Budget Season
Posted January 16, 2012
This is the time of year when governments start making choices about what should be in the next budget. These choices reflect the entire scope of Government. The Minister of Finance has solicited taxpayer input and in this vein the following comments on decisions so far, together with recommendations for the next budget, are respectfully submitted.
(1) After a slow start the Government has engaged in serious efforts to rationalize spending. The fast ferry to Yarmouth soaked up over $20 million in subsidies in the four years before government pulled the plug. Perhaps a different ferry can be justified but “The Cat” was never a good idea. And the American tourist market to which it was supposedly catering to is drying up everywhere.
(2) The tough choices on health show a great deal of political courage. But many opportunities to save money without hurting care, such as reducing the number of regional health authorities, can only be made by the Minister of Health and Wellness. She needs to make them. If health care suffers in Nova Scotia it will be ridiculous to blame the Federal Government, which is increasing funding by 6% per year while the province is making cuts.
(3) University funding has been cut by another 3% while tuition increases are capped at 3%. This is tough but necessary. Anyone who believes that there is no room for improved productivity in the system should read one of the faculty collective bargaining agreements, available on the university websites.
(4) The Government has stated that the number of civil servants will go down by 1,000. In fact the number has gone up by 200 as of the last budget. It is time to get serious and that means identifying the departments where the reductions are to occur. Obviously hoping that attrition will do the job has not been made to work.
(5) Kudos to the Government for staying far away from the proposed Stadium. The 300 pages of reports produced at considerable expense to the HRM taxpayer do not make a cogent or compelling case.
(6) On the other hand some of the choices about “Economic Development “ spending have been ill-judged. As the expensive dredging of Sydney Harbour nears completion there is absolutely no prospect for a container operator. The Industrial Expansion Fund, rightly criticized by the Auditor general for poor management, continues to make unwise choices. The $4.5 million loan to Scanwood that went almost immediately into default is only the most recent example. Let an arm’s length body that understands business issues (such as NSBI) make clear headed evaluations of these choices before they reach cabinet.
(7) Labour market policy that creates cost uncertainty for employers makes the province unattractive as a place to invest. Reverse the recent legislation on first contract arbitration. Review other employer-unfriendly legislation. This will make it less expensive to attract new jobs and retain existing ones.
(8) The province’s commitment to greenhouse gas reduction is appropriate. The requirement that 40% of electricity be generated by renewable sources is not. It can add to our already expensive power costs, hurting households and energy intensive employers such as paper mills and manufacturing. Eliminating this unnecessary requirement will make it less expensive to attract new jobs and retain existing ones.
(9) By far the best chance for jobs in rural Nova Scotia is in resource industries, particularly oil and gas, mining and aquaculture. Create a policy context that encourages each within a framework of environmentally responsible regulations.
Even if the Government gets all of the above right the province will be in serious difficulty if it does not satisfactorily address the two biggest issues:
(10) Our population is aging rapidly which will increase health care costs and reduce tax revenues as people progress into retirement. On present form there will be 100,000 fewer working-age Nova Scotians twenty years from now. To improve our demographics we must dramatically increase our immigrant numbers to at least 10,000 per year. Both the Government and the private sector must be energetically engaged.
(11) Frequent supplementary funding of public sector pensions have exacted a huge cost to taxpayers, approaching $1 billion dollars so far. The teachers plan deficit was still $1.2 billion as of the last valuation. With poor market performance in 2011 and record low interest rates we can anticipate a further deterioration when the next valuation reports are released in the spring. Government must move these plans to a basis where benefits are made to fit what the contributions will buy. They should start with the MLA pension plan.
We are currently a high tax province which discourages investment and interprovincial immigration . But tax cuts should not be considered until the books are balanced.
Readers will recognize in this article a summary of many previous submissions. The rollovers above provide convenient links.