Falcon shrinking government in name of restraint
In Finance Minister Kevin Falcon’s version, he has discovered something new about the art of governing. “think that this is the new reality for governments,” Falcon told reporters in the budget lockup on Tuesday as he displayed a slide on managing government spending.
“Some governments haven’t got this message yet and some may be forced to take some really unpopular decisions, but we have really started to bend down the growth in government expenditures.”
It will come as a surprise to former B. C. finance ministers — who are known inside government as the dour gatekeepers who pour cold water on worthy initiatives — that controlling spending wasn’t part of their mandate.
Governments have always had to keep a sharp watch on spending, but Falcon has embarked on more than just an exercise in thrift; he is planning to shrink the size of the provincial government by arguing that we have no choice but to reduce our expectations in the face of economic uncertainty because tax increases aren’t an option.
Falcon’s message is simple. Get back to a balanced budget pronto or face the wrath of the money lenders. With the plight of Greece as his cautionary tale, he warns that failure to maintain fiscal discipline will be punished by higher interest rates and ultimately choices that are much tougher than anything we face now. It’s not a fair comparison, because we are orders of magnitude away from the problems of Greece. But that’s another story.
Falcon is doing more than just holding the line on spending. He has set a target — a two- per- cent increase in each of the next three years — that will reduce the size of the government relative to both the size of the economy and the population it serves. His budget predicts about four- per- cent growth each year in nominal GDP. That’s the figure that, all other things being equal, governments can expect their revenues to grow by.
Despite his assertion that this is a virtuous path onto which he has recently stumbled, it’s the road the Liberal government has been down for the past decade; all he has done is pick up the pace.
Over the past decade, the economy grew by 53 per cent while government spending increased by only 41 per cent. At the same time, BC Statistics reports the number of people employed by the government — expressed as full- time equivalents or FTES — fell, so that while there were 94 British Columbians for every provincial government employee in 2000- 01, by 2010 there were 131. Falcon’s plan calls for a further decrease over the next three years of 2,000 FTES.
For taxpayers who are paying the bills, all this is a good news story. Good news, that is, until you need the services of one of those civil servants who now have to serve a lot more people. Good news until you need to get into the overcrowded emergency room or until you are trapped in a traffic jam caused by crumbling infrastructure. Good news until you discover how long the waiting list is for your aging mother to be assessed for supportive housing.
Falcon’s 2012- 13 budget essentially freezes the budgets for 13 of 16 ministries. In government, a freeze means that the ministry has to start looking for ways to cut back, since even with the relatively low inflation rates, the cost of delivering the same level of service next year as they did in the past is at least three percentage points higher when population growth is factored in.
Looking at the ministry of children and family development, one of the flatlined ministries, you can see how this works. Three per cent of the $ 1.33- billion budget is $ 40 million. So in the first year, employees have to find $ 40 million in services to cut. In the second year, $ 80 million and in the third, the cost of providing the same level of services for children is $ 120 million more, $ 120 million they won’t have for children and families in need.
In Falcon’s version of sound management, prudence applies to fiscal risk, while the risk to people who depend on government services is something we can afford.