Category Archives: Public Finances

Fiscal Management Act a positive option for Atlantic First Nations

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(Photo: destination Membertou)

By Joseph Quesnel, AIMS Fellow

Despite all the doom and gloom we often hear about First Nations in Atlantic Canada, there are some good news stories out there. In particular, it may be news to some that there is an approach to improving First Nations that has strong evidence to back it up.

In 2016, three First Nations from Atlantic Canada were added to the First Nations Fiscal Management Act (FNFMA), which means in 2017 that they now have access to First Nation institutions that have been proven to improve indigenous wellbeing.

The three Nova Scotia-based Indigenous communities that were added to the schedule of the FNFMA were: Acadia First Nation, Paqtnkek Mi’kmaw Nation, and Sipekne’katik.

The FNFMA proves that voluntary outside accreditation is a strong way for First Nations to improve their communities and participate in their local economies.

The FNFMA regime is great because it is voluntary for First Nations and is run by First Nation institutions. With the addition of new bands in 2016, the total number of bands under the FNFMA schedule is up to 211. The FNFMA came into force in 2006, but this option is growing in popularity among First Nations.

The FNFMA allows participating bands to gain authority over financial management, property taxation and local revenues, and financing for infrastructure and economic development.

Through the First Nations Tax Commission, FNFTA-compliant communities can tax real property on reserve lands and raise local revenues. These are own-source funds in addition to federal transfer funds.

The good news? The National Aboriginal Economic Development Board found that First Nations that have real property taxation bylaws tend to have better economic outcomes than those that do not.

The last part of the FNFMA is very important. It allows First Nations to prove they are subject to strong financial management practices and as a result access financing for important things such as infrastructure. First, the bands must receive certification through the First Nations Financial Management Board. To obtain this certificate, a First Nation must have a financial administration law that meets First Nations Financial Management Board standards.  Then, finally, the First Nation may access funding through the First Nation Finance Authority. This allows participating First Nations to enter the bond market and access the kind of capital they need at lower interest rates to meaningfully participate in major economic projects.

The First Nation Finance Authority has lent $343 million to 41 First Nations since 2014.

Atlantic First Nations are not new to the FNFMA experience. Membertou First Nation on Cape Breton Island provided one of the best examples of borrowing from the First Nation Finance Authority. That community used its loan to refinance a commercial loan and save over $140,000 a month from the difference in interest rates.

2017 will be interesting to watch as we see what these three Atlantic First Nations do with their new access to the FNFMA.

 

 

 

 

 

 

 

 

 

Examination of public sector in Western Canada remains necessary

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By Marco Navarro-Génie, President and CEO

The paper AIMS published last week with the Frontier Centre for Public Policy looked again at public sector workers in Canadian provinces, excluding the federal public service.  The new work placed an emphasis on Western Provinces;  the first one focused on the Atlantic region.

The type of reaction to the “Western” data paper in the Winnipeg Free Press caught my attention.  David Camfield, an associate professor of labour studies and sociology at the University of Manitoba was quick to dismiss the paper as a kind of fake news.  He charged that the paper was looking for troubles where there are none, and suggested the authors of the study thought the public sector workers are unimportant.  None of those comments had evidentiary bases in the paper.

Camfield did introduce substance to his criticism by addressing the issue of scales, which dictates that smaller provinces (in population) tend to be at a disadvantage.  This is true to some extent, and the observation is valid. But the critique is less effective because the measure we use (number of public servants per one thousand people) goes some distance to account for scale.

The data, in addition, show that other smaller provinces with similar profiles have fewer public sector workers per thousand residents than Manitoba.  The worst case in Atlantic Canada, Newfoundland and Labrador, has half the population of Manitoba. Newfoundland’s population is extended over a very large territory, yet Newfoundland has 101 public sector workers per thousand versus the 111 in Manitoba.

Manitoba is more densely populated (Newfoundland and Labrador has 1.31 inhabitants per square kilometer; Manitoba has 2.03).  Should it take 10 more public servants per thousand paid by provincial residents to deliver services in Manitoba than it does in Newfoundland and Labrador?

Manitobans ought to ask why it is that their provincial and municipal governments need so many public servants. 111 public servants per thousand drawing pay from the provincial taxpayer in Manitoba represent 28 more per thousand than the national average, or 34 per cent more over all.  Manitobans need to ask if the services they receive are 34 per cent better than those of the average Canadian. Are they 34 per cent better than in New Brunswick?

New Brunswick offers an instructive comparison with Manitoba.  While Manitoba has a notable French-speaking population (4 per cent), New Brunswick (and its relatively-high rural population) is officially bilingual (and 32 per cent francophone). It offers many public services in French, significantly increasing their delivery costs and often duplicating them.  Yet, New Brunswick is below the national average with 81 civil servants per thousand.

Our call for a thorough examination of the public sector’s size in Manitoba and Saskatchewan remains necessary.

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All their economic roads lead to more spending

screen-shot-2017-01-06-at-2-34-12-pmIn commenting against our recent study exposing talk of “austerity” in Atlantic Canada as alarmist, Jordan Brennan’s prescriptions are misguided. Brennan himself recently published a paper with the Canadian Center for Policy Alternatives that depicts as austerity measures the modest attempts to keep government spending under control in Nova Scotia.

However, Brennan’s comment is useful in that it draws attention to an economic worldview that no one endorses, save those who profit from it. That view offers government growth and the hiring of more civil servants as the response to both a succeeding and a failing economy:

  1. If the economy is contracting, their standard recipe is that growing government and hiring more public sector workers serves as an economic stimulus and will prevent deeper recessionary troubles.  This suggests spending one’s way out of recessions, as British economist John Maynard Keynes proposed.
  2. If the economy is growing, Brennan thinks that governments ought to hire more public sector workers in order for government growth to keep up in proportion to overall economic growth. This suggests spending one’s way through economic booms (It means little that this is the opposite logic of point 1, and the contrary to what Keynes prescribed).

Brennan goes on to taunt the productive sectors of the economy in near-zero growth: “Nova Scotia’s public sector is giving a boost to overall employment growth when the private sector has not stepped up to do its part.”

Apart from the contradicting issues, the vicious circularity of the last point is lost on me.  Taxed more and more in order to pay for the bloated public sector in Nova Scotia, the productive sector is less able to hire additional workers.

It is not a shock to see that for those who over time profit most handsomely and most directly from greater and greater government spending, the only solution to every type of economic situation is more government spending.

 Editor’s Note: This blog entry is the final part in a series of four blog posts related to our recent paper “Measuring Austerity in Atlantic Canada” by Patrick Webber. Following misdirected comments and criticism of the study, we compiled this series to clarify misconceptions and to underscore its findings. Read part one here. Read part two here. Read part three here.