Rough seas ahead for Atlantic finance ministers

While deficits are not new to provinces like Alberta, its rich oil reserves mean the good times outnumber the bad in terms of the province’s finances. When oil prices rise, so does revenue and deficits disappear as quickly as they came.

In Atlantic Canada, deficits have been more the rule than the exception. After decades of tinkering with various schemes to address this persistent issue, it could be time for something completely different in Atlantic Canada. Whether that happens anytime soon remains to be seen.

In recent years, Atlantic Canada has enjoyed a bit of a golden period. Much of that can be put down to population growth. People flocked to the region from both inside and outside of Canada because of the region’s enviable lifestyle and what was once a relatively affordable and available housing stock. More people spending more money meant more revenue and balanced budgets.

Today, housing prices are up, and availability is down. Immigration has been curtailed and for the first time in nearly a decade, population numbers across Atlantic Canada are in decline. So are the provinces’ financial forecasts.

New Brunswick is a great example of how things have come full circle. A decade ago, the government released a public document called “Choices to move New Brunswick Forward.” A few months ago, a document titled “Difficult Decisions” was released. While not identical, the two pre-budget documents are very much the same. Cuts to education, health care efficiencies, road tolls, all things considered — but not really acted on — in 2016, are back on the table in 2026. In 2016, government did hike the HST to be in line with other Atlantic provinces, raising hundreds of millions of dollars in new revenue. The reprieve, however, proved temporary.

With no stomach for increased taxation, Atlantic finance ministers now must consider what services they deliver, or whether some of those services would be better delivered by someone other than the civil service.

We often see language in budgets, speeches and government documents refer to cuts to the civil service through things like attrition, retirements, or right sizing.  However, the number of government employees, and the accompanying wage bill, is getting larger, not smaller across Atlantic Canada. Public Service reform has been more of a talking point than a practice.

One thing Atlantic provinces have been shy to do is court the private sector to provide services while taking employees off the books. Granted, premiers are probably never going to consider privatizing hospitals, schools, or the justice system. But the province sells alcohol and cannabis, runs tourism sites, provides online services, and maintains roads. The private sector could have a significant role to play in these types of services, if provinces were willing to open that door.

Nova Scotia has already dropped its budget and the public is voicing its discontent with some of the government’s changes. While some small cuts have been walked back, it does carry a promise to reduce the civil service by five per cent a year over the next four years. That could mean eliminating about 2,000 positions, a challenging goal if only relying on attrition and retirements. Despite the promised cuts, Nova Scotia’s spending will increase by a projected $610 million this coming year, versus a projected increase in revenue of $88 million. Like all Atlantic Premiers, Tim Houston is heavily promoting economic growth, but the pay-off won’t be immediate.

In Newfoundland & Labrador, Tony Wakeham’s newly elected government promised tax cuts and better services in areas such as health care, so drastic reforms to the civil service are not likely to be on the table this year. However, one should expect a lot of potential volatility in the NL budget in coming years. Wakeham’s election has put the Churchill Falls deal inked by the previous Furey government with Quebec under review, along with its projected $200 billion in revenue. Newfoundland has potential oil revenues and the deal on Bay du Nord struck recently by the Wakeham government has raised hopes of a revenue spike down the road. But that revenue is market-reliant, which is a bit of a rollercoaster, as Alberta knows well.

New Brunswick’s budget comes on St. Patrick’s Day and promises to be more sober than celebratory with a high deficit in the forecast. It wasn’t that long ago that the province kicked around ideas to cut the government payroll and engage the private sector in service delivery. Premier Susan Holt’s background includes a stint as head of the New Brunswick Business Council, so she’d likely be open to at least discussing more private sector involvement. The province is communicating that the road back to balanced budgets will be long so such reforms would likely be more incremental than abrupt.

Prince Edward Island, with its smaller population and budget probably has more flexibility to experiment with greater private sector involvement. However, despite a large majority of seats Premier Rob Lantz is likely looking to shore up support after a surprisingly bruising leadership race. The public service is largely based in Charlottetown, where a big chuck of the province’s ridings are.

Ultimately, that will be a dilemma for all four Atlantic premiers if they want to cut the civil service — balancing the books while balancing the political implications in the city where they work or live. Seismic shifts in delivering services would likely set of a firestorm of protests from unions and others. The civil servants charged with advising premiers are unlikely to make moving their jobs to the private sector their top recommendation. Right sizing the civil service will not be an easy route for any premier moving forward.

Carl Davies is an accomplished writer, strategist and public relations advisor with more than two decades of experience in communications and public affairs. He serves as Senior Counsel on the Atlantic team at Global Public Affairs.