Research Overview: Public Finance & Fiscal Federalism

All four Atlantic Provinces face serious fiscal challenges. Public debt as a share of GDP is high, and debt servicing costs threaten to further constrain the ability of governments to keep taxes competitive and public services adequately funded in the years ahead.

Research Focus

Our work in the area of public finances and fiscal federalism draws on lessons from our own country’s history and other jurisdictions to identify successful strategies for public spending and tax reform that can help spur economic growth while improving the health of public finances. Of special focus for us in the year ahead will be growth-oriented tax reform. AIMS will also continue to be a leading centre for research on equalization and fiscal federalism. Canada’s equalization program is motivated by good intentions, but it has unintended consequences which constrain economic growth in the region and discourage natural resource development. By continuing to document the problems with our current system and identify solutions (including successful policy reforms from other countries) our research will help contribute to public awareness of the ways in which equalization is the “help that hurts” Maritime Canada and of the need for policy reform.

Papers and Studies

Short of the Green: Golf as an Economic Development Tool on Prince Edward Island
February 2015
Ian Munro, Independent Economic and Public Policy Analyst

Ian Munro discusses whether Prince Edward Island’s tourism strategy benefitted taxpayers and argues that measures to boost tourism on the Island using the golf industry were largely unsuccessful. The paper also documents a number of reasons for the policy failure and offers lessons from the experience for provincial governments on the Island and elsewhere: “The provincial government in Prince Edward Island relied on simplistic projections, while failing to consider risks and alternative scenarios. The strategy may have seemed compelling, but a combination of bad luck and strategic missteps resulted in a policy failure.”

Declining Equalization Payments and Fiscal Challenges in the Small, “Have-not” Provinces
November 2014
Ben Eisen, Director of Research
David Murrell, Professor of Economics, University of New Brunswick
Shaun Fantauzzo, Policy Analyst

Ben Eisen, David Murrell, and Shaun Fantauzzo document a decline in equalization payments relative to GDP in Manitoba, New Brunswick, Nova Scotia, and Prince Edward Island and argue that fiscal consolidation is necessary in those provinces if they wish to constrain public debt: “Economic weakness in Ontario and Quebec is having a real impact on the bottom line for the small, have-not provinces. It would be risky to depend on an economic turnaround in Ontario and Quebec to solve the fiscal challenges facing the four provinces in our study and the prudent course of action is to assume that help is not on the way.”

The Size and Cost of Atlantic Canada’s Public Sector
September 2014
Ben Eisen, Director of Research
Shaun Fantauzzo, Policy Analyst

Ben Eisen and Shaun Fantauzzo compare public sector employment levels and compensation rates in the provinces and show that they are higher than the national average in the Atlantic region. If provincial governments in Atlantic Canada aligned their public sector with the national average in terms of employment, it would have reduced the public sector wage bill by $1.89 billion. In the context of sustained deficit spending, rising net debt, and weak economic forecasts, they recommend a government-wide cost-benefit analysis of public sector spending.

New Brunswick’s Debt and Deficit: A Historical Look
May 2014
David Murrell, Professor of Economics, University of New Brunswick
Shaun Fantauzzo, Policy Analyst

David Murrell and Shaun Fantauzzo identify spending restraint as the most viable option for curbing public debt in New Brunswick. Their data reveals a decline in the province’s revenue capacity since the 1980s, and while they acknowledge the provincial government’s recent moves to consolidate the province’s finances, they warn that additional fiscal consolidation efforts will be necessary to ensure the stability of provincial finances.

Opinion Pieces

Provincially-owned golf courses continue to bleed red ink on PEI
17 February 2015 in the Guardian
Ian Munro, Independent Economic and Public Policy Analyst

Declining Equalization Payments, Fiscal Challenges In P.E.I.
14 November 2014 in the Guardian
Ben Eisen, Director of Research
David Murrell, Professor of Economics, University of New Brunswick
Shaun Fantauzzo, Policy Analyst

Atlantic Canada’s public sector bigger than average
19 September 2014 in the Chronicle Herald
Ben Eisen, Director of Research
Shaun Fantauzzo, Policy Analyst

PEI’s liquor woes: surcharge constrains initiative
20 August 2014 in the Guardian
Shaun Fantauzzo, Policy Analyst

New Brunswick must tackle its debt problem
22 May 2014 in the Telegraph Journal
David Murrell, Professor of Economics, University of New Brunswick
Shaun Fantauzzo, Policy Analyst
Ben Eisen, Director of Research

Media Coverage

Government calculators out of whack
17 February 2015 in the Telegram

PEI Golf has important lessons for all provinces: report
13 February 2015 in the Times and Transcript

Time to be bold and shrink the public service
12 February 2015 in the Chronicle Herald

Manitoba’s bloated public sector
11 February 2015 in the Winnipeg Free Press

Selling provincial golf courses “takes time”: Tourism Minister Henderson
10 February 2015 in the Guardian

It’s not about big or small, it’s about good or bad
2 February 2015 in the Times and Transcript

Wage standards: a one-dollar fix for a $12 billion problem
28 January 2015 in the Times and Transcript

Atlantic Provinces look to set standard public sector wages
24 January 2015 in the Telegraph Journal and Times and Transcript

Time to remedy dependent culture
11 December 2014 in the Telegraph Journal

Time to adjust our appetite
15 November 2014 in the Telegraph Journal

We need to shrink our civil service
25 September 2014 in the Telegraph Journal

Are minimum wages an effective anti-poverty tool?(video)
17 June 2014 in the CBC Maritimes

AIMS: cut spending
22 May 2014 in the Telegraph Journal

Shed the luxuries
21 May 2014 in the Daily Gleaner

Institute: cut hospitals, merge schools to trim debt
21 May 2014 in the Telegraph Journal

Study suggests NB government not doing enough to reduce debt (video)
20 May 2014 in CTV Atlantic

Opinion Pieces

Minimum wage ineffective on poverty
6 May 2014 in the London Community News
Ben Eisen, Director of Research
Shaun Fantauzzo, Policy Analyst

Media Coverage

Hospital closures cited in debt report as way to save money
20 May 2014 in CBC News Brunswick

Un rapport recommande de fermer des écoles et des hôpitaux
20 May 2014 in Acadie Nouvelle

Black: Liberals must wiggle out of civil service straitjacket
20 February 2014 in the Chronicle Herald

Income splitting and CPP reform
26 November 2013 in the Telegraph Journal

Payroll taxes and job subsidies (video)
27 November 2013 in CBC New Brunswick