If the banks that finance the Yukon’s growing debt were the only sure winners of our recent promise-laden election, then the only sure losers are the staff of the Department of Finance.
They now have to re-do the budget, and in a hurry.
They’ll have to include the extra campaign promises made by the Liberals during the campaign as well as the concessions extracted by the NDP as the price of its legislative alliance with the Liberals.
The campaign was full of ambitious promises from all parties, but fiscal hawks noticed the absence of costing estimates for most of them.
Yukon Finance officials will now be scrambling to estimate the cost of promises such as electric-vehicle charging stations from Tuktoyaktuk to Vancouver, a varsity sports program at Yukon University or universal dental coverage.
Their job will be made easier if the parties quietly drop some election promises now that the voting is over.
But the Liberal-NDP deal commits to some big ticket items that will need to be costed.
Take dental care. It’s clear that the promise of a “territory-wide dental care plan” will not come cheap. But estimating the cost more precisely is difficult.
For example, how much does the average person spend on dental coverage per year? How much would they spend if they didn’t have to pay for it? How does this change if most of your population lives in a city where, say, city council decided to discontinue fluoridating the water?
Last fall, the federal Parliamentary Budget Officer cited estimates from $250 to $300 per year across Canada. They also estimated costs in the first year would be more than double the long-run costs as newly-covered citizens caught up on overdue procedures.
Will the Yukon plan include only procedures covered by the federal estimates, or will we have a more generous definition of “essential.” Do Yukon dentists charge the same fees as southern dentists?
The Liberal-NDP deal refers to the dental section of the Yukon government’s Putting People First health report. This discusses a possible program that would be available only to Yukoners below a certain income threshold, and not to those who already have dental coverage through a spouse or at work.
However, the NDP election platform did not include an income test. It promised dental care for “every Yukoner not currently covered.”
Then there is the question of how employers and insurance companies will respond. How long will it take them to change benefit plans to exclude dental if everyone is covered by government?
And how much will administering the plan cost? Putting People First refers to outsourcing administration to an efficient external service provider, presumably one of the big Outside insurance and benefits companies. Does the NDP support privatizing dental health administration?
The Liberal-NDP alliance refers to putting an additional $500,000 in this year’s budget. But the number for future years is likely to be much higher. Somewhere between $500,000 and $13 million per year, which is what universal dental care would cost if you use the upper end of the Parliamentary Budget Officer’s cost figures.
With all these spending plans, the key number to watch in the updated budget will be the annual cash burn.
The Yukon government burned through its cash reserve and went into debt in 2018-19. Since then we’ve been borrowing $40-50 million per year to supplement the $1.4 billion the money plane brings each year from Ottawa.
The budget that was tabled just before the election doubled this burn rate, planning to borrow $87 million. That would have taken the Yukon government’s debt up to $175 million, or over $4,000 per Yukoner.
Now, unless they cut some other programs, this will have to be increased to pay for all the additional commitments.
Last year, the Yukon government asked the federal government to increase our credit limit. The feds duly did so, raising it from $400 million to $800 million.
If we were to borrow, say, a hundred million a year for a couple of years we would have half a billion dollars in debt. Given our hefty transfers from Ottawa, we will not have trouble finding banks to lend to us. But we will have to pay the interest.
By coincidence, the annual interest on a half-a-billion dollar debt is about the same as the cost of a universal dental program. That’s assuming interest rates stay as low as they are now, which is a big, risky assumption.
As it goes into debt, maybe the Yukon government should think about sharing those juicy interest payments with Yukoners rather than just the big banks. Ditto for Yukon Energy and its borrowing. First Nations endowment funds, Yukon retirees and young adults trying to save for an increasingly expensive house are looking for somewhere safe to park their cash while earning more than the near-zero interest rates currently on offer at Main Street banks.
The Yukon government could offer a form of Yukon savings bond, where Yukoners can park money with the territorial government and get paid the same interest rate Bay Street gets. They could even offer a break on territorial income tax on the interest, especially for young people saving for a home.
Who knows? Such a program might even garner as many votes as varsity sports or charging stations on the Dempster Highway.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.