Government’s Plans For Growth Are Based Neither On Its Goal Nor Recent Experience
Posted March 24, 2023
Nova Scotia’s budget for 2023-2024 and the many other recent announcements reflect a mixed bag of choices.
In 2022-2023, income from taxes and other sources was an astonishing $1.66 billion higher than forecast this time a year ago. Through herculean efforts the government managed to spend $1.42 billion on items not in the previous budget, including $578 million in the last three weeks. This left a deficit of $259 million.
The new budget keeps up the pace with spending in 2023-2024, estimated at $14.8 billion and a similar deficit. Health care is the big source of the increases, as the province struggles to reduce wait times and the list of people without a primary care provider.
The Good
(1) A long list of health initiatives, costing almost $600 million, to improve response times, add surgeries, improve compensation for workers, increase mental health care, and facilitate innovation. Given the long list of big ticket projects it will be challenging to spend that much extra money wisely.
(2) More than $100 million spread over eight programs, for rent supplements, homeowner repair programs, investments in Public Housing, funding for homelessness and supportive housing, disability support programs, foster care, and to address the needs of youth with complex needs.
(3) Raising the rent control cap to 5% at the end of 2023 and phasing it out altogether after that. This avoids massive increases that would accompany an immediate discontinuance, and will encourage more builders to get projects moving. New housing starts declined by 12% in 2022.
(4) No mention of the “Better Paycheck Guarantee,” which was never going to be cost effective and is entirely unnecessary when unemployment is at record lows. Likewise, the original Nova Scotia Loyal plan was clearly a mistake and appears to have been abandoned.
The Bad
(1) $17 million for the Yarmouth Ferry, which brings less than 1% of the visitors to Nova Scotia, many of whom would come by other means if there was no ferry. $39 million for film subsidies, which cover about 30% of Nova Scotia payroll but will not create a single sustainable job. Small businesses everywhere can think about these when they struggle to meet payroll.
(2) Rushing money out to universities by March 31st to keep what is clearly a future cost in the current year, leaving the government with no control over how the funds will be managed.
(3) Failure to begin indexing tax brackets, which is both unfair and uncompetitive with other provinces. At some point, perhaps already, this makes Nova Scotia less attractive to international immigrants and interprovincial migrants.
(4) A projection over the next four years of increasing deficits and an additional debt of $5 billion, with an increasing ratio of debt to GDP. This at a time of high employment and growing population. It could be ameliorated if economic performance exceeds the conservative estimate.
The Ugly
Each year the budget’s economic outlook includes a forecast of future population as of July 1st each year. Departments are required to use it when developing their budget requests. Examples include the needs for new schools, post-secondary capacity, health care, administrative and social services and so on. Getting it right matters.
In recent years it has been spectacularly wrong because immigration and net migration from other provinces has been growing rapidly. The projections took a while to catch up with the growth in the previous decade, which paused in 2020 but came roaring back in 2021.
The forecast in last year’s budget was woefully inadequate, predicting a level in 2025 which has already been surpassed. The departments had to plan based on that forecast. No wonder so many portable classrooms had to be quickly found, or that our waiting list for primary care keeps growing.
This year’s forecast is not an improvement. It projects an increase of about 17,000 in the 12 months ending this July, dwindling to 11,000 in the 12 months ending in mid 2031.
The two main components of growth have been immigration and net migration from other provinces. Each of them has been running above 10,000 a year. The total from all components for calendar year 2022 was more than 35,000, but that included some sources that will not recur.
The forecast assumes a level 11,000 immigrants per year, which is reasonable, although cautious given Nova Scotia’s growth trend and Canada’s intention to up the national numbers. The implied forecast for net interprovincial movements is that they will shrink to nothing.
The government has confirmed the goal of growing to 2 million people by 2060, implying an average annual growth of 25,000 people per year. The projection predicts failure.
It governs the way that departments plan for services to Nova Scotians, and may be self-fulfilling. Because it has been so far off, Nova Scotia is constantly playing catchup in providing enough health care resources, classrooms and teachers, spaces in universities and NSCC programs, housing, and social services.
Health care facilities are being added as quickly as possible. That will need to continue longer than would be allowed by the current projection.
There are many Canadians who want to move to Nova Scotia but are deterred by the difficulty in finding a doctor, and concerns that their children will be in overcrowded schools.
The government needs to plan for success in its population goal unless and until the actual data point to failure.