How Will Nova Scotia Pay For The Surge In Health Care Spending?
Posted August 19, 2022
Premier Houston is spending money as fast as he can in the campaign to improve health care: 270 added post-secondary nursing seats, 16 additional future doctors admitted to Dalhousie every year; more services, more surgeries, more recruiting of health professionals, multiple initiatives for mental health, more help for newcomers, more virtual care, more hospital space including major additions in CBRM and Halifax.
The health care budget, together with long term care and support for seniors, amounts to 44% of the province’s program spending. Health alone is growing by more than $400 million, which must be found elsewhere. At the same time employment is at an all-time high, with many employers struggling to find workers. It makes sense to take a hard look at programs to create jobs.
1. Subsidies for the wine industry cost the province $4.5 million a year. The result of an international trade arbitration is forcing a change.
Preferential markups by the Nova Scotia Liquor Commission, which will no longer be allowed, provide a $6.06 benefit on a $25 bottle of wine. Eliminating the federal duty discount is another $0.52. It represents a major hit to winemakers on the two thirds of their sales which happen through the NSLC.
Winemakers in Australia and New Zealand receive $6.58 less than local producers on a $25 bottle and endure substantial shipping costs. They still make a profit. The major factor is economies of scale.
New Zealand, four times the size of Nova Scotia, cultivates 100,000 acres for wine, two-thirds of it in Sauvignon Blanc. Nova scotia cultivates 1,000 acres by more than 20 wineries, many of them growing several different grapes.
Nova Scotia’s industry is inefficient. It is ripe for consolidation and would benefit from mechanization. Hopefully the province can help with both without transgressing its trade commitments. Either way, the potential savings of up to $4.5 million is a small contribution towards $400 million for health.
2. Film industry subsidies are budgeted for $25 million annually but last year cost $49 million. These support short term jobs which have to be paid for again every year. That spending makes even less sense than previously, when jobs were needed. The film industry is not being greedy—similar benefits are available from other provinces and states.
It would be wrong to cancel the program abruptly. A two or three year phaseout would allow the affected workers time to change careers or relocate.
3. The Yarmouth ferry costs the province $17.2 million a year, although the province was able to get it down to $14.2 million in 2021, the last of the three years that it did not operate.
In 2018, the last year of full operation before 2022, the ferry brought in fewer than 1% of Nova Scotia’s tourism arrivals. Remarkably the number of Americans coming to Nova Scotia did not drop in 2019, when there was no ferry due to delays in completing the arrivals facility in Bar Harbour, Maine. The $8.5 million upgrades were paid for by Nova Scotia.
Based on Bay Ferries’ estimate of trips for 2022 there will be about 20,000 arrivals in Yarmouth, of which perhaps 14,000 would be Americans, again a tiny proportion of the province’s total arrivals. The rest will be returning Nova Scotians. The $17.2 million subsidy will be about $1,200 per arriving tourist. Most of them would come by other means if the ferry was not available.
The ten-year contract with Bay Ferries ends after the 2025 season. The ferry’s impact on Nova Scotia tourism is tiny, but it is important to Yarmouth. The government should indicate now that the ferry contract will not be renewed. This will provide time to make sure that Yarmouth is getting a big share of the jobs boom that is happening in Nova Scotia.
4. Innovacorp, Nova Scotia Business Inc. and the Invest Nova Scotia Fund are being combined to create Invest Nova Scotia. Good.
Innovacorp, with a budget of $9 million has been a source of early funding for promising startups, some of which have had big wins. That capability should be retained with limited budget.
NSBI, with a budget of $44 million, has used payroll rebate agreements which phase out while the jobs continue. Not all of them succeed, but there are numerous well-rooted employers that are here because of the program.
That said, there is little need for new initiatives at a time when existing employers are often unable to find workers. The infrastructure should be reduced, but the essence should be kept in place to properly honour existing rebate agreements and to maintain the capability for a future day when it will be needed.
The government will experience a welcome surge in income taxes from the recent and future growth in workforce. It will not be enough to pay for the spike in health care spending. These recommendations taken together can make a valuable contribution to filling the gap.