2013 Budget Season

A central plank in the government’s election platform was the promise of fiscal responsibility. Budgets were to be balanced starting in the second year of the mandate and the only tax promise was a reduction in charges on home energy.

In fact, the provincial portion of HST has increased by 2%. Last year saw a deficit which is expected to recur in the current year.

The minister has been grumbling about the prospect for federal transfers although these have provided a relatively stable share of revenue throughout this government’s mandate. Meanwhile the province continues to benefit from the extraordinarily low interest rate environment.

Balancing the budget will nevertheless be difficult. Here are three necessary choices:

1. The 2010 budget committed to reduce 1,000 civil service positions through retirements and attrition, but there has been no evidence of a plan to make it happen. The government’s claims that 400 reductions have already been identified are hardly impressive. As of last March the number had actually gone up. The topic did not even get mention in the 2012-13 budget, and some of the reduction is from transfers that don’t save any money.

The government can show serious intent by identifying the departments where the reductions are to occur and when they are expected to happen.

2. Stop writing big cheques.

No more pension bailouts.

We don’t need any more woodland.

The government is demonstrably weak at negotiating business deals and should stay away from job creation or preservation arrangements that involve multi-million dollar upfront payments.

Most of these payments have been counted as assets so they do not show up in current year deficits, but the lenders who provided the money will have the same expectation of repayment from our children and grandchildren.

3. The government has passed excellent legislation that will give taxpayers certainty over the cost of civil servant pensions, while keeping those pensions among the very best in the province for their participants. The necessary regulations and procedures should be in place in the spring of 2013. Of course this should be implemented without adding to the $536 million bailout from taxpayers in 2011.

The same mechanism must be implemented for teachers where the deficit at the end of 2011 was $1.65 billion and may have worsened in 2012. This plan has also received bailouts from previous governments, amounting to more than $400 million. The arrangement is unfair both to taxpayers and to active teachers, who are unlikely to ever receive indexing benefits they believe they are paying for.

Similar arrangements are needed for Nova Scotia Power and for universities, municipalities, and other organizations that depend in part on access to the provincial taxpayer’s purse. The province should pass legislation requiring these to be implemented.

Making these kinds of choices is hard and unpopular work. Hopefully we will soon see a time which is less constrained. Next week we will look at areas that need more spending, and how to do so with the best impact.


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