Friday, 7 April 2017

Budget 2017: Holding the Line

Budget 2017: Holding the Line

By: Ryan Young

After months of speculation and debate, Cathy Bennett delivered her second budget speech in the House of Assembly on Thursday. The large scale public sector layoffs that everyone was expecting did not materialize, and there was very little of anything to make headlines in this year’s budget speech. The deficit went down thanks to a rise in oil prices and production and the harsh revenue measures from budget 2016, but other than a few bright spots, the budget itself was pretty lackluster. Even the flagship peace offering, a decrease in the gas tax, was preempted by a seven cent rise at the pumps on Thursday. During it all, a small but boisterous crowd gathered on the front steps of Confederation building with food and music to let the government know that the people are still angry and they are not going away.

The really good news in the budget was that oil revenues were up, which along with the extra tax revenue, reduced the deficit from a projected $1.83 Billion to $1.1 Billion. The projected deficit for 2017-2018 is $778 million as long as oil prices hold steady. Oil production is expected to be slightly lower this year with a projected average price of $56 per barrel. Hebron will come online later this year but with an equity stake in the project, the province will not reap many benefits from that development in this fiscal year.

The gas tax reduction was the other big news in the budget, with the Liberals pledging to reduce the tax by 75% by the end of the year. The first reduction of 8.5 cents will come into effect June 1st with an additional 4 cents coming off in December. The remaining tax will be evaluated before the fall fiscal update. Unfortunately for the Liberals, their good news piece of the budget was counteracted by a big bump in the prices at the pumps. In any case, the reduction of this tax is good news, even if the other 299 taxes and fees they raised in budget 2016 are still in place.

Some other good news items were included in Bennett's speech. Money for child care subsidies and raises for Early Childhood Educators are positive stop-gap investments in lieu of a new child care strategy for the province. New money was allocated for planning for the replacement of the Waterford Hospital and the penitentiary. Money was also added to the justice system, including $250 000 for free legal advice for sexual assault victims and more crown attorneys to help reduce caseloads. Federal monies for mental health and home care came down the pipes, and $500 000 will be spent to hire new student assistants for inclusive classrooms. Funding was also restored to the operational grant for libraries to keep the doors open until the EY report is complete.

Transfers to Nalcor will come in at around $485 million, which is significantly lower than the $1.3 Billion allocated in budget 2016. Nalcor has also been instructed to find $210 million in revenues by 2020 to help offset electricity rate increases. No specifics were given on how that would be accomplished, but both Bennett and Premier Ball offered assurances that rate mitigation is a priority for this government.

It was a budget that tried to get a little bit in for a lot of groups and it did a good job of doing that without ruffling too many feathers. The downside is that the budget left in limbo thousands of public sector employees who still have no idea how safe their jobs are. Minister Bennett stated that mass layoffs would not be her approach but that her government would continue to find efficiencies moving forward. That has many believing that instead of facing the hard criticism of big job cuts, that they will dole them out instead as a death by a thousand cuts. While many public employees were breathing a sigh of relief that they still have a job today, they are still in a position of uncertainty when it comes to planning for their short and long-term futures. That will likely mean another year of decreased consumer confidence which will continue to negatively affect the economy.

Very little was done in this budget to address government spending. Nearly $300 Million in spending reductions are planned although we don’t know exactly where those savings will come from. A wage freeze was also introduced for this fiscal year for all managers and non-unionized public employees. While the freeze itself will not offer much in the way of savings, it may be setting the tone for future negotiations between Bennett and union leaders.

The overall theme put forth by the government seems to be that their tough decisions are working and that we are turning a corner and need to stay the course. The reality, however, is that we are doing better because of the price of oil, and even the massive hardships that have been placed on the people of the province have made little difference to our bottom line. The Liberals claim to be on track to reach their target of a return to surplus by 2022, but that claim is based on assumptions that oil will continue to rise and bail us out from our grim situation.

While there are a few good things in this budget, it is mostly an exercise in smoke and mirrors designed to buy the government another year in the hopes that oil royalties will allow them to spend their way out of the people’s bad books. There is no obvious plan to address spending issues or our escalating provincial debt, and despite a little well intentioned money being spent, all they really have to show for their efforts are plans to make more plans. While few would argue that proper consultation is needed before a government acts, many are wondering when this government will stop consulting and start acting on what they heard. The solutions offered in this budget are band-aids at best and offer no indication of what this government’s plans are, beyond waiting for the price of oil to go up.

As benign as Budget 2017 seems to be, the devil will be in the details and it might be quite a while before the full effects are known. Instead of large scale cuts we should expect layoffs in dribs and drabs, but the final number will likely depend on how much the price of oil rises. Even after the rude awakening we just went through on the dangers of relying to heavily on oil royalties, the Liberals seem content to ride the wave and hope to utilize offshore revenues to offset all of the new taxes and fees. They keep promising us a plan but what they delivered was a hold-the-line budget that does nothing to address the real issues at play. I guess all we can do is pray to the great god of oil and hope that the prices can stay up until we have time to elect a government that does have a plan.

No comments:

Post a Comment