Revenue Problem or Spending Problem?

In the context of Nova Scotia Bill 148, the bill passed by the McNeil government in an attempt to bring some rationality to public spending, Stephen Kimber, a local commentator who teaches journalism, has declared that the Nova Scotia Government has a revenue problem.

The crux of it is that the Nova Scotia government does not have enough money to pay for all that it currently spends.  Does it really matter whether the problem is caused by a shortage of revenue or by an excess of spending?

Spending more than you have is always problematic but the difference is meaningful because misdiagnosing the problem makes it difficult to provide a remedy for it.

To argue that there is a spending problem suggests that spending less can cure the problem, and in order to spend less one would have to curtail some expenses.  Conversely, the revenue-shortage diagnosis is shorthand for raising taxes and fees to Nova Scotians.

Kimber exclusively looks at the difference between budget projections and the last fiscal update to make his assessment.

While government spending was within .05 per cent –a rounding error– of initial budget projections, revenues are down.

This is the hasty equivalent of assessing last week’s weather projections against the temperature update at 10AM this morning to conclude that we have had nothing but sunshine in the past decade.

Even looking at budget variations in the year before (2014) does not support  such conclusion. Provincial revenue (without federal transfers and equalization) in 2015 fell by 0.76 per cent, spending rose by 1.25 per cent.

A more honest assessment rests on a wider context.  Graphing the trends for provincial revenue and spending in the last decade (adjusted for inflation and expressed in thousands) presents a different story.

revenueProvincial revenue (above) has fluctuated. It has sometimes  declined and at times it has increased.  However modest, the trend over all is upward, more sharply so since 2011, from $5.4 billion to 5.8 billion, at a time when the population has decreased.

Provincial spending also fluctuates but shows a more consistent and sharper upward trend over all, growing by over $1 billion, more than 10 per cent, in the last decade.

NS Spending 2015

Overall, in the last 10 years revenue has modestly increased but spending consistently has grown and outstripped income. The evidence may not grant room for grand generalizations but spending more and faster than we receive brings us closer to a spending problem –not a revenue problem.

While Nova Scotians are the second most taxed jurisdiction in the country, its public servants are much better paid than the average Nova Scotian worker employed by the private sector.  In addition, Nova Scotia has a much larger number of public servants on its provincial rolls per 1000 inhabitants than the Canadian average.

Undoubtedly, public servants deserve to be paid in accordance with their skills and performance. But when money is scarce, Stephen Kimber and those who favour fees and tax hikes to finance above-average pay raises for provincial public servants should explain why regular Nova Scotian workers should pay even more taxes to create an even greater gap between their salaries and those of provincial government workers.

One thought on “Revenue Problem or Spending Problem?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s