Fails to make tough decisions in two key areas
The 2012 Provincial Budget, released Tuesday, delivered on two of the NLEC’s pre-budget requests by reducing government spending to sustainable levels and reviewing government departments for cost savings. The budget failed, however, to make two tough but necessary decisions for our province — how to address our massive public sector post retirement liabilities and how to enable businesses in this province to compete on wages.
The provincial government took some positive steps by reducing government spending to sustainable levels. Net program expenses will grow by 1.7%, in comparison to a 2.2% expected rate of inflation. They also found $38.8 million in savings by reviewing all government departments for ways to reduce expenditures without negatively impacting program or service delivery, another request made by the NLEC at pre-budget consultations.
While these cost savings and reductions in expenditures are positive steps, the NLEC was extremely disappointed to see no plan in this budget to address growing public sector post retirement liabilities. These unfunded liabilities account for 66% of our net debt and increased by $725 million this year alone. With thousands of provincial public sector workers set to retire in the coming years, a review of the current public sector pension plan is needed to evaluate options that make the plan financially sustainable; do not compete with the private sector; are fair and equitable to what non-public sector workers receive; and ensure this level of debt is not passed on to the next generation – a generation that will not have oil revenues to pay for these obligations. The NLEC feels this budget was a missed opportunity to address this important issue and will continue to lobby to ensure these liabilities are addressed.
The NLEC is also disappointed to see no mention of the elimination of the payroll tax that was promised in the Blue Book. While employers are appreciative of government’s investment into labour market initiatives, the best thing government can do to create a competitive employment environment is “get out of the way, cut red tape and reduce taxes” as Minister Marshall said in Tuesday’s budget speech. This uncompetitive tax reduces employment levels and salaries employers in this province are able to offer. We will continue to lobby government to ensure their commitment to phase this uncompetitive tax out over time is honoured.
For more information on the Provincial Budget visit the provincial government website.
For more information on the NLEC’s position, view some of the media coverage of our reaction: