Blood and turnips

Russell Wangersky russell.wangersky@tc.tc
Published on January 4, 2016
Russell Wangersky

Well, we’ve had a little while to let it soak in a bit.

Just before Christmas, the new Liberal provincial government dropped the news about just what kind of financial shape this province is actually in. This year, the province isn’t just going to spend $1.1 billion more than it is taking in: it’s going to spend almost $2 billion more than it’s taking in.

And you can’t say we haven’t seen it coming for a long time: here’s then-premier Kathy Dunderdale at the Progressive Conservative annual convention in October 2012: “When people don’t pay a whole lot of income tax and so on, then sometimes you can get a little benign about your advice to government. Yes, give ’em a higher raise. Yes, build that. Yes, do that. Yes, yes, yes,” Dunderdale said. “Startling fact for you now: we are all so dependent on oil and revenue from our offshore and our mining and our fishery so on to keep this place going. Nineteen per cent of the people in this province pay 70 per cent of the taxes.”

(Now, at that point, oil was still pumping royalties into the provincial coffers, and Dunderdale was saying the province was going to have to cut spending anyway. Too bad it didn’t happen.)

But take that number now: assuming that Dunderdale was talking income taxes (the only area where the government can identify precisely where tax dollars are coming from), that would mean that roughly 96,000 people in this province paid 70 per cent of the $1.2 billion collected in provincial income taxes.

Stop right there and think about that number again: every penny of income tax the province expects to collect in this province totals just $1.2 billion, yet we’re short $2 billion this year alone.

The simple fact, to put a shortfall of $2 billion into perspective, is that if the provincial government wanted to cover those costs outside of oil revenues, it would have to not only double the province’s income tax rates, but double the provincial share of the HST as well. (Given the current five per cent federal and eight per cent provincial breakdown of the 13 per cent HST, that would bring this province’s total sales tax to 21 per cent.)

Neither of those is even remotely possible — but they indicate the sheer size of a problem the province is in. To break even, we would have to essentially double the take from not one, but both, of the province’s largest sources of revenue.

Then, there’s expenditures. When it comes to what the province spends its money on, the big two, the most expensive services, are health and education.

Between them, they account for roughly half of the province’s expenses, clocking in at around $3.7 billion a year. Of that, by far the largest is health, which eats up $2.4 billion all on its own.

Again, stop there.

The amount of this year’s shortfall is perilously close to the cost of the province’s entire health-care system combined. All the doctors, all the nurses, all the paramedics, all the support staff, all the hospitals, all the health-care services.

The fact is, though, that something’s going to have to be done, and not just more borrowing. In fact, the province is going to have a hard time going to the financial markets to borrow for even this year’s deficit — let alone the deficits expected in coming years — unless it can show clear signs that it’s bringing its costs under control.

And not just some kind of knee-jerk “well, we’re reviewing discretionary spending” effort, either.

Right now, the rock we’re looking at rolling is huge, but it didn’t get there overnight. The former government was warned as long ago as 2005 that oil revenues might be fleeting — and it was warned regularly: by this newspaper, by the province’s auditor general, and by a host of others, that there had to be fundamental changes. Even the province’s finance minister took to warning that there were problems with depending on oil — not that any of those ministers actually did anything about it.

Nero fiddled. You get the rest.

Russell Wangersky is TC Media’s Atlantic regional columnist. He can be reached at russell.wangersky@tc.tc — Twitter: @Wangersky.