Budget Reviews

Posted April 5, 2012

Minister Steele’s budget landed on carefully prepared terrain. Like his federal counterpart, he had issued a series of dire warnings, making the final product seem comparatively mild. In fact, all of the bad news was old news while the new information was mostly positive.

The previous provincial and current federal governments deserve much of the credit.  Income from federal sources will increase by $220 million.  Equalization is up sharply because of the success of other provinces which have been exploiting their natural resources and was further enhanced by a special arrangement negotiated by the MacDonald government. Federal health transfers are going up far more rapidly than provincial spending. The same is true for social transfers.

Debt servicing costs are well below previous expectation because of historically low interest rates. The province has done well to lock these in by increasing the proportion of its debt financed by long term bonds.

Cuts to schools and universities persist, and health care spending is severely restrained, although not cut as previously forecast.

The prospect of deficit elimination and gradual phase out of the HST increase are both welcome, even if substantially aided by events over which the current government had no influence.

But in two areas this budget is an admission of failure.

Previous budgets had forecast a reduction through attrition of 1,000 civil service positions. In fact there are more civil servants today than when the government took power. There appears to have been no plan to achieve  this reduction, which would save perhaps $100 million per year.

Secondly a large and growing pension adjustment is forecast. This is the additional amount taxpayers are providing for civil servant and teacher pension funds, even after the recent $536 million bailout. Over the next four years the budget forecasts a further $420 million of expense to taxpayers with no corresponding employee contribution. Meanwhile the Ontario and Federal governments are moving to a 50/50 cost sharing arrangement. And the former says that benefits will have to be reduced if current funding is insufficient.

Astonishingly the Minister’s self-congratulatory speech and hundreds of pages of supplementary information included barely a word about this enormous problem. The one brief mention is a move toward joint sponsorship of the civil servant plan which could actually make things worse if it takes away the Minister’s right to make unilateral changes as he did two years ago.

Fulfilling the promise to reduce staffing and taking the volatility out of pension costs could free up perhaps $200 million per year for health care and education, while maintaining the path to balance and HST reduction.

Surely these should be the priorities.

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  • Gary thanks for your comment. The problems with most pension plans,both public and private, are not the result of bad faith by either employees or employers. It is because the contributions turned out to be inadequate to pay for the benefits promised. The question we have to address for public sector plans is how the solution should be shared between employees and taxpayers,most of whom have no pension plan.

    Bill

    Bill | June 16, 2012

  • As a recently retired government employee (35 years service) I am sick and tired of hearing about my “gold plated” pension. Yes, I am fortunate that I chose to work for the government. Some people I know tried to talk me out of working for the government and chose the private sector. They thought they were paying into pension plans that would sustain them during retirement only to find out their pension was either bought out by a new employer or the funds had been depleted because of the 2008 stock market crash.
    Upon being hired I was told that if I did not want to pay into the pension plan or pay union dues I could not be employed as a government employee.  Starting in high school with summer jobs I have paid into five pension plans including Superannuation, RRSPs, CPP, taxed for old age pension and a national health plan as well as employment insurance which I had no hope of ever collecting and thankfully did not have to collect. Over the years, collectively, employees have contributed billions of dollars to these plans.  To balance the books In the 90s the Canadian government took DVA money as well as union funds, employment insurance funds and put it all into general revenue.  As well, because of austerity measures, in the 90s, union negotiations were frozen for nine years and many government employees did not receive any raises during that time, me included. As the government has begun pulling  the rug out from existing pension plans they have the audacity to create a new government group pension plan where employees control the amount of money they want to contribute.  I predict that when it comes time to collect on the benefits of this plan people will be told, “Ooops, we’re sorry but we are not able to pay you the amount of money you expected to receive due to stock market declines.” or “We didn’t have enough participation in the plan to provide the expected benefits you require, and you have to share the pain”.
    Ever since the Wall Street meltdown in 2008, people who have not been as fortunate as myself have been bashing government employees.  Since the war years governments and employers alike have sold employees on the idea that paying into pensions was a good thing and would benefit us in our golden years.  Now that there is an economic crunch, people who have paid into these plans in good faith are slowly watching their benefits erode while  the corporate and political leaders who were responsible for the Wall Street meltdown walk away with billions in benefits and were left unscathed. I cannot believe pensioners are being asked to share the pain while economists try to figure out a way to prevent a full blown collapse of the global economy. After all it was through the dishonest ponzi schemes and sub prime loans created by banks and some corporate and political leaders who are responsible for the present state of the economy.
    It was when I turned sixty years old I realized I had been duped and told a pack of lies.  Pensions are being eroded, employment insurance is being attacked and the health care system, especially in Nova Scotia is in shambles.  While we are watching our pensions disappear our leaders in Nova Scotia tell us our economy is on the verge of collapse, they take four hundred million dollars from health care and education, give to one of the richest families in Canada, the Irvings and bail out multi-million dollar pulp mills. Where do the lies stop.  

    Gary MacLeod
    Halifax
    477-1012

    Gary MacLeod | June 15, 2012

  • Hello Bill: I’ve given you my comments before. I hope that you are not advocating that the rest of us, (taxpayer), who typically have no pension at all, should contribute again to boost payments to sustain a fund that was paid for (by our contributions) to support a favoured group of teachers, and government clerks, etc. Why would you ever think we would want to do that!

    Michael J Monteith (Irate)

    Michael J Monteith | May 3, 2012

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