Big gaps in provincial wealth, but similar grades for using tax dollars – think tank

In the report titled Good Enough for Government Work, the Atlantic Institute for Market Studies has awarded the 10 provincial finance ministers grades ranging from a high of B+ for Alberta and Ontario, to a low of C-for Nova Scotia and Manitoba. The study of the 2007-08 provincial budgets is the fourth in a series of annual rankings published by the institute, which uses a standardized marking system that rewards governments for keeping spending in check.

Newfoundland and Labrador, New Brunswick, Saskatchewan, and British Columbia manage average C+ grades, and Prince Edward Island and Quebec are slightly below with C marks.

“Because most provinces have both weaknesses and strengths that are captured in this analysis, the final results tend to bunch toward the middle,” said Ian Munro, the director of research at the institute and author of the report. He said the oil of Alberta and manufacturing industries of Ontario help those provinces’ generate wealth, but notes they also have some failings in the management of their finances.

“Powerhouses like Alberta still record very low grades…on some indicators. Similarly, traditionally poorer provinces like Newfoundland and Labrador are able to score highly on many measures, despite the more difficult circumstances they face in certain economic dimensions,” Munro said in a news release.

Alberta scores first in the categories of fiscal health and in the accuracy of its financial forecasts, but received a D+ for the impact of its budget due to a rise in per capita spending of tax dollars. Meanwhile, though Ontario is given high marks for keeping public spending under control, it gets a B-for its budget due partly to its income and corporate taxes.

The institute, which argues that sales taxes are healthier for an economy than income taxes, has developed a ratio of the “good” taxes (sales, fuel, user fees) versus “bad” taxes (income tax, corporate tax, liquor and tobacco taxes). It finds that Ontario’s “bad” revenues are 61.7 per cent of the total, the second highest after Manitoba in its list.

The institute gives high grades to Newfoundland and Labrador and Saskatchewan because “they presented the 2007-08 budgets that would do the most to promote healthy economies in the long term – by limiting or reducing taxes, expenditures, interest payments, and deficits.”

The overall results are similar to last year’s findings. The only provinces showing significant movement are Alberta, moving up from a B to a B+, and Manitoba, going in the other direction from a C+/B last year to a C this year. The budgets that are being introduced in provincial legislatures in the spring of 2008 will form the basis of next year’s analysis.

The overall mark is calculated from three subgrades:

-Fiscal health, a measure of the state of the province’s fiscal finances for fiscal year 2006-07, prior to the tabling of the spring 2007 budget.

-Fiscal accuracy, which assesses 2007-08 budget figures against both the estimates made in the prior year’s budget document and independent third party figures.