By JOHN WILLIAMSON (Vice President of Research)
• Telegraph-Journal, 14 Sep 2016
The New Brunswick government released its budget update two weeks ago. The picture isn’t pretty. The province will borrow more money because expenditures increased faster than anticipated. Once again, we are reminded the government has a spending problem.
Since 2005, New Brunswick’s program spending has swelled a staggering 50 per cent. Yet who among us believes we are getting better government services for the extra costs, added debt, and heavier tax burden? The government – like any household or business – needs to live within its means by controlling expenditures. But it hasn’t done that. Our provincial bureaucracy is costlier and larger than the Canadian average.
The province could today be running a $1-billion budget surplus had governments over the last decade limited spending growth to 2 per cent a year. Even after accounting for inflation, that’s still a small overall annual increase. Instead, expenditures each year expanded at almost twice that amount, on average by 3.8 per cent – double the rate of inflation and our negligible population growth.
We know from experience spending is driven up when governments fail to set expenditure targets and follow them. The consequences in New Brunswick of unchecked spending are chronic deficits since 2008 combined with large tax hikes on working families and businesses. These policies have hurt the economy and dampened job creation. And this year will be more of the same. The Gallant government will increase spending by at least 3.6 per cent. And the red ink will continue even after the HST increased by two points because the province will spend the additional tax revenue.
Controlling spending isn’t easy. It requires discipline. But the payoff is a more efficient public sector, more effective social programs with defined goals and objectives, lower taxes and a stronger economy with more people working.
This is something taxpayers aren’t seeing at New Brunswick’s Education Department. A new report, entitled Education Spending & Public Student Enrolment in Canada, reviews public education spending along with school enrolment figures using numbers from Statistics Canada. It should raise some tough questions for policymakers in Fredericton because our province’s education budget has continually increased over the past decade even while the number of K-to-12 students in our schools has fallen swiftly.
Published by the Vancouver-based Fraser Institute, the study reports total spending on public school education in New Brunswick grew from $1 billion in 2004 to $1.3 billion in 2013 (the most recent year StatCan data is available). That’s a cool $300-million increase, which by coincidence happens to roughly equal this year’s provincial budget deficit.
In fact, the extra $300-million in education funding dramatically understates the real spending increase because it doesn’t reflect declining enrolment levels. According to StatCan data, the number of students attending New Brunswick public schools dropped from 117,144 in 2004 to 99,921 in 2013. That’s an eye-popping 17,223 fewer pupils and a decrease of 14.7 per cent.
The Fraser report also adjusted the budget numbers to reflect the cost of living. In 2004, New Brunswick spent $10,158 per pupil, in 2013 dollars. But instead of controlling costs, government spending for each student – after inflation – jumped by more than $3,000 and stood at $13,271 in 2013. That’s 30.6 per cent higher than inflation growth.
Had provincial education spending been better controlled, the budget could be $300 million lower without any decrease in real per pupil funding. That’s because the rising cost of living was entirely offset by having to fund so many fewer students. But the province didn’t control its costs. Instead, it blindly added more dollars to the budget each year.
Realizing these savings would have meant prioritizing classrooms over the education bureaucracy. Perhaps the extra spending would be worth the cost had student outcomes improved noticeably. But they haven’t. Two years ago, New Democratic Party leader Dominic Cardy pinpointed part of the problem when he criticized the province’s no-fail policy. That’s the practice of moving poorly performing students to a higher grade before they are ready. It results in some students receiving a diploma without completing what is needed to graduate from high school, including an ability to read or write.
It is a stain on our province’s education system that over half of New Brunswick’s population is functionally illiterate. But there is scant evidence our province’s high illiteracy rates will drop because of the extra money.
None of this is meant to suggest we balance the books by exclusively targeting the education budget. Far from it since an educated workforce is a necessary ingredient to economic growth. But the budget should not automatically increase each year when enrolment is falling. That’s doubly true when the government has preserved and expanded the separate French and English school bus program that divides student ridership based on language.
Critics and the teachers’ union will no doubt insist any budget restraint would shortchange students. They should consider British Columbia. Outside of Atlantic Canada, the west-coast province had the largest decline in student enrolment in Canada, dropping by 9.5 per cent. Yet, B.C. responded by spending 40 per cent less per student than New Brunswick did over the same ten years.
Because B.C. better controlled its spending, its public finances are in better shape. That has made it easier for B.C. legislators to lower and keep taxes down to encourage investment and job growth. Today, it is home to Canada’s strongest economy.
New Brunswick once had a tax advantage over Quebec and other Atlantic provinces, but today is one of the highest taxed provinces in Canada. The result is little job creation and an unemployment rate that hasn’t dropped since 2010.
New Brunswick needs its provincial policymakers and political leaders to develop ideas that emulate Canada’s economic winners – like British Columbia. We should not be satisfied with a sluggish, low-growth economy because the government spends excessively and imprudently adopted Quebec-level taxes.