Evaluating provincial budgetary policy

Article Abstract:

This paper reviews the period 1965-84, providing an analysis of the contribution of provincial budgets to regional stabilization and the impact of budgets on the financial position of provincial governments. The perversity hypothesis, which proposes that provincial budgetary behaviour may serve to exacerbate rather than reduce cyclical swings in local economies, is examined. An effort is made to differentiate between the automatic and discretionary components of provincial budgets, by calculating cyclically and inflation-adjusted revenues, expenditures and budget balances. A budget balance analysis arrives at the following conclusions: the behaviour of provincial budgets, including both automatic and discretionary components, was stabilizing, for the most part, during the study period; however, in most cases, discretionary budgetary policy was perverse. A regression analysis arrives at the following conclusions: in Newfoundland, New Brunswick, Manitoba and Saskatchewan, both revenue and expenditure policy demonstrated neutral cyclical behaviour during the study period; in Nova Scotia and British Columbia, destabilizing expenditure-side behaviour offset stabilizing revenue-side behaviour, while in Quebec, Ontario and Alberta, stabilizing expenditure changes may have dominated destabilizing revenue changes; in Nova Scotia and Manitoba, the long-run rate of expenditure growth exceeded the rate of revenue growth, suggesting a possible structural deficit problem, while the other provinces appear to have exercised greater financial control; and provincial expenditure policy was affected by the electoral cycle, while revenue policy appears to have been unaffected. It is expected that provincial involvement in cyclical regulation will be limited in the immediate future and that the provinces will take further steps to shore up their finances, following the stresses that were imposed on their budgets by the last recession. (Reprinted by permission of the publisher.)

Provinces

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Federal finance and fiscal federalism: the two worlds of Canadian public finance

Article Abstract:

Canadians are all two aware of such effects of "federal finance" as the impact of federal deficit-cutting on provincial and local governments. Economists have a well-developed theory of "fiscal federalism" that they commonly use to analyse problems of multilevel finance. Are "federal finance and fiscal federalism" just different names for the same thing? This paper argues that the two concepts differ in some important key respects and illustrate our argument in terms of marked contrasts in developments at the federal-provincial and provincial-municipal levels with respect to taxes, transfers and borrowing. (Reprinted by permission of the publisher.)

Economic aspects, Federalism, Economic policy, Fiscal policy, Intergovernmental fiscal relations

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From Chaos Comes Opportunity: The Movement toward Spending Limits in American and Canadian Budgeting

Article Abstract:

The limitations on the government's part to regulate the scope of its functions and effect positive change are analyzed. Four research projects on that point are reviewed. Budget reforms are treated in one project, and tax reforms in another. Regulations in telecommunications are another area of concern. Pro-spending bias in budgeting is highlighted.

Laws, regulations and rules, Telecommunications systems, Telecommunication Systems

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