increase in consultants spending has been calculated multiple times, with some variation in the results. The Provincial Auditor, using data from the government’s MIDAS database, calculated an increase of 228% between 2008-09 and 2013-14. The Saskatchewan NDP, also using figures from Written Question 585, arrived at an increase of 303% from 2007-08 to 2014-15. The consensus seems to be that expenditure on consultants has doubled or tripled under the Saskatchewan Party government’s term in office.

[2] Joe Couture, “Highways work goes private; Will lead to Regina, Saskatoon lab closures.” Regina Leader-Post, p. A1, April 11 2012; “Simon Enoch, “The Wrong Track: A Decade of Privatization in Saskatchewan.” Canadian Centre for Policy Alternatives, March 2015, p. 16.
[3] These comparisons use the “fully-burdened” cost public employees, which factors in benefit and pension costs, etc., as well as wage costs. See: Taylor Bendig, “Road to Ruin: Use of costly highways consultants has skyrocketed.” Behind the Numbers, March 17, 2015.

[4] “New report ‘final straw’ for Lean, Sask. NDP says.” CBC News, Feb. 1, 2016.

[5] “Backgrounder on K-Bro Linen Systems: The new provider of hospital linens in Saskatchewan.” Canadian Union of Public Employees, Dec. 17, 2013, pp. 3-4.
[6] Hugh Grant, Manish Pandey and James Townsend. Long-term Gain, Long-term Pain: The Privatization of Hospital Laundry Services in Saskatchewan. Canadian Centre for Policy Alternatives, December 2014, p.5.

[7] Legislative Assembly of Saskatchewan Hansard for Nov. 22, 2016, p. 1442

[8] The federal government’s Job Bank, which uses Statistics Canada data to provide wage information by community, lists “low” wages for janitors at $11.00 per hour in Regina and Saskatoon, and at the minimum wage of $10.72 in smaller centres such as Prince Albert and Melfort.