What could little Prince Edward Island teach only slightly larger New Brunswick about managing public public finances?
Don’t ask Wes Sheridan, P.E.I.’s garrulous finance minister, who actually hails from Moncton. These days, he likes to keep his discourse civil and stick close to his political happy place.
And why not? With a track record like his, the belly laughs just keep coming.
If all goes as expected, Canada’s smallest member of Confederation (population, 145,000; geographic area, the size of two Swiss cantons), will be deficit-free, possibly in surplus, sometime in the next fiscal year (2015-2016),
Compare this with the recent, annual fiscal performances of the other Atlantic provinces, and you might appreciate the dimension of Mr. Sheridan’s merriment.
Nova Scotia’s 2014-2015 deficit forecast is $274.5 million; New Brunswick’s is $387 million; and Newfoundland and Labrador’s is $538 million.
P.E.I., on the other hand, is looking at $3.6-million worth of black ink next fiscal year. That’s after running shortfalls of $56 million and $40 million, respectively, over the past two years.
According to Mr. Sheridan, it all comes down to sound planning and winsome leadership. “You have to have full buy-in,” he told me recently. “You have to have a premier who is willing to do this. You have to have ministers who are playing along. We’ve also had greet buy-in from our deputy (minister) group here. It has been a very positive experience.”
Moreover, he said, “From the beginning, we had a plan. We had balanced (budgets) in 2006-2007 and 2007-2008. As the economic downturn hit, all jurisdictions, including the federal government, went into deficit in order to try to stimulate their economies. And it worked.”
In fact, he added, “It worked in spades here on the Island. We didn’t actually suffer a recession on Prince Edward Island. Through the stimulation that we applied mostly through our capital budget and a number of different program measures, we were actually able to increase the number of jobs by about 4,500. We were able to keep our province above the recession. We were the only jurisdiction in North America to do that. But the plan also called on us to get back to a balanced budget, and that’s what we’re up to.”
Of course, not everyone is a true believer. People like Don Desserud, professor of political science at the University of Prince Edward Island, and those at the helm of the Greater Charlottetown Chamber of Commerce, are justifiably worried about the province’s long-term debt, which has, according to some calculations, jumped from $1.3-billion to $2.1-billion, an increase of 61 per cent, over the past seven years.
Annual deficits during this period, expressed as percentages of the increase in net debt, have risen from 11.4 per cent in 2008 to 49 per cent today. And, as the province’s gross domestic product has grown (in line with Mr. Sheridan’s claims) from $4.6 billion in 2007 to $5.5 billion, the net debt as a percentage of GDP has risen from 28.4 per cent in 2007 to the current 33.4 per cent.
Said Mr. Dessurd in an interview recently: “I am not suggesting that they (government members) are insincere. But as far as the public is concerned, every government for the past 30 years has been promising that they are going to balance the budget. It’s a claim that’s already devoid of meaning. This is simply a matter of whether they are going to bring in more money than they spend on a yearly basis. But the real point is that the debt is not getting smaller, it’s getting larger. The problem is looming so large, people almost greet it with a shrug. This is not an issue that makes or breaks governments.”
If any province understands the truth of this assertion, it should be New Brunswick. Here, we don’t even dream of surpluses, which seem almost absurdly remote.
Still, even if P.E.I.’s fiscal health be only fleeting, it stands as a welcome inspiration to the rest of us in this region who might one day dare to imagine that government solvency is a lesson that can actually be taught.