HALIFAX -- A government compensation offer for the removal of principals and vice-principals from the Nova Scotia Teachers Union would cost about $800,000, Premier Stephen McNeil said Wednesday.

Speaking with reporters following his annual state-of-the-province speech, McNeil said the offer was to help make the union "whole" while it found ways to make up union dues with the pending loss of part of its membership.

"What we've said to them is that we would transition them for a year," said McNeil. "It's about $800,000 is what we figured out the amount would be ... and that would allow the union to make decisions for their own sustainability."

He said the government wasn't interested in subsidizing the union beyond a year.

Last month the Liberal government said it would adopt all 22 recommendations in a report by consultant Avis Glaze. She recommended that principals and vice-principals be moved into a new professional association to eliminate the "conflict of interest" when both management and employees are in the same union.

The Nova Scotia Teachers Union immediately rejected the report and the government's offer of financial help. At the time, union president Liette Doucet called it "insulting" and an attempt to buy off the union membership.

On Wednesday Doucet said the union's position hadn't changed, adding that she was also puzzled by the dollar figure quoted by McNeil.

"The only thing I can confirm is that he said it today in a scrum," she said. "I had not heard that -- the offer was never made to us directly."

Doucet said money is not the issue in any event: "The bottom line here is that we are not going to sell out public education."

In his speech to the Halifax Chamber of Commerce, McNeil said his government would "embrace" the Glaze report, which also called for the elimination of seven regional English language school boards.

"Nova Scotians have told us that there is too much bureaucracy, there are too many barriers between the minister and students," he said. "We are going to continue to make sure we make changes in the education system."

McNeil also defended the creation of a single health authority, saying it was about "tearing down the boundaries" within the system. But he also admitted administrative change brings challenges.

"We know we will look at the structure of our health authority and make sure it reflects the concerns that we've heard from one end of this province to the other, where communities feel their voice has been lost."

McNeil said the government would also work with doctors to address issues in primary care that have led to shortages of family doctors, while continuing to manage the province's finances wisely.

"It is not time to take an easy road and it is not time to change direction," said McNeil. "Minister (Karen) Casey will stand in the House of Assembly next month and table our third balanced budget."

In conclusion, McNeil sounded a slightly defiant tone for the mainly business audience. He noted that private capital is often spent when businesses see an opportunity to grow.

"Political capital is meant to be spent too, and I'm prepared to spend all the political capital I have, if it's in the best interest of you and every other Nova Scotian to move this province forward."