A tide of red ink erodes services in Canada
By Clifford Krauss
ST. JOHN’S, Newfoundland and Labrador – As soon as 20,000 government workers went on strike two weeks ago, 70 Native Canadian hunters from Quebec took advantage of the absence of conservation officers and slaughtered dozens of caribou in an endangered Labrador herd.
It was a dramatic sign among several that many vital public services in this remote province of 525,000 people are beginning to break down.
It was also a cautionary tale for many other Canadian provinces that have growing budget deficits, debt burdens and tensions with public-sector unions since the federal government began shifting many of the costs of social services to them in the mid-1990s.
With nurses and X-ray and lab technicians on strike, hospitals in Newfoundland and Labrador have cancelled elective surgery and are delaying chemotherapy for some patients. Public school assistants are on picket lines, and thus unavailable to children with learning disabilities. Ferry services connecting small island communities are virtually paralysed, disrupting deliveries of food and other supplies.
The walkouts began after Danny Williams, the new Conservative premier of Newfoundland and Labrador, announced that to reduce a $770 million budget deficit he would have to lay off 4,000 public service workers, or 13 percent of the provincial government’s payroll, in the next four years and freeze wages for two years.
We face an awful dilemma, Williams said in an interview on Wednesday. To achieve a balanced budget in four years we had to look at removing dentures and eyeglasses for people on social assistance.
Instead, he said, the government chose to raise the cost of driver and liquor licenses and moose-hunting fees, as well as postpone school and hospital projects.
Canada’s 10 provinces collectively registered budget shortfalls of more than $4 billion last year the weakest financial performance in six years, according to the Dominion Bond Rating Service.
With a slowing economy, listless corporate tax collection and, most important, rising costs in the health care system, provincial government finances are expected to be even weaker this year.
Ontario, Canada’s most populous province, is expected to announce a multibillion-dollar deficit in the coming weeks that will require serious belt-tightening. Politicians are considering several painful measures, including raising road tolls and reducing drug benefits for affluent senior citizens. The new Liberal government has already reversed tax cuts, raised tobacco taxes and lifted a cap on electricity rates.
New Brunswick, with a $250 million deficit, announced last month that it would trim 750 public-sector jobs, close several hospitals and raise user fees. Prince Edward Island, with a $20 million deficit, is raising taxes on gasoline and cigarettes.
Quebec was able to balance its books this year by announcing that it would sell more than $600 million in yet-to-be-disclosed public assets, but warned of a $1.3 billion deficit next year unless the federal government grants it substantial help in meeting health care costs.
Provincial finances began to suffer in the mid-1990s when the federal government began running up its own budget surpluses largely by reducing revenue transfers to provincial governments for welfare, health care and education.
The federal share of spending for Canada’s health care system, which is based on a sprawling public medical insurance system, has dropped from 40 percent to about 16 percent since the mid-1990s.
Meanwhile, the health care budget of Newfoundland and Labrador has increased 70 percent 35 times faster than the province’s total spending in the last decade.
With Canada’s population aging, health care salaries rising and the need to upgrade medical equipment, provincial health budgets are expected to continue to rise across the country.
Premiers are coming together to lobby Ottawa for more financial help. We have created a health care system that is a voracious devourer of every public dollar we have, said Brian Lee Crowley, head of the Atlantic Institute for Market Studies, a policy institute based in Halifax.
Only Alberta and Saskatchewan, with their oil wealth, have managed to reduce debt in recent years, but Saskatchewan was still forced to raise its provincial sales tax to 7 percent from 6 percent last week to avert a significant deficit.
The provinces are all under water with the exception of Alberta, Robert Rae, a former Ontario premier, said in an interview.
Canadians like to have European social services and American- style taxes, and the result is we have Canadian-style deficits and the chickens always come home to roost.