In a scene reminiscent of Bernie Boudreau’s road show after the election of the John Savage Liberal government in 1993, Nova Scotia’s new minister of finance rolled out his big chart this week showing a heavy red line trending upward on an “Unsustainable Path.”
In 16 years, the province has seen only three majority governments elected — Savage’s, John Hamm’s Tories in 1999, and Darrell Dexter’s New Democrats in 2009. Each of these elections brought a change in government, and in each case the “unsustainable” financial trend lines of the government became an early overriding concern.
By the end of the Liberal reign in 1999, and the Tories’ turn in 2009, fiscal prudence had pretty well gone by the board. Indeed, the appetite for restraint doesn’t last long. Even Hamm’s vaunted reputation as a fiscal conservative was somewhat overblown, the improvement in the province’s finances due more to robust revenue growth than to tough restraint. In its review of the province’s finances, released by the new government this week, the consulting firm Deloitte noted that provincial spending increased faster than inflation at annual rates between 6.2 and 8.9 per cent since fiscal 2004-05 — a period that includes most of the last two years of Hamm’s tenure.
So now the new government is setting up to take its hacks at this so far irrepressible, two-headed bogeyman of deficit and debt, who keeps reappearing like Freddy Krueger, the Elm Street nightmare. Finance Minister Graham Steele’s release of the review was preceded by preemptive strikes from right and left. Charles Cirtwill of the Atlantic Institute for Market Studies suggested the public sector is bloated (97 public servants for every 1,000 Nova Scotians) and warned against tax increases, while Saint Mary’s University professor Larry Haiven painted the review is a cynical move to dampen expectations and create political room for government cuts.
The government, meanwhile, isn’t saying what it will do except that it’s sticking by its campaign commitments which include balancing the budget in the next fiscal year. According to the Deloitte review, the government will have close a gap of more than $800 million between projected revenue and spending to get out of the red in fiscal 2010-11. Dexter has already said the government would use the so-called Crown share revenue, derived from offshore agreements, but he may end up raiding the offshore revenues currently earmarked for debt payment as the defeated Conservatives proposed to do in May.
Even if the Deloitte projections are ballooned somewhat to make the situation look as bad as possible, as Liberal Leader Stephen McNeil alleges, the government will face formidable fiscal challenges throughout its first term. We’ll see the outline of its plan when the legislature convenes in September.
Trend lines towards a $1.2 billion deficit in 2012-13, with debt growing at a clip of more than a billion dollars annually, are not fictions and neither can the numbers be blown off as inconsequential. For voters, the galling thing is that we’re finding this out now, after the election. While working to fix finances, the government has to reform financial reporting as well to end the cynical gamesmanship that all parties play when voters are kept in the dark.