It's that time of year again. In the coming weeks, millions of honest, hard-working Canadians will spend a few evenings at the kitchen table, or the family computer preparing their income tax returns.
It is also budget season in provincial legislatures across the land. Finance ministers take turns rising from their seats to read long, often windy speeches. They unveil plans to tax and spend for another year, and they assure us that all is well, thanks to their prudence and sagacity.
Three ministers spoke in the space of two days in late March. Shirley McClellan, in Alberta the enviable, went first, followed by her counterparts in Ontario and Quebec. A close reading of all three budgets reveals two approaches. If you've got money - which was the case in Alberta and Ontario - then spend it. If you haven't got the money - think Quebec - well, spend it anyway.
If you're looking for a brake on runaway government spending or, heaven forbid, meaningful tax cuts, forget it and go back to work. You'll have to wait another year, probably more.
Start with Quebec, the closest thing to a fiscal basket case in this federation. Quebec has the largest provincial debt in the country at $118 billion, or 43 per cent of gross domestic product, which is much higher than any other province. Quebec has the highest taxes of any jurisdiction in North America and this country's most generous entitlements, including the cheapest tuition, the most heavily subsidized daycare, the most generous parental-leave plan and a high-priced prescription drug program.
Premier Jean Charest and his Liberals came to office promising to reduce the tax burden by $1 billion a year. To keep their word, they would have had to take on Quebec's radical public-sector unions and their militant private- sector allies, as well as a populace pampered by decades of ill-conceived government largesse.
Alas, Charest and his colleagues have proved too weak-kneed for that. So spending is going up as usual - health care by $1.3 billion, education by $660 million. The provincial debt will grow $3 billion this year and the same next year. But the government has a plan to deal with its debt - a bit of budgetary chicanery called the Generation Fund, which will be built through royalties charged to private power producers and eventually Hydro Quebec. The funds will be invested and the returns used to pay down the debt - at about the same rate as water erodes granite.
Ontario Finance Minister Dwight Duncan found himself in the pleasant position of deciding what to do with a windfall of $2.3 billion thanks to personal and corporate taxes that brought in more than expected. Did he use the money to: (a) eliminate a deficit estimated at $1.4 billion; (b) reduce the province's debt; or (c) spend it? The answer is: He spent it.
Most of the windfall - $1.2 billion of it - is going into transportation projects, including $670 million to extend a Toronto subway line and $400 million on roads and bridges. Like a wizard waving a magic wand, Duncan solved Toronto's budget deficit problem with a surprise offering of $200 million.
This budget item seems to defy rational analysis. First, it was described as a "one-time transit investment ... for subway operations," except that finance department officials hinted to reporters that the city could do what it liked with the money. Second, the Toronto Transit Commission has an operating shortfall of only $20 million, not $200 million. Finally, even with all that extra money, the TTC stuck with a 10-cent fare increase effective April 1.
McClellan is surely the envy of her peers. She merely had a $4.1-billion budget surplus in a debt-free province with some of the lowest taxes in the country. It would be hard to make the case for austerity under such circumstances and McClellan didn't try.
Program spending will hit a record $28 billion in fiscal 2006-07, up eight per cent. Dozens of programs are getting new money, including healthcare as usual. It already consumes more than one-third of the budget and spending will rise to $10.3 billion, up $735 million or 7.7 per cent.
Alberta will spend $13 billion over the next four years on infrastructure - hospitals, schools, highways, bridges, public transit, you name it - up from the $9 billion pledged in the last year's budget. That has many private-sector observers worried because, in order to build, you need labour and materials and Alberta's economy is already facing serious shortages of both. The government building program will only increase demand and drive prices upward.
Alberta, Ontario and Quebec are very different places and each faces its own challenges. Yet when it comes to budget-making, a similar mentality prevails. The thinking seems to be: Spend a mountain of money and hope you solve a few problems, even if the big ones go untouched and real opportunities go unrealized.
Quebec is doing nothing meaningful about its ruinously high debt. Ontario is doing nothing about the erosion of its manufacturing base, which remains a cornerstone of its economy. And Alberta is spending a rare windfall on routine projects rather than investing in strategic initiatives that could make the province a world leader in medical and scientific research, as well as a global centre for technological innovation and discovery.
(D'Arcy Jenish can be reached at jenish@businessedge.ca)
