The Now or Never Budget
Posted April 3, 2015
On April 9th Finance Minister Whalen will unveil her plan to balance the province’s books by the end of the current electoral mandate. We have been to this movie before, under the NDP government. As a prologue we have had an array of studies from Ivany to Broten with many in between. Will this one have a happier ending?
There are some items over which government has little control. The level of gas production from Sable and Panuke continue to decline-seriously impacting royalties. On the other hand interest rates continue to be extremely low. As long term debt rolls over at lower rates it builds in significant long term savings—perhaps $23 million for renewals this year and early in 2016.
Federal transfer payments are scheduled to increase, although more slowly for the health transfer as the system adjusts to a per capita basis.
That leaves a great deal that the province can control. Here are some of the key things to look for next Thursday, and in the subsequent weeks:
Public Sector Wage Restraint
The NDP caved in with its last public sector contract, giving unaffordable increases that greatly exceeded what was happening in the private sector. A case could be made for a wage freeze. The premier has already rejected any cuts.* Increases should not exceed 1% per year. That outcome should be announced now for management and other non-union employees. And of course elected members should lead by example.
As argued by AIMS and others the number needs to be reduced. This will only happen if the government has specific plans to simplify or eliminate activities, and can identify the particular departments where savings are to be achieved. Proposals to achieve reductions through retirements and turnover never work because on their own they do not address how the workload can be reduced proportionately.
Joining the national securities regulator is a gold-plated opportunity to save money and reduce red tape. The government cannot pretend it is serious about reductions while turning down the substantial federal incentives to do so.
The publicity around the poor quality Drake online courses made it apparent that teachers can earn big pay increases for programs that are not needed or not used. Minister Casey has belatedly dealt with the particular issue but will she deal with the bigger question?
Pensions and Benefits
The inadequate response to the problems with the Teachers’ Pension Plan means that extra charges will be a growing burden for at least the next five years. In addition to post-retirement health benefits public sector employees receive generous retirement allowances, a package almost unknown in the private sector. The premier has indicated this will get attention.
Government has more than once mentioned the possibility of privatising certain administrative activities. It is hard to see how this can be usefully accomplished without eliminating the no-layoff clause, which counts an employee as being laid off even if the he or she is offered the same pay at a private sector employer. That in turn will require elimination of mandatory binding arbitration as prescribed by the Civil Service Collective Bargaining Act.
Subject to that outsourcing some activities might make sense. With government borrowing costs at record lows it makes no sense to use the private sector for capital. For example, selling off a profitable operation like the NSLC would only make sense if the province was guaranteed to also retain today’s profit margin on sales.
The government has mostly avoided writing big cheques to private corporations. The one ugly exception is the Yarmouth Ferry which is already over $40 million. When will the government tell us what the ceiling is?
A year ago the government announced Invest Nova Scotia as a central government economic development activity. The mandate described was extremely vague, and regulations that might bring some clarity have yet to be released. In the meantime nothing has been accomplished.
These represent the best opportunities for prosperity in rural Nova Scotia. A way forward has been established for aquaculture but again regulations are necessary, for any new developments. When will they arrive?
Will the government rethink its approach to fracking, under a new full time minister?
Laurel Broten’s report pointed out that Nova Scotians are already the highest taxed in Canada, so there is hardly room for rates to go up. She did suggest that some exempted items from HST could be included, and that certain tax incentives should be reviewed. These would be more than offset by reductions in income taxes. Will the government’s proposed tax changes be revenue neutral or better for taxpayers?
This list, certainly not complete, shows the urgent need for government to take substantial action. When looking at this year’s budget readers should consider not just these items. More generally does the government understand that this is not a time for business as usual? Is it taking the needed strong and decisive action to improve Nova Scotia’s future prospects?
*Error corrected on 04/09/15
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