Lead Us Not Into More Subsidies: Taxpayers and BC Ferries
Author:
Mark Milke
2000/07/30
What is the proper subsidy for a public sector monopoly The answer to that question may be as difficult to determine as how many angels dance on the head of a pin. But as regards BC Ferries in particular, and given the possible new contract, some history would help in the discussion.
Since 1986 to the end of this budget year, taxpayers will have sunk just over $1.8 billion into BC's fleet of ships. Adjusting for inflation, subsidies total just under $2 billion.
In the current budget year, BC Ferries forecasts it will spend $470 million, down from $516 million last year. The reduction is due almost entirely to the $1 billion bailout of the corporation's debt by government, and the effect it had on debt interest payments by the Crown Corporation.
Out of the $470 million, $242 million will go to salaries, or about 51.5% of its total expenses. Fuel, repair and maintenance will cost $102 million (21.8%), while the other $125 million (26.7%) will be eaten up by amortization, computer, and now-smaller financing expenses. If the reports about the wage increases of two percent this year and next, and a cost-of-living adjustment in 2002 are correct, the wage bill will rise by roughly $15 million annually by 2002.
As it is, and before this proposed new contract with its workers, BC Ferries was predicting a deficit of $10 million this year. Rising fuel and wage costs will thus likely boost that figure. That brings us back to taxpayers and subsidies. Every motorist in the province subsidizes ferries at the gas pump to the tune of 1.25 cents a litre, or just over $72 million this year in total.
Over at BC Ferries, there are some jobs that are reasonably paid given their responsibilities and some that are over-paid vis-à-vis the private sector. Before this latest contract proposal, chief cooks were making $24.17 an hour, (up from $16.95 in 1986.) Welders make $25.69, (up from $18.80 in 1986.) Those seem fair wages and competitive with private sector comparisons.
But here are the ones that stick out: Buffet attendants at $18.20 an hour and dishwashers at $19.05. Cashiers earn between $19.82 and $20.45 while ticket agents collect $20.45 per hour. Everyone likes a decent salary, and employees rightly argue they shouldn't be punished for the dumb fast ferry experiment. But not all of that debt was due to fast ferries. Moreover, should taxpayers, who must pay off the debt with interest, really pay for positions that could be staffed at a more reasonable wage level Is it really government's responsibility to pay someone $20 an hour for a job that would fetch at most $10 at the 7-11
Politics is about choices and governments cannot (and should not) bump up public sector pay packets artificially above what a similar job would pay privately. Ferry workers deserve reasonable compensation for their duties, but my guess is that most taxpayers would rather see some positions paid less and the difference sent to healthcare, where nurses earn equivalent salaries to ticket agents, the difference being that the nurses requires some post-secondary education.
From another angle, the ferry corporation could also stand to re-visit some of its more money-losing runs, as well as fare subsidies based on age instead of what subsidies should be based on - income. If such reforms along with wage readjustments for some categories do not take place, the long-run prognosis for taxpayer subsidies is simple: more.