And Now the Heavy Lifting Begins

Published in the Telegraph-Journal 3rd April 2012

The dust is beginning to settle on pronouncements over last week’s provincial budget. While it appears to have set the correct course to extricate New Brunswick from fiscal disaster, does it have the necessary impetus to drag New Brunswick not only into solvency but to prosperity in coming years? The debt and deficit crunch is merely the symptom, and we have yet to address the cause. Government has no time to be complacent since it must steel itself against the impact of four critical and profound challenges: health care, education, pension plans and the fiscal debt.

Many governments around the world have found that attempts to contain health care costs are resisted by almost intractable positions. In New Brunswick, as in other jurisdictions, the demographics of an aging population and steady technological advances are conspiring to expand expenditures. In jurisdictions where some proposed programs of reform have been attempted, they have tended to introduce unintended consequences, such as reduced access, rationing or adverse localized effects on service delivery.  Preventing chronic illness would offer hope of a reduction in demand but innovation throughout the health care delivery cycle is clearly the answer. No clear formula has yet been found. Until it is, increasing health care cost will remain a daunting political and social challenge.

Education costs similarly have resisted conventional solutions, although in New Brunswick there is widespread recognition that we have an oversupply of schools in regions where their existence can no longer be financially justified. This raised the curtain on the question of entitlements in a most crude way where the obstacles will be inescapably linked to the proposition that any reductions in the number of schools should not be tolerated. Administrative cost-control solutions will be inadequate to the task in part because these measures have been shown to ration productive and nonproductive activities alike.

On the issue of public sector pension entitlements, even a statement of intent rather than a specification will bring out torches and pitchforks, where a bunker mentality has taken hold on both sides of the equation. To place pension costs on a sustainable footing – moving from a purely benefits-based model to one that accepts that a contribution-based scheme will be necessary – will require addressing the concerns of civil service employees that they will have to pay more, work longer and earn less. If we accept the government’s proposition that public sector pensions must be reformed to make them sustainable in the long term, these reforms will need to be designed in a progressive way.

Looming over each of these discussions is the issue of how New Brunswick will manage its fiscal debt. Expected to reach more than $10 billion before the end of this fiscal year, debt service payments increasingly are playing a major role in its expansion. Clearly, New Brunswick needs to find additional sources of revenue to offset the debt. Finance Minister Blaine Higgs has stated that government is disinclined to raise the HST because the deficit is structural in nature. While he is technically correct, it remains to be seen where government will find sources of revenue equivalent to the amount it would recognize if the HST was brought into the equation. Interestingly, the government has placed a number of its properties up for sale, ostensibly to raise revenue from them. Conceivably, this real estate sale is a trial balloon, testing the public for its acceptance of the sale of government assets. If successful, both in concept and in practice, the door could be opened to additional divestment of government assets, such as NB Liquor.

Each of these challenges will demand responses outside our comfort zone. Our dialogues about government and societal transformation frequently betray a secret desire to be living in normal times once more; times that will restore the authority of solutions past. In fact, this traditional era is now moribund and it should not be mourned.


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Filed under Economics, Healthcare, New Brunswick, Uncategorized

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