Can we fix the revenue generation problem?

“We will find efficiences and cut waste”

During election campaigns, political parties make various promises to the electorate. They seldom tell us where the money to fund the programs will come from, and, to be fair, when economies are growing quickly and tax revenue is flowing in, money might very well be available. These days, however, regional economies are not so robust and new dollars to fund new promises are hard to come by. Federal and provincial tax cuts in recent years have further reduced available revenue. Consequently, the new mantra is to make the promises and then state that funding will come from ‘finding efficiencies’ or cutting ‘waste’. It is rare for politicians to admit that certain taxes might have to be raised in order to fund their campaign promises.

Canadians expect to receive similar services from governments, regardless of which province they live in. Provincial governments have to find the revenue to meet those voter expectations. There is not much point in claiming we can eliminate a large number of those services and thus make large expenditure cuts – if you feel that way, you might find it more productive to go bark at the moon. As I showed in a previous post, when we adjust spending for inflation, non-healthcare government spending in New Brunswick has been fairly flat since the early 90s. Since then, the major contributor to rising spending has been growth in health care costs. That does not mean that new non-health programs have not been launched – it just means that they have been funded either by taking money from other programs or via debt financing. So it comes as no surprise that when Messrs Alward and Higgs promise to make spending cuts but not service cuts, they have a hard time doing so. Most of the ‘efficiencies’ have already been found over the past decade. That does not mean more can’t be found, but it can become increasingly difficult to do so.

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Regional service commissions – another train wreck?

A few months ago, the government of New Brunswick released its plan for reforming local governance. This has been a long time coming and it appears that fiscal pressures have finally forced action. While problems in local governance and cost-sharing have long been recognized, political resistance to change has prevented action until now.

The Province has a significant and growing debt, and, given stagnant economic growth, there is little room for optimism. While a reversal of the corporate and income tax cuts of a few years ago, plus a rise in the HST, might balance the books for now, those measures will provide only a brief respite for the Province’s fiscal managers. The main driver in the decision to move forward with the formation of the Regional Service Commissions was, I am sure,  the desire to off-load certain costs to property owners, especially those in rural areas, where villages and local service districts have relied upon the province to provide local services at below cost. This reorganization provides an opportunity for the Province to eventually free itself of a cost burden. Moreover, the property tax hikes that are coming down the road (especially for rural residents) will be the laid at the feet of local governments rather than the Province.

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Text of the Penobsquis report and comments

Recently, the Mining Commissioner of the Province of New Brunswick released his report on the complaint by residents of the Penobsquis area regarding damage to their property they claimed was the result of mining activities by the Potash Corporation of Saskatchewan.

As is detailed below, the Commissioner’s report deals mainly with a land subsidence claim put forward by some residents. Water damage claims were withdrawn – some reasons for that withdrawal are given here. The whole story is quite an indictment of the Province’s apparent complete lack of regard for the concerns of its citizens. In short, the Province has failed to show that it ‘has the people’s back’. That, in fact, is the most alarming aspect of this decades-old story. I am not in a position to evaluate the damage claims made by Penobsquis residents, but the’ hands-off’, ‘let the lawyers decide’ attitude of successive Provincial governments is chilling.

The text of the Commissioner’s report is below. This text was formatted for this website from a PDF version of the report. Some errors may have been introduced during this formatting – for those, I apologize (please send me an email if you find errors that mislead).

I am not a mining expert and cannot comment on the technical issues here. But I will make the following comments:

1. The Mining Commissioner appears to be a lawyer and there is no evidence that he has sufficient technical backgound to judge the merits of the evidence before him. Given the powers of the Commissioner, it seems to me that it would be preferable (and more fair) if the Commissioner had considerable technical backgound in the issues at hand, but had access to legal advice where needed. Here we have the opposite – in fact, it is worse than the opposite as there is no evidence that the Commissioner had access to any independent technical advice.

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How New Brunswick spends its health care dollars

In a previous post, we saw that if provincial government spending in New Brunswick over the past few decades is adjusted for inflation, non-health care spending has not increased since the mid-90s. Rising health care expenditures are largely responsible for spending increases since then. And how are those health care dollars being spent? The numbers below suggest that NB is not doing as well as some other provinces with respect to hospital operations costs; that might mean there are some potential savings to be had there. But I expect those ‘savings’ to be reallocated to other health care spending issues (e.g. wait-time reductions). The goal should not be to reduce spending by a certain amount, or keep increases at a particular rate, but to improve services while spending the same proportion of tax revenue.

Let’s start with a re-post of this chart (using data from Statistics Canada and CIHI’s National Health Expenditure Database), where spending (EXP) and revenue (REV) patterns for the past few decades are adjusted for inflation:

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