A day in the life of Danny D'Amours

New Brunswick budget day – Tax and spend or just spend?

The New Brunswick government released its provincial budget today in the Legislature.

Among some of the highlights:

  • 2007-2008 surplus of $18 million
  • 2008-2009 projected surplus of $19 million
  • 2008 projected 1.8% growth of provincial real GDP
  • Post secondary tuition freeze thanks to an increase of $12 million to post secondary institutions
  • $63.5 million or 7.2% additional funding for K-12 education
  • Health spending increased by 5.4% to a total of $2.2 billion
  • Funding for an additional 43 social workers
  • $15 million administrative cuts across various provincial departments

As David Campbell points out…. sigh. How is NB ever to become “self-sufficient” by throwing more money at budget items that don’t give us any return. The focus appears to continue to be on expenditures instead of investment.

Let’s stop throwing money down the health hole!

Don’t get me wrong, I truly value our health care system and the need for investment in it. My concern is the unsustainable expenditures which take place which don’t improve the long term sustainability of the health care system.

What percentage of the increased health spending is a continuing expense that we will have to carry forward every year such as increased funding for doctors? Why not focus on some short (or medium) term projects that improve the efficiency of service delivery or the efficiency of our valuable health care professionals? By making services or personnel more efficient, we can reduce future costs of the health care system.

For example, investing in digital imaging technology may have a high upfront cost but if you combine the improved efficiencies with the reduced cost of delivering services results in a win – win combination. Similarly, investing in a better diagnostic scheduling system which would allow contact via email or automated dialing service to notify patients of appointments instead of the current practice (at least in Fredericton) of printing and sending a notification to you via snail mail. Assuming a conservative cost of $1 per patient, a changeover to an automated system could reduce the cost to perhaps $0.10 or so.

I think that the government is on the right track with the reduction of the previously crazy 8 regional health authorities to a more manageable 2 (though I would argue that it should be 1 bilingual authority instead). This could pave the way to province-wide improvements in efficiencies. Instead of purchasing 8 different automated scheduling system, it is cheaper and easier to purchase and manage one.

Investment, not expenditures

As David Campbell argues, the focus for the government should be to attract business and economic activity to the province. It is only by attracting and developing well paying jobs that the province will be able to become self-sufficient. What is needed is for New Brunswick to attract companies with high paying jobs such as tech companies Google, Microsoft, IBM, Apple and RIM or aerospace companies Boeing, Airbus and CAE to setup in NB. Only by doing this will we ensure a growing tax base and a way to attract people to New Brunswick. After all, people migrate for job opportunities. You don’t hear that people are moving to Alberta because they have a good health care system or a good elementary school system. People follow the money…..

Spending 10 million (or any other non-trivial sum) to attract a quality stable company that will have a large payroll is an investment as you will likely get the investment back (and then some) through payroll taxes, corporate taxes and the additional economic activities being created. An investment as opposed to an expenditure.

Perplexed….

One thing that really confuses and irks me about the budget is the claimed surplus. If one looks closer, it is stated that the net provincial debt will increase (and indeed the debt – GDP ratio will increase from 26.1% to 26.2% before dropping back down to 25.6% in 2009). How can one run a surplus and yet accumulate debt? If I am not mistaken, any surplus must be applied to the debt and so in any year with a surplus, the net debt should be going down not up.

It appears that the increase in debt is due to amortization of capital assets but in my view if the money has been paid out by the government it must come out of this year’s budget whether it is $400 million for a four lane highway that will last 50 years or $3 billion for a nuclear reactor that will last 10 years.

Can anybody enlighten me???

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March 19th, 2008 Posted by Danny D'Amours | Economics, New Brunswick | no comments

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