Nova Scotia’s Tourism Ferry Tales

Nova Scotia has historically relied on sound marine infrastructure to move goods, services, and people around the province, the country, and other countries. Travel and transportation from Nova Scotia to the United States and other jurisdictions in Atlantic Canada is quicker by sea than by land and investing in such infrastructure is useful, but sometimes politically motivated.

Such is the situation surrounding the Nova Star Cruises in Yarmouth, Nova Scotia

First and foremost, the provincial government has invested millions of taxpayer dollars into the ferry despite several problems plaguing it since the 1970s. Moreover, negotiations surrounding it have not been transparent and elected officials who support the ferry, which connects Yarmouth to Portland, Maine, more than likely do so for political, rather than economic, reasons.

Initially, the Nova Scotia government approved a seven-year $21 million subsidy to the ferry operator, Nova Star Cruises, which that company spent wholly in its maiden season. Following the initial subsidy, the provincial government forwarded to Nova Star Cruises an additional $5 million to cover expenses, and shortly after, it sent another $2.5 million for staffing fees and transportation costs.

It remains unclear why, or how, Nova Star Cruises spent $21 million that was meant to last for seven years and it is possible that the provincial government has given the ferry operator additional funds that have not been disclosed publicly. Economic and Rural Development Minister Michel Samson, for example, initially and unequivocally stated that the provincial government had only paid out a total of $26 million, but later, following a government report on the ferry expenses, it forked out an additional $2.5 million, raising the total to $28.5 million. This discrepancy may appear minor, however, the fact that Nova Scotia’s government is mum about these expenses is concerning.

Aside from issues of transparency and government accountability, investing in the ferry service seems to have been misguided. The Nova Scotia Tourism Agency, for instance, attempted to quantify how impactful the ferry has been on the Nova Scotia economy and found that it may have contributed to an $11 million increase in hotel revenue. In other words, for every dollar the government spends to use the ferry as a means of attracting tourists to the province, they get less than half of a dollar in return, which even Keynesians would agree is a terrible multiplier.

The provincial government will announce its plans for the 2015 Nova Star Cruise ferry service within a few days, and although I suspect the announcement will include additional subsidies for the ferry operator and a “feel good” plan to attract more tourists, the provincial government should rethink its tourist strategy in southwest Nova Scotia. Tourism numbers have been increasing steadily in Nova Scotia recently and it is doubtful that the ferry service is having a large enough effect on the local economy to warrant such large cash injections. Moreover, the operator employs only 20 individuals from the province.

Instead, the government should focus on increasing the presence of short-distance ferries for transportation. One major problem facing local fisherman and processors is not having the ability to transport their fish to markets outside of Nova Scotia at a low-cost and before their product expires. Reefer trailers, which fishermen use to transport their product from the point of processing to consumers in other jurisdictions in Canada and the United States, are costly and time-consuming; increasing ferry capacity for trucks and trailers transiting to Portland and New Brunswick would better service the community than focusing solely on tourism.

Provincial governments in Nova Scotia focus on promoting tourism because residents in that province have bought into the idea that it is a tourist destination constrained by a lack of accommodating and appealing services, i.e. if the provincial government simply invests in tourism infrastructure, Nova Scotia will shine as a tourist destination. This perception of the issue compels elected officials to lobby for projects that do not necessarily provide real benefits to Nova Scotians. A fair compromise would be to follow the Marine Atlantic approach in Newfoundland and Labrador, which is to ferry passengers and transport goods and services.

In the end, this issue is another example of how government can mismanage an issue that has a clear and simple solution.

Corey Schruder is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in history at Cape Breton University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

Melting Newfoundland’s Tuition Freeze

Recent comments by the Auditor General of Newfoundland and Labrador have sparked debate throughout the province surrounding public investment in post-secondary education. Specifically, the Auditor General suggested the need to review the existing tuition freeze and evaluate whether it has been effective. By considering the high costs of the tuition freeze and the lack of significant benefits, however, it is clear that ensuring fairness for provincial taxpayers requires some form of change. Thus, the provincial government should consider removing the tuition freeze in the upcoming provincial budget.

In 2001, the Government of Newfoundland and Labrador announced a program to freeze tuition in an effort to keep post-secondary education affordable in the province and encourage enrolment. This program focused primarily on increasing core funding to two post-secondary institutions in the province, namely College of the North Atlantic (CNA) and Memorial University of Newfoundland (MUN), including spending over $282 million since 2005. Further, tuition was lowered every year from 2002 to 2005 for a total decrease of 22.7 per cent at the cost of over $50 million. Now, provincial tuition rates are second only to Quebec for affordability, yet the question remains: has this investment been worth it?

To consider whether it has been, it is important to evaluate how effective the tuition freeze has been in meeting the goals that the policy was to address. The provincial government implemented a tuition freeze for two reasons: 1) encouraging university enrolment in a province that has an ageing population and substantial outmigration in the last half-century and 2) helping ensure that post-secondary education for residents of the province is affordable. An appeal to the evidence, however, shows that this policy has not effectively met these goals.

While there are serious demographic issues set to face the province over the coming decade, including severe labour shortages due to a lack of young skilled workers in an ageing workforce, the tuition freeze has not been successful in attracting skilled young people to enrol in provincial institutions or to stay in the province after graduation. Instead, we have seen increased enrolment from out-of-province Canadian students who pay the same discounted rate. Out of province enrolment has increased by 64 per cent, however, less than half of them (43 per cent) are staying in the province after graduation to work and live. Further, enrolment for provincial residents has actually decreased by 13 per cent in the same period. This development should signal to the provincial government that the policy is not working. It also shows massive inequity for provincial taxpayers who subsidize students from other provinces to earn a post-secondary education.

Furthermore, while the tuition freeze was put in place to ensure that provincial residents can afford to earn a post-secondary education, the existing policy ignores recent reforms made to the provincial student aid program that already ensures this possibility. Over the last decade, the Government of Newfoundland and Labrador has invested over a $100 million in their existing student aid program and has modified the program criteria to ensure more students are able to access Student Aid services. Most notably, the Government has announced the conversion of provincial student loans to non-repayable grants to take effect this fall. These reforms have significantly reduced the barriers for provincial residents to earn a post-secondary education and would continue to assist students in earning an education without the continued implementation of a tuition freeze.

As indicated in my last blog post, faltering oil prices means severe consequences for the government of Newfoundland and Labrador and illustrates a need to curb spending in risk of a near-billion dollar deficit. By cutting the tuition freeze, Newfoundlanders and Labradoreans would no longer be subsidizing the tuition rates of out-of-province students, nor be on the hook for an ineffective public policy.

Devin Drover is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in economics at Memorial University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

AIMS on Campus Announces the 2014-15 Student Fellows

Following a tremendously successful year in 2013-14, AIMS on Campus is happy to announce the 2014-15 student fellows:

Rinzin Ngodup
Dalhousie University, Development Economics

Rinzin is a graduate student in development economics at Dalhousie University. Born to Tibetan parents in India, he completed undergraduate studies in economics at the University of Madras, India. He has worked as a teaching assistant at Dalhousie University and has been living in Halifax since 2010 with his cousin. In his spare time, he enjoys reading classic novels and practicing meditation.

Interests: development economics, welfare economics, environmental economics, and macroeconomic policy

Samuel Hammond
Carleton University, Economics

Samuel is a Nova Scotia-native, born and raised on the South Shore. During his undergraduate studies at Saint Mary’s University, he was Editor-in-Chief of the SMU Journal and spent over a year working as a junior economist for ACOA Halifax. He currently resides in Ottawa, where he is a graduate student in economics at Carleton University.

Interests: social choice theory, regional economic development, public finance, and growth theory

Leo Plumer
McGill University, Economics and Political Science

A Newfoundlander, Leo resides in Montreal, where he is enrolled in the joint economics and political science undergraduate programme at McGill University. He is an active member of Students for Liberty, a writer for the Mises Canada Emerging Scholars blog, and a proprietor of his own campus group, all of which has contributed to his interest in public policy. During the few breaks he takes from complaining about politics, he is an avid outdoorsman, gourmand, and metal-head.

Interests: development economics, welfare economics, social justice, international relations, and monetary policy

Corey Schruder
Cape Breton University, History

Corey is pursuing an undergraduate degree in history at Cape Breton University following two years at Queen’s University. He was previously an executive member of the Queen’s Students for Liberty group, where he was responsible for organizing the “Free Speech Wall” on campus, a contributor to the Queen’s Journal and Queen’s International Observer, and a former research assistant with the Canadian Taxpayers Federation. Most recently, he was an intern at the PMO. In his spare time, he enjoys reading about economic history and spending time with friends and family.

Interests: economic history, labour policy, municipal governance, welfare economics

We’re excited to begin another year and hope to expand the success brought by last year’s student fellows!