Another spending record shattered

If you thought Yukon athletes broke some records winning 122 medals at the Arctic Winter Games, you should have visited the legislature last Thursday to watch Premier Darrell Pasloski shatter the record for biggest Yukon budget ever.

If you thought Yukon athletes broke some records winning 122 medals at the Arctic Winter Games, you should have visited the legislature last Thursday to watch Premier Darrell Pasloski shatter the record for biggest Yukon budget ever.

The main estimates came in at $1,156,763,000 in total spending. That’s more than $60 million more than last year’s, the previous record.

To put this $1.16 billion in perspective, the last Liberal premier’s budget was a paltry $565 million and the last NDP premier’s barely broke $500 million. Those were pre-devolution budgets of course, but Pasloski’s latest whopper is still around $450 million bigger than the 2004-05 post-devolution budget.

Since 2003, the first full year of Yukon Party government, the number of government officials in the Yukon has risen by about 2,000. That’s all levels of government, but a big chunk of it is Yukon government growth. This, of course, raises eyebrows among conservative-minded Yukoners who worry about the growth of government here.

You might think that the recent mining boom has reversed the trend. But not really. Over the last two years, on a consolidated basis, Yukon tax and general revenues have been up solidly with the good economic conditions at 6.8 per cent per year. But funding from Ottawa has been rising at 6.2 per cent. As a result, our reliance on federal largesse remains largely unchanged. In the 2010 fiscal year, the Yukon government got 83 per cent of its revenue from Ottawa.

In the upcoming fiscal year, the figure will be … 83 per cent.

To put this in perspective, the Alaskan government gets just 23 per cent of its revenue from Washington.

Tax rates have remained relatively steady. Our personal income tax rates of 7.04 per cent for the first $43 thousand and 9.68 per cent on income up to $85 thousand are higher than B.C.‘s rates but lower than Alberta’s flat 10 per cent rate.

Strangely, for a government that claims to be small-business friendly, the Yukon’s small business tax rate of four per cent is at the upper end of the Canadian scale. Businesses in all the Western provinces pay less, ranging from zero per cent in Manitoba to three per cent in Alberta. On the other hand, our diesel and gas taxes are around six to seven cents a litre while Alberta charges nine cents and B.C. around 20 cents.

One of the big questions at budget time is who the winners and losers are. Following the money is a good way to see what a government’s actual priorities are compared to its rhetoric, which usually attempts to portray everything as a “priority.”

Looking at operational funding trends over the last two years, some of the big departments with above-average funding increases include Energy, Mines and Resources, Justice, and the Legislative Assembly (this is partly caused by the raises our representatives voted for themselves).

Meanwhile, the departments given below-average funding increases include Education, Environment, Highways, Tourism and Culture. Interestingly, the Health and Social Services budget has gone up less than four per cent per year over the last two years even as the Yukon’s population grew. How they managed this will be of interest to some of the provinces, which continue to see health expenditures eat an ever bigger proportion of their budgets.

A big change this year has been in the capital budget, which is down three per cent since last year and more than $30 million or over 10 per cent since its peak in pre-election fiscal year 2010. The delay to the reconstruction of F.H. Collins is an example of this. Despite a now-embarrassing pre-election photo op with ministers turning sod, the project has now been put off into future years. A $30-million swing in government capital expenditures will have a noticeable impact in the local construction scene, but mining development and house construction will pick up at least part of the slack.

The Yukon’s budget is one that any provincial premier would drool over. Ontario’s Dalton McGuinty, Quebec’s Jean Charest and B.C.‘s Christy Clark all have significant fiscal challenges. The recent Drummond report on Ontario’s fiscal situation was particularly grim, and any B.C. teacher can tell you about the B.C. budget.

The fact that our money mostly comes from taxpayers in these big provinces, and that the formula behind our transfer payments is linked to provincial budgets, suggests our budget may not keep going up forever.

But in the meantime, except for fiscal conservatives and a few particularly unloved grant applicants who didn’t get a share of the $60 million in new spending, we should all sit back and enjoy the largesse the Yukon government is spreading around this year.

Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels.

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