Download Newfoundland and Labrador Privatization

Is the fiscal sky really falling
over Nova Scotia?
Toby Sanger, Economist
CUPE National
CUPE Nova Scotia Strategizing for Success
October 2, 2015
Public service sustainability: “moving
forward together”
“Public service sustainability” initiative
Lots of positive collaborative language:
 “Our
shared challenge: long-term sustainability.”
 “collaboration,
 “openness
openness and transparency”
to innovation, creativity, and new ideas”
Goals:
 “meaningfully
engage public sector employees through their unions in
a collective bargaining process…”
 “To
protect and preserve public services … by negotiating collective
agreements that are affordable to the taxpayers of the province”
Why?
Oh my God!
But we can be saved….
What does this really mean?

No funding for compensation increases beyond what is in the
fiscal plan.

“Net zero” funding for compensation increases beyond fiscal
plan. May come from cost reduction, avoidance, service
redesign or other efficiency measures. Savings must be real,
measurable and achieved.

Compensation increases must not have negative impact on
fiscal plan or level of services.

Agreements must be minimum of five years. Applies to all CAs
that expire after March 31, 2014.
What’s in the “fiscal plan”
2014-15
2015-16
2016-17
2017-18
2018-19
$8,829.0
$8,910.0
$9,078.5
$9,213.6
$9,433.6
Increase
0.9%
1.9%
1.5%
2.4%
Increase vs 2014-15
$81.0
$249.5
$384.6
$604.6
$9,920.0
$10,202.2
$10,369.3
$10,653.3
-$122.5
$22.6
$25.3
$66.1
Departmental Expenses (millions)
Total Revenues
Projected Deficit/ Surplus
$9,762.8
What does this really mean?
Example: proposal with NSTU
2015-16
2016-17
2017-18
0%
0%
0%
1%
1%
Consumer price inflation
0.8%
2.6%
2.0%
2.0%
2.0%
Annual real base wage decrease
-0.8%
-2.6%
-2.0%
-1.0%
-1.0%
Cumulative real base wage loss
-0.8%
-3.4%
-5.3%
-6.3%
-7.2%
Base wage increase
2018-19 201920
What would this mean?
CPI Inflation for NS
Base wage average settlement
NS public sector
2007
2008
2009
2010
2011
2012
2013 2014 07-14
1.9%
2.9%
-0.1%
2.2%
3.8%
2.0%
1.2% 1.7%
3.0%
3.8%
2.9%
1.5%
1.2%
1.1%
0.9%
3.0%
-0.7%
-2.6%
Est CUPE NS base wage
increase
2.9%
2.9%
2.9%
2.5%
1.6%
After inflation – real wage incr.
1.0%
0.0%
3.0%
0.3%
After inflation – real wage incr.
2.1% 2.5% 2.7%
0.1% 1.3% 1.0% 4.1%
1.9% 2.5% 2.0%
-2.2% -0.1% 1.3% 0.3% 3.6%
Could erase more than a decade of real wage gains!
Does NS have a “structural deficit”?
Definitions:
Structural deficit: a deficit that exists when the economy is at
full capacity (e.g. w/ “full employment”).
Cyclical deficit: deficit resulting from economy operating below
capacity (e.g. from recession).
Does NS have a “structural deficit”?
$150
$100
$50
$0
-$50
-$100
-$150
9.0%
6.0%
3.0%
0.0%
-3.0%
-6.0%
-9.0%
2014/15
2015/16
NS deficit/surplus (left axis)
2016/17
2017/18
2018/19
Unemployment rate (actual & forecast - right axis)
Nova Scotia does not have a structural deficit.
Nova Scotia does not have a structural deficit.
Nova Scotia does not have a structural deficit.
unemployment rate
$millions
Nova Scotia Deficit/Surplus and Unemployment Rate
Nova Scotia deficit one of lowest in Canada
Deficit as % of GDP
4%
3%
2%
1%
0%
BC
AB
SK
MB
ON
PQ
NB
NS
PEI
NL
-1%
RBC Canadian Federal and Provincial Fiscal Tables, September 28. Data for 2015/16.
Nova Scotia net public debt also mid-range
Net public debt per person
$25,000
$23,304
$21,908
$21,644
$20,000
$15,000
$16,716
$15,751
$16,021
$17,172
$14,826
$10,000
$8,706
$5,000
$5,875
$0
BC
-$5,000
-$932
AB
SK
MB
ON
PQ
NB
NS
PEI
NL
RBC Canadian Federal and Provincial Fiscal Tables, September 28. Data for 2015/16.
CA
The NS government’s estimates of future
revenue growth are low
Forecasted Revenues
2014-15
2015-16
2016-17
2017-18
2018-19
$9,762.8
$9,920.0
$10,202.2
$10,369.3
$10,653.3
1.5%
-$122.5
2.9%
$22.6
1.6%
$25.3
2.7%
$66.1
2.4%
3.0%
3.2%
3.2%
$10,000
$10,303
$10,630
$10,967
(36)
$116
$278
$372
Increase
Projected Deficit/ Surplus
Higher growth
Revenues
Resulting deficit/surplus
3.8%
Revenues & spending shares to decline
Nova Scotia forecast revenue & spending
as a share of GDP
25%
24%
23%
22%
2014
2015
Revenues/GDP
2016
2017
Spending/GDP
2018
Real problem household debt ratios
Debt ratios of Canadian households,
corporations and governments
200%
180%
160%
Household debt to disposable income
Corporate credit market debt to equity
Cdn govts net debt to GDP
140%
120%
100%
80%
60%
40%
20%
0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: Statistics Canada National Balance Sheet Cansim tables
378-0123, 378-0124 and 378-0125.
 Household debt at
record ratios, almost
double 1990s.
 Government and
corporate debt
ratios in much
better shape.
 Low interest costs
making debt more
manageable.
Public sector cuts hurt economy
Public Investment Yields Strongest
Economic Impact
(per $1 Million invested or spent)
45
4.5
35
4
GDP
3.5
30
3
25
2.5
20
2
15
1.5
10
1
Corporate tax cut
Income tax cut
0
Education
0
Public Infrastructure
0.5
Health care and social
services
5
Sources: Federal Budget 2009 (p. 240), Informetrica Ltd Macroeconomic
Impacts (2009) and Centre for Spatial Economics, Economic Impacts of
Early Learning and Care (2011).
$million GDP impact
Jobs
Child care
Jobs Generated
40
This chart of
“economic
multipliers” shows
public spending
yields more jobs and
economic growth
than tax cuts.
Conversely cuts to
public spending also
more damaging for
the economy.
Austerity budgets bad for the economy;
doubly bad for working people.
Majority of economists agree austerity budgets are
bad for the economy:
“The notion that instead of increasing government
spending to fight recessions, you should slash spending
instead … represents a stunning failure of policy”
Paul Krugman Nobel Economics prize winner
“This is the sort of foolish fiscal austerity that backfired
so badly in the euro zone.”
David Madani, Capital Economics
Slower wage growth bad for economy, revenues
Deficit alarmism being used for political ends
NB, NS, NL, other provinces all singing
similar tune to justify austerity
• Say public spending “unsustainable”
• Say need to constrain public spending
to eliminate deficit and reduce debt
• Exaggerating size of deficit/ debt so
they’ll have surpluses to use later
• But this hurts public services, reduces
wage growth and slows down
economic growth
Alternatives to Austerity

Focus on jobs, growth & reducing inequality: grow the
economy.
 Higher

revenues, lower deficits and debt/GDP ratios.
Public services and public investments good for people,
good for the economy.
 Priority
investments in areas that provide broad benefits:
childcare, education, health care, community services

Fair taxes would make economy more equitable,
stronger & generate revenues.
Summary

Net zero proposal to lead to either large real wage cuts or
deep cuts to public services

Would erase more than a decade of real wage gains

NS does not have a structural deficit: finances are sustainable
and will soon be in surplus

NS gov’t underestimating future revenues and exaggerating
deficits so it will have larger surpluses to play with.

Squeezing wages and cutting public spending bad for the
economy.