Paul MacNeill

After 12 years in the political wilderness it’s hard to blame the King government for opening the spending spigot on non-budgeted items like $17 million in new road construction.

In a play to the party’s rural base, Transportation, Infrastructure and Energy Minister Steven Myers whipped out 185 kilometres of paving shortly after the PCs assumed office arguing rural roads were ignored too long and our secondary highway system is imperative to get fish and agriculture products to market.

The logic is not without merit. The issue is a lack of long-term planning. The $17 million spend is on top of the four year $225 million joint federal/provincial program announced in July to upgrade Island roads and bridges

It’s easy to spend money. It’s tougher to spend it in the right places, as evidenced by the Greens reaction to a higher than expected $57 million budget surplus that the Official Opposition immediately declared is a sign that “you’re not delivering services that are needed.”

Ummm. No. That’s not what a budget surplus means. Especially in a province whose fiscal capacity is subject to subtle shifts in the marketplace and federal transfers to provide basic services like health care.

Every new government has the right to decide what priorities it will pursue. We’re still waiting for a clear picture of the path the Tory administration will follow. But the fiscal hand the new government received is among the best dealt in modern times.

In August DBRS upgraded PEI’s bond rating to A, marking the first improvement in a key ranking of our provincial fiscal health since 2000. Finance Minister Darlene Compton credited the improvement on fiscal sustainability and the ‘’efforts of hard-working Islanders.”

That may be part of it. But the primary reason is owed to one person: Former Premier Wade MacLauchlan, whose legacy is the politically unsexy reshaping of the internal guts of government to focus on benchmarks that yield long-term benefit.

When MacLauchlan became premier in 2015 our debt to gross domestic product (GDP) ratio stood at 36.7 per cent, an alarmingly high number that crept up unchecked under successive Liberal and Tory governments. Interest payments just to service our provincial debt of $2 billion plus - let alone pay it down - became the third largest budget item behind only health care and education. We spent more on interest than on highways, economic development and environmental protection. By the time MacLauchlan left office debt to GDP stood at 30.5 per cent, the lowest of any province east of Saskatchewan.

The payout to Islanders for this largely uncelebrated accomplishment is lower interest payments, now the fifth largest item in a government of PEI budget. These are real dollars freed up to spend on front line services or debt reduction.

While many Islanders will debate the relative merit of immigration, MacLauchlan helped reverse a 50 year trend toward an aging population, although this is not expected to continue, especially in rural areas.

Tag on public pensions that are now funded in surplus, compared to the tens of millions of emergency top-up payments former governments were forced to contribute, and the PEI fiscal house is in order.

There are, however, caution signs flashing. 2019 will be a record year for housing starts, but CMHC predicts a rapid decline over the next two years, from 1700 this year to 725 in 2021, when there will be a surplus of housing product. This will have a major economic impact.

For years the PEI government has relied on immigration cash to fuel growth and government coffers. In the year ending June 30, 2019 our natural growth (births minus deaths) was minus 1. Immigration is vital to our future, but the halcyon days of PNP cash flow are over.

In its first budget the King government announced $156 million in new revenue, almost all of which is going to new program spending. Two-thirds of the revenue will come from the federal government. While our economy is humming along, we are not immune to outside pressures, be they international trade, interest rates or the vagaries of federal funding.

Minority governments often implement progressive programming. Nothing wrong with that. But there is also a risk of trying to appease all people and issues. We can’t afford it. Smart investments built on long-term planning is the sustainable recipe.

Let’s hope that in the rush to mark their territory like puppies at a tree, our political leaders don’t spend like drunken sailors and blow the inheritance received.

Paul MacNeill is Publisher of Island Press Limited. He can be contacted at

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