February 3, 2009

Stimulus and Deficit Pay Penalty: Both Small

Premier Campbell would have you believe that he is taking a bold step to stimulate the economy by accelerating $2 billion in capital spending over the next three years. Keep in mind that B.C.'s GDP is $200 billion, so over three years $2 billion represents 0.3% of GDP - get that decimal correct; it's one third of one percent. Most galling about Campbell's announcement is the claim that the $2 billion includes: "…hundreds of millions of dollars to be launched in the next 90 days." We last heard from Campbell on the economy in a special 6 PM news hour news conference where he promised action to fix the economy. That was on the eve of two by-elections. This time he is laying the ground work for lots of ribbon cutting before the May 12th provincial election, which by coincidence is 99 days from his announcement. Couldn't those millions have been put to work to employ people soon after his October announcement, or does this have much more to do with election campaigning than it does to do with the economy?

Claims about cabinet ministers facing a pay cut are also all about the election. If you believe what Michael Smyth wrote in the Vancouver Province, you might think that cabinet ministers are about to take a 10% hit but that is not true. The pay cut for a cabinet minister is 3.3% of their total pay which is largely offset by automatic increases and is peanuts compared to the 29% pay raise MLAs gave themselves in 2007.

The pay for MLAs and the extra pay for cabinet ministers is specified in Part 1 of the Members' Remuneration and Pensions Act. It provides a base salary of $98,000 effective April 1, 2007 indexed to the CPI effective December and applied each April. So the base pay for MLAs increased by 1.8% April 1, 2008 and is scheduled to increase automatically by another 2.1% April 1, 2009. Cabinet ministers get a bonus equal to 50% of base pay; the Premier gets 90% of base pay, so the bonuses increase automatically just like the indexed base pay.

The Balanced Budget and Ministerial Accountability Act requires that 20% of ministerial pay (50% on top of MLA base pay) be held back; half of the holdback is paid if there is no overall government deficit and half is paid if the minister doesn't exceed spending estimates in his or her own ministry. No minister has ever suffered for running over budget estimates in their own ministry because government always introduces a bill to excuse overruns. A deficit for 2009-2010 means that ministers will lose 10% of their 50% bonus pay. A loss of 5% on 150% is 3.3%.

It adds insult to injury for the Campbell government to pretend that its members are making a personal sacrifice. Vaughn Palmer put it best when he wrote in the Sun for February 3rd: "Other leaders might have tossed and turned over mill closures, homelessness, the convention centre overrun, even. But this one made budget-balancing the central tenet of his fiscal ideology, something he swore to do in tough years as well as easy ones."