The Hard Truth About the Budget and Canadian Space

It's the Sunday after the Conservative government brought down the 2012 Federal budget and the reviews on how it will effect the Canadian space systems industry are still mixed.

Here's what we know for sure (kinda...).

Finance Minister Jim Flaherty at the Canadian Club on March 30th, where he said that the federal budget has "modest" austerity measures compared to Europe and the country is on track to grow as quickly as "emerging economies."

As outlined in my December 5th, 2012 post "Canadian Space Rovers on the Chopping Block" the rovers being constructed under contract to the Canadian Space Agency (CSA) by Kanata, Ontario based Neptec Design Group and BC based MacDonald Dettwiler (MDA) are no longer funded. This is either an important capacity building activity being slashed or part of the long-expected winding down of the $110 million CSA portion of the Canadian Economic Action Plan, intended originally to counteract the 2008 worldwide economic crisis but now no longer necessary.

As well, the overall CSA budget has been slashed by either 10% or 14% or 16% (depending on the source) which is either a catastrophe for MDA and the RADARSAT Constellation mission or actually represents an increase in RADARSAT funding when added to the naturally decreasing (but totally expected) CSA cash flow requirements in other areas as described in the February 29th, 2012 Spaceref.ca article "Canadian Space Agency Budget Estimates Before Budget Cuts Released."

One of the three proposed RADARSAT Constellation satellites. Now with either more, or less Federal funding.

Best of all, most of the big issues (as outlined in my February 28th post "Aerospace (and Space) Policy Review Head Announced") are waiting for the formal report from the Federal Review of Aerospace and Space Programs and Policies (or aerospace review), which is expected sometime next December.

After that, we're left with more ambiguous perceptions and pronouncements, indicative of political patterns slowly emerging around the budget and the upcoming aerospace review.

Here are a few:

MDA CEO Dan Friedmann.

• According to the March 30th, 2012 Canadian Press article "Budget blamed for aerospace layoffs," the  prime contractor for the RADARSAT Constellation mission (RCM) said Friday that "it's laying off workers after a preliminary assessment of the federal budget suggests it doesn't include the money needed for the RCM as envisioned." The article quotes BC based MDA (the prime contractor for RCM) said stating that it was “uncertain on the way forward on Phase D of RCM and expects to work with its customer to seek clarification over the coming weeks.”The article also quotes the customer (CSA spokesperson Jean-Pierre Arseneault) as stating that the space agency is still analyzing the federal budget but the RCM mission has not been cancelled. MDA has been no stranger to layoffs lately, with ongoing reductions in its Brampton, Ontario robotics factory due to the winding down of the US space shuttle program and the inability of the MDA on-orbit satellite servicing program (so far, at least) to gain any traction at the Defense Advanced Research Projects Agency (DARPA). 

• According to the March 29th, 2012 Ottawa Business Journal article "2012 BUDGET: Deficit to be eliminated by 2015" the budget "will create long-term savings, shaving more than $1 billion off the deficit in 2012-13 and climbing to $5 billion in 2014-15" which is probably good in the abstract. The article also mentions how the Federal government proposes to make permanent the Canadian Innovation Commercialization Program, a 2010 initiative intended to help small and medium sized businesses sell unique or high-tech products and services to federal departments and agencies. According to the article "the objective is to give these businesses a reference account to scale up their businesses to other clients, particularly foreign governments," which seems particularly useful for space systems firms who sell 50% of their products to foreign firms and governments.

James Turk.

• Nature, which bills itself as "the international journal of science" has weighed in on the budget with the March 30th, 2012 article "Canadian budget hits basic science," which argues that the "latest budget will slash spending on the environment and push for more collaboration between basic researchers and industry." But the article also quotes James Turk, the executive director of the Canadian Association of University Teachers as stating unequivocally that the budget "is disastrous. The government has no understanding of how scientific advancement is made (and) no appreciation of blue-sky research."

• The university community hasn't been the only community with mixed feelings about the budget. According to the March 29th, 2012 Financial Post article "Business greets R&D funding changes with mixed emotions," proposed budget changes to the accessibility and administration of public funding for research and development in the private sector "were met with mixed reactions by the country’s business community." The changes include the exclusion of capital expenditures for re-reimbursement under the program, a reduction of the investment tax credit from 20% to 15% and limiting eligibility of claims related to third-party contracts to 80% of contract payments. The article also states that "the budget outlined an injection of $110-million per year beginning in 2012-13 to the Industrial Research Assistance Program (IRAP)."

David Shellenberg.

• Other communities are more positive. The March 30th, 2012 Aerospace Industries Association of Canada (AIAC) press release "AIAC reaction to the 2012 federal budget" states that "AIAC and its member companies are pleased with the overall support in yesterday’s federal budget for research and development, as well as those measures that will enhance the competitiveness of small and medium enterprises (SMEs)." However, the AIAC press release also quotes AIAC Chairman David Shellenberg expressing reservations over “the proposed changes to SR&ED," such as the reduction of the SR&ED tax credit rate and the lowering of the eligibility rate for subcontractors "which have the potential to counteract some of the other positive changes the government has proposed in the budget." The press release also indicates AIAC concern "that the announced cuts to the Canadian Space Agency’s budget may impact programs that are critical government priorities" such as the continuing Canadian presence aboard the International Space Station (ISS). As outlined in my March 4th, 2012 post "Canuck ISS Commitment Now Backed with Cash (Sorta)" the Federal government has announced an ongoing Canadian commitment to the ISS through 2020, but has only funded the program until March, 2013.

With all those changes and new programs and cutbacks and additions, it will be interesting to see what actually changes as the budget moves forward and independent pundits begin to assess the new lay of the land.