Union president ignores facts about government spending in P.E.I.

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Appeared in the Charlottetown Guardian, December 28, 2022
Union president ignores facts about government spending in P.E.I.

In a recent op-ed, we said the Dennis King government should follow the fiscal example of New Brunswick’s government under Premier Blaine Higgs, which has run consistent budget surpluses, reduced debt and lowered personal income taxes.

In a response op-ed, Karen Jackson, president of the Union of Public Sector Employees in Prince Edward Island, disagreed. Apparently, she supports higher government spending generally, and more spending on health-care specifically. We’ll deal with each of these items in turn, as the data and historical experience simply do not support her claims.

First, when governments allow spending to increase rapidly and outpace revenue, the government accumulates debt. And with the recent rise in interest rates, debt has become more expensive. Indeed, all else equal, as debt and/or interest rates increase, so do interest payments. These debt interest payments—paid for by taxpayers—leave less money for priorities such as health care and education.

Recent budget surpluses by the King government represent an encouraging start for the province. But according to P.E.I.’s latest budget, the province will increase its net debt (gross debt less financial assets) to $2.7 billion this year (or roughly $15,610 per Islander). If the King government is not fiscally responsible with spending going forward, it will add more to this burden and see interest payments grow over time. Clearly, higher spending, deficits and debt come with big costs.

By contrast, the Higgs government in New Brunswick managed to not only run surpluses throughout the entirety of COVID, but is projected to decrease net debt by more than $2 billion by the end of the current fiscal year 2022/23 while seeing a decline in annual debt interest payments from pre-pandemic totals. This approach has yielded multiple benefits including lower taxes for New Brunswickers, a strong fiscal position to withstand future recessions, and a reduced debt burden on future generations.

Running surpluses remains a sustainable and responsible approach to government finances.

Secondly, Jackson correctly notes that the health-care system in P.E.I., like other provinces, is under intense pressure. However, it’s folly to assert that “investing” more money will solve the province’s health-care woes. We’ve already seen significant increases in the province’s health-care spending in past decades and P.E.I. has failed to achieve better results.

In 1993, the province spent $373.9 million (in 2022 dollars) on provincial health spending (or $2,829 per Islander). During that year, the median wait time between referral by a general practitioner to a specialist to actually receiving treatment was 17.1 weeks for residents in the province.

Since then, P.E.I.’s health-care spending has skyrocketed and is forecasted to reach approximately $976.5 million this year, nearly triple the amount it was three decades ago. On a per-person basis, the province now spends $5,865 per Islander. Yet despite this increased spending, the median wait time to receive treatment in P.E.I. has increased significantly to 64.7 weeks. While not a problem unique to P.E.I., this is the longest wait time of any province in Canada.

Increasing government spending, particularly health-care spending, clearly does not always produce success. The King government must be responsible with spending and continue to balance budgets to avoid burdening future generations of Islanders. Contrary to the rhetoric of government-sector unions, this finding is rooted in both data and historical evidence.

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