If you hoped for something more
than rhetoric from Premier Furey’s ebullient Minister of Finance or a definitive
response to the debt crisis of the Province, you won’t find it in the 2021-22
Budget.
Furey likely didn’t need much
reason to delay fiscal repair, but he found it (ostensibly) in a rebound in
revenues; from a one-time cash payment of $325 million from the federal
government to aid the oil industry, other federal-provincial cost-sharing
agreements, and higher oil revenues ($1.1 billion up from $567 million).
The Government boasts revenue projections for 2021-22 of $8.5 billion, an increase of
$1.4 billion over 2020-21. The figure contrasts with revenues projected on a “cash”
basis of only $6.48 billion. That is a big difference based solely on accounting
methodology.
Frankly, the Government’s “accrual” figures look
a lot like jiggery pokery!
However, I am mindful that page 4 of the 2019-20 Public Accounts affirms
that “Within the annual Original Budget Speech (in this case the one delivered by Minister Coady) is a series of statements which are
comparable to the Public Accounts as both are prepared using the accrual
basis of accounting…” It is also noteworthy that the Public Accounts, which are audited, use accrual accounts
which combine current and capital spending. These are very important statement
confirming the confidence level we should place in the Minister’s claims. Yet, I remain dubious.
As always, the best test of whether
Premier Furey is engaged in the key issue of the day is found on the spending
side of the ledger. Even discounting for the $325 million ‘Fed-funds flow’ to the
oil industry, spending exceeds last year’s sum by a country-mile: $8.14 billion
in 2021-22 vs. $6.84 billion in the last fiscal year.
On an accrual accounting basis, the
budgetary expenditures rise to $9.3 billion.
(I am aware that reference to two
different accounting systems is confusing for most people. GNL prefers to use “accrual”
accounting but the differences. But the system is supposed to aid the budgetary
process, not obscure or distort it. You can now see first-hand why this is a
big concern.)
Then there is the question of the
deficit.
In this, PERT’s Year I of the
path to fiscal solvency, the deficit has ostensibly gone way, way down. It can’t
have happened due to the few tax increases and other inconsequential jigs and
jogs, including a cut to Memorial’s operating budget of $2.6 million, a tax on sweet drinks, and pennies on cigarettes and liquor contained in the Budget; big
expenditure reductions have been left for another day.
PERT’s Plan assumed a deficit this
year of $1,369.9 billion (See Deficit without plan in Exhibit below). GNL now projects a deficit for 2021-22 of
$826 million. That is a difference of $543.9 million when Moya’s implemented Plan was supposed to account for savings of only $235.7 million.
On the
other hand, on a “cash” basis – the more objective, less fiddley accounting
method – exhibits a shortfall (deficit) of $1.66 billion – twice the amount GNL reports on an “accrual” basis!
Frankly, I am not buying the
Minister’s wildly divergent numbers.
It is worth reminding readers that
only weeks ago the Department of Finance furnished Moya Greene the budgetary figures that the PERT Report contains. They could not have come from anywhere else.
How is
it that in such a brief timespan the Minister has found another
$308.2 million and presumes the savings to be durable along with more reductions in
future years?
The Minister needs to explain.
In language reminiscent of former
Finance Minister, Tom Osborne, the budgetary crisis is manageable again. Based
upon this Budget forecast, how can the public not think that any issue of “crisis”
is largely overblown?
How can public sector unions not
think that Government has engaged in a political charade, giving them legitimate
cause to doubt the seriousness of the issue?
The Government wants to introduce
balanced budget legislation which, like the “Future Fund”, is a fine idea – in a
particular context. But such inventions can have no merit until the deficit
fighting plan is well underway and Government is transparently off its fiscal
knees.
Think about it. Where are the bold moves?
Possibly the idea of bringing the English School District into
the Department of Education is well-founded on the presumption of obtaining management
efficiencies; likewise, integrating the Centre for Health Information into the
Dept. of Health. In each case, however, cost savings await.
Otherwise, a plan to “immediately begin the restructuring
of Nalcor” is offered but GNL will not commit to eliminating the
Corporation; they will review OILco, review
the sale of Marble Mountain, review the sale of the offshore oil and gas equity
stake, and review the sale of the Newfoundland and Labrador Liquor Corporation.
Are you sure Dwight Ball didn’t reclaim the Premier’s Office?
The most important issue that should have been addressed did
not warrant mention: The Federal Government’s response to “rate mitigation”.
If the Government has any chance of fiscal survival, the Feds
have to be prepared to take on the Muskrat Falls debt obligations and its
attendant risks (and I don’t just mean Gilbert Bennett).
But on this critical issue, Coady offers not a word.
Is the Government planning a fire-sale to Hydro Quebec of the
Upper Churchill?
We still don’t know.
Did the Budget square the total public sector debt with Moya
Greene’s figure of $47.3 billion?
It did not even try.
Does it offer an accounting of how the monstrous Public Private
Partnership commitments of $5.3 billion will impact current account spending on
programs during the remaining five years of the Plan to achieve budget balance?
No such disclosure is offered.
The Finance Minister concludes the Budget Address
with “Let us all have the courage to make the bold decisions and the faith to
work together.”
There are no bold decisions in this Budget that constitute
such a call to action. All await further study and review. Then there is the
natural tendency of Governments to forget fiscal urgencies when the poll
numbers cause Caucus strife in advance of an election
If I seem sceptical of the Government’s claims to
budget balance by 2025-26, it is probably because I see in this Budget more a rekindling of former Finance Minister Ross Wiseman’s Plan – which was “hope” – rather than any earnest intention.
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| Budget Balance Plan of Minister of Finance |