VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 6, 2012) - Premier Kathy Dunderdale of Newfoundland and Labrador has governed with the best fiscal policy among 10 provincial premiers, according to a new report released today by the Fraser Institute, Canada's leading public policy think-tank.
The report, Measuring the Fiscal Performance of Canada's Premiers 2012, is a relative assessment of how Canada's premiers have managed the public finances of their provinces. It ranks 10 premiers (eight current and two former) on three components of fiscal policy: government spending, taxes, and debt and deficits.
"The pursuit of sound fiscal policy by our premiers is an important foundation for improving our economic well-being," said Charles Lammam, Fraser Institute economist and co-author of the report.
"Sound fiscal policy means premiers have to manage government spending prudently, balance budgets, and avoid imposing a tax burden so heavy that it becomes a disincentive for people to work hard, save, invest, and be entrepreneurial. The economic record shows clearly that these factors help foster economic growth and prosperity."
Kathy Dunderdale (Newfoundland and Labrador) ranked first overall with a score of 71.4 out of 100; David Alward (New Brunswick) placed second, with a score of 70.4; Brad Wall (Saskatchewan) was third, with a score of 61.6; and Christy Clark (British Columbia) ranked fourth, with a score of 60.8.
All other premiers scored less than 50 out of 100. Ed Stelmach (former premier of Alberta) placed fifth, with a score of 49.1; Darrell Dexter (Nova Scotia) came in sixth, with a score of 37.9; Jean Charest (former premier of Quebec) was seventh, with a score of 35.9; Dalton McGuinty (Ontario) ranked eighth, with a score of 28.9; Robert Ghiz, (Prince Edward Island) placed ninth, with a score of 23.5; and Greg Selinger (Manitoba) was last overall, with a score of 19.2 out of a possible 100.
Spotlight on Government Spending
A large body of academic research shows that excessive increases to government spending can hinder an economy's performance.
On government spending, New Brunswick's David Alward took top position with a score of 88.5 out of a possible 100, followed by Kathy Dunderdale (Newfoundland and Labrador) at 70.8 and Christy Clark (British Columbia) at 54.5. The remaining premiers scored below 50: Darrell Dexter (Nova Scotia) at 31.3, Jean Charest (Quebec) at 29.9, Ed Stelmach (Alberta) at 28.6, Brad Wall (Saskatchewan) at 27.5, Robert Ghiz (PEI) at 13.9, Dalton McGuinty (Ontario) at 12.3, and Greg Selinger (Manitoba) last overall with a score of 0.0.
Premiers who increased spending faster than economic growth and the rate needed to compensate for inflation and population growth performed worse on this component than their counterparts.
Tax rates and the structure of the tax system have a significant impact on incentives that influence whether businesses and individuals engage in productive economic activity.
New Brunswick's David Alward led with a score of 87.6 out of a possible 100, followed by Ed Stelmach (Alberta) with a score of 70.0, Christy Clark (British Columbia) at 62.8, Brad Wall (Saskatchewan) at 57.4, and Dalton McGuinty (Ontario) at 54.8. The remaining premiers scored below 50: Greg Selinger (Manitoba) at 44.8, Kathy Dunderdale (Newfoundland and Labrador) at 43.3, Jean Charest (Quebec) at 38.0, Robert Ghiz (PEI) at 32.0, and Darrell Dexter (Nova Scotia) last overall with a score of 14.1.
Premiers who maintained lower corporate and personal tax rates and reduced them relative to their counterparts performed better, as did premiers who presided over personal income tax systems with fewer, rather than more, tax brackets.
Tackling Debt and Deficits
Debts and deficits are a critical aspect of fiscal performance because annual deficits increase the overall level of government debt, requiring more tax dollars to be spent on interest costs and less on public services and tax relief.
Kathy Dunderdale of Newfoundland and Labrador and Brad Wall of Saskatchewan tied for first place on this measure with perfect scores of 100. They were the only premiers to both record a surplus and reduce net debt, on average, during their tenures.
Darrell Dexter (Nova Scotia) was a distant third, scoring 68.4, with Christy Clark (British Columbia) in fourth at 65.0. The other six premiers, all of whom incurred a deficit, failed to score above 50: Ed Stelmach (Alberta) at 48.6, Jean Charest (Quebec) at 39.9, David Alward (New Brunswick) at 35.1, Robert Ghiz (PEI) at 24.8, Dalton McGuinty (Ontario) at 19.7, and Greg Selinger (Manitoba) last overall with a score of 12.7 out of a possible 100.
The Debt and Deficits component measures a premier's use of deficit financing for government spending and whether they increased the province's accumulated debt burden.
"With nearly all provinces expecting budget deficits and increased government debt this year, prudent fiscal management is a pressing economic issue for many Canadians," Lammam said.
"Premiers who fare well should be commended, while those lagging behind should use the performance of others as a model for reform. Regardless of where they ranked, all premiers, even those with high rankings, have room for improvement."
In Measuring the Fiscal Performance of Canada's Premiers 2012, each premier's performance is measured over the time he or she held office up to the most recent year with available historical data (fiscal year 2011/12). Some premiers were evaluated over a longer period than others; for instance, Quebec's former premier Jean Charest was evaluated for the longest period (2003/04 to 2011/12), whereas British Columbia's Christy Clark, New Brunswick's David Alward, and Newfoundland and Labrador's Kathy Dunderdale were evaluated for the shortest period (2011/12).
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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.