The future of New Brunswick: how to pay for vital services

By Tom Mann
New Brunswick Union of Public and Private Employees

Fredericton (28 March 2008) - If there is to be genuine healthy debate on how New Brunswick will achieve transformational growth by 2026, a firm understanding as to where the money currently comes from to finance our vital public service infrastructure and services is necessary.

In last year’s budget presentation Finance Minister Victor Boudreau identified that revenues were projected at $6.677 billion for 2007-08. Where does the money come from? This amount is generated from two primary sources: equalization payments from the federal government and taxes.

In the delivery of his government’s action plan issued last November Premier Shawn Graham stated, “A self sufficient New Brunswick would be productive, innovative and amongst other things providing first class public services to its citizens.” The premier then identified a number of initiatives that were important to move towards self sufficiency. In his words, “To build a better New Brunswick, we must do more."

In an analysis of where our money comes from to provide such vital, first class public services it is important to consider the sources. A full 21.5% of government revenue available for public services flows from the equalization transfers from the federal government. Despite this financial reality there have been whimsical arguments that in order for the province to become economically stable, it must dismiss equalization payments as part of its economic growth.

This is nonsense. No matter where we live in this country, part of being Canadian means we are entitled to receive the same rights and benefits as citizens regardless of the economic status of our province. This commitment to providing equal access was enshrined in the Federal Constitution Act of 1982 where in section 36(2), it states that:

“Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonable comparable levels of public services at reasonable comparable levels of taxation.”

The federal government has two principal means of providing the necessary resources to the provinces to allow equality of treatment: (1) transfer payments and (2) equalization. These payments are the federal government’s main method of funding vital public services such as health care, education, and income assistance.

What equalization means

Equalization payments are intended to ensure that less well-off provinces have the ability to provide a level of public services equal to that of the wealthier provinces – in other words, the transfer of wealth between provinces.

Unfortunately, the federal government unilaterally changed the formula used to calculate equalization payments and some less wealthy provinces have lost millions of dollars in federal transfers. These changes have also allowed some of the wealthier provinces to offer higher levels of public services at lower tax rates than the rest of Canada, arguably a violation of section 36(2) of the Constitution Act.

Provinces such as New Brunswick have used reduced federal funding as a justification to downsize and privatize public services, meaning less quality services. Federal funding is an element of the future economic stability of this province and is enshrined within the Constitution Act of 1982. Let’s not lose sight of this fact or the reality that as the provincial debt has grown, the federal surplus has expanded.

Universally accessible and high quality public services are an entitlement of citizenship, not merely pieces of legislation that can be overturned at the whim of the government. Shouldn’t we believe that the provision of public services by public employees is the most democratic and accountable means available to ensure that New Brunswickers have access to quality services vital to their social and economic security?

In the Telegraph-Journal on July 1, 2006, the New Brunswick Business Council (NBBC), a powerful business group including the Irving, McCain, Ganong and Moosehead interests, published a commentary entitled, The Business Case for Equalization Reform. It stated: “We believe that Canada’s competitiveness will always be linked to having a robust equalization that puts all Canadians in the game.”

An entitlement of citizenship

Public services, funded with equalization payments, and provided by public employees, help create a healthy, well-educated, highly-trained, financially-secure work force. This is the foundation that allows businesses to be competitive in the global market. It is clear that the NBBC understands this. High quality public services are an entitlement of citizenship. Simply put, the NBBC, NBUPPE and other New Brunswickers believe that equalization payments ensure that the province delivers services of national standard.

With increased cost and the need for substantial investment in public infrastructure, the province must do more than depend on equalization payments. The other traditional source of funding is through taxation. After a full 20 years of tax cuts by the federal and provincial governments, taxpayers have been conditioned against tax increases of any kind.

Historically, general across the board tax cuts were not a way to solve real problems but served to cut the effectiveness of government and public services. Last year, for the first time in 20 years, the finance minister's budget speech informed New Brunswickers of the need for fair taxation to fund public services.

Until last year, lower taxes, smaller government and a larger role for the private sector have been the dominant policy. In addition to the pronouncement that there was insufficient public money, the premier also projected that New Brunswick must provide first class public services. How do we provide this? We do need to look at our tax system – a fair system that will enhance economic growth.

Everyone needs services

This is why New Brunswickers must engage in a debate that asks when and how more revenues can be raised to provide for necessary services?

A fair tax system is a mechanism to enhance economic growth. Tax money, our common wealth, contributes to the highway system, healthcare and education, the court system, the banking system and public security. Just about every business depends on bank loans, on contract enforcement, the shipping of goods, highways and the health and education of its workforce.

No business can exist without massive use of the common wealth.

All New Brunswickers want first-class public services. Citizens deserve the best public services, health care, education, environmental stewardship and social services. The principle of "fair taxation to fund public services” takes citizens back to a day when these shared values were a priority in this province. When the principle of fair taxation and an equalization formula are combined with sound public policy, a strong foundation is established for the long-term well-being of everyone.

More information:

First article: NBUPPE calls for a true debate