You think we have big-spending governments in the Maritimes? Look east, to Newfoundland and Labrador if you want to see spending.
Last week, the auditor general of our beloved sister province rapped successive Newfoundland governments for spending beyond their means, way beyond them. He found the provincial government there is spending so freely that its offshore oil revenues can’t keep up. The result is a big deficit, something that shouldn’t happen in any petro-province.
Auditor-General Terry Paddon’s report serves as a warning to the government in St. John’s that it can’t keep flailing about with the cheque book. In 2012, that province spent $7.8 billion or $15,159 for every citizen, a rate that is 50 per cent higher than the average of all the other provinces.
That’s a fair bit of cash, considering that the average of all the provinces includes bigspenders Quebec and Ontario and, of course, the Maritimes.
It leaves the Newfoundland government with a deficit of $725 million this year and a provincial debt of $8.9 billion. That debt number sounds high and it is, but it’s well off the peak of almost $12 billion back in 2004.
Guardian readers might not be surprised to find out that P.E.I. leads the spending parade among Maritime governments, at least by my inexpert figuring. In thecurrent year, it will spend $1.6 billion to operate government, or $11,411 per capita. New Brunswick will spend $8.2 billion or $10,918 per person and Nova Scotia will spend $9.5 billion, $10,306 a head.
Of course, a key difference is that black gold. Because of the oil off its shores, Newfoundland and Labrador no longer collects payments under the federal equalization program. In the Maritimes, we couldn’t keep the lights on without it.
In round terms, Newfoundland gets about a third of its overall provincial revenue from oil and gas. In the Maritimes, we get a third of ours from equalization. So in effect, Newfoundland is spending more of its own money and the Maritimes is spending comparatively more of others’ money.
And every Newfoundland government faces challenges we don’t have to worry about. It has way more territory to serve than any Maritime province. Labrador City is 1,159 kilometres from St. John’s. The land is rich, but the climate is harsh. It’s an expensive place to govern.
Newfoundland’s finances are also tied to the whims of global markets. When the price of oil goes down because of economic trouble in Europe or the U.S., Newfoundland loses money. Last year, the North American benchmark oil price veered between $88 and $105, ending the year closer to the low than the high. A $1 drop in the oilprice costs the province $20 million in lost revenues.
That leaves Newfoundland exposed and poses challenges for its budget makers. Over the past several years, Progressive Conservative governments under Danny Williams and Kathy Dunderdale have opted to keep on spending and live with the vagaries of the oil market. Here in the Maritimes, equalization funding isn’t so volatile.
At least, it hasn’t been volatile until now. The current equalization agreement expires in 2014 and it should be a key priority of every Maritime government to make sure it’s ready for changes. And that doesn’t mean issuing press releases about equalization fairness. It means spending the money wisely and working harder than ever to find ways to support ourselves.
It also means picking spending priorities with great care. Newfoundland decided to put $600 million into the Muskrat Falls project, but it’s expecting to collect $20 billion in profits over the years.
Nova Scotia has promised $300 million to get the Halifax Shipyards in shape to build $25 billion worth of naval ships. The NDP government says it will get all of that back and more as the project matures. If those governments are right, they are making sensible investments. We’ll see.
It might also mean spending less on government. The biggest cost of government is people and that would mean jobs. What Maritime government is ready to go there?
Dan Leger is a Halifax-based writer and commentator. Twitter: @Dantheeditor.
