Time to take the books away from the cooks
The public deserves to see honest numbers
Last week’s blast from the Ontario Auditor General, accusing the Wynne government of misrepresenting the true state of the province’s finances to the tune of billions of dollars a year, was dismissed by the government as an “accounting dispute.”
This is true, in the sense that it is a dispute with the accountants, i.e. the people with the authority to decide these things. In the same way, an accusation of tax fraud may be described as a “tax dispute,” or a theft as a dispute over property. If a corporation were found to have misstated its books the way the Wynne government has, its CEO would not be able to shrug it off quite so insouciantly. Only it’s the government, so as usual the normal rules don’t apply.
At any rate, now the province’s Financial Accountability Office has weighed in. Where the government’s 2018 budget projects deficits of roughly $6.5 billion a year over the next three years, the FAO, like the Auditor General, puts the true figure at more than $12 billion.
As for that “accounting dispute,” it’s true that not everyone agrees with the Auditor General on the question of whether surpluses in the province’s two largest public pension plans should be recorded as assets on the government’s books. That does not entitle the government to simply ignore her.
First, it’s not clear the government has access to those surpluses in any meaningful sense. Certainly it could not do so by unilaterally reducing its contributions to the plans, which are co-managed with its employees.
And second, it’s not clear the surpluses even exist. As the C. D. Howe Institute has noted, public pension plans tend to discount their liabilities at higher rates than is either usual or prudent — and the province discounts them at a higher rate still. “Using a more appropriate discount rate,” the Institute argues, “would show not pension surpluses, but deficits — and likely big ones.”
Neither is the pension issue the only count on which the Wynne government stands indicted. There is also the “Fair Hydro Plan,” under which it suppressed the soaring electricity rates that were killing its chances of re-election, borrowed the difference, then understated the debt by recording a phantom asset against it — the higher revenues it will supposedly collect years hence when it jacks up rates again. The AG calls this attempt to book revenues that may or may not materialize in future as if they were earned in the present “bogus” accounting. Another “dispute”?
But then, these are just the most obvious dodges the Ontario Liberals have employed to obscure their fiscal record. The budget deficit, in particular, has ceased to mean much of anything, as the government has moved more and more of its borrowing off-budget. So even as recent budgets showed the deficit declining to near zero, the debt was growing by tens of billions.
As indeed it will continue to do. Over the next three years, the FAO projects the province will add another $70 billion to its net debt. While the government forecasts a balanced budget by 2024-25, that’s based on a sudden and hitherto-undetected commitment to restraint: after growing for three years at 4.2 per cent per year, spending later slows to just half that pace.
On more realistic assumptions, the FAO finds, deficits would grow steadily worse. The debt-to-GDP ratio, already at nearly 40 per cent, would exceed 45 per cent — roughly twice what it was when Bob Rae’s NDP government was freaking everyone out.
Understated expenses. Overstated revenues. Hidden debts. Conveniently optimistic assumptions. One wishes this were unusual. But in fact, as a new C. D. Howe report finds, Ontario is not even the worst offender among Canada’s governments (PEI is worse). Generally, provincial financial statements can charitably be described as inconsistent — inconsistent with each other; inconsistent between budgets, estimates, and public accounts; inconsistent with generally accepted accounting practices.
This is, needless to say, unacceptable. It is our money governments are spending; those in temporary charge of their finances are our employees. Their responsibility is to tell us clearly how much of our money they are spending, and on what; instead, they seem to do their level best to be as obscure and misleading as possible.
Which raises the question, again, of why we entrust the public accounts to people with a proven record of lying to us?
It is time, surely, to take the books away from the cooks: to hand formal responsibility for recording and stating the government’s financial position to an independent and impartial body, at arms’ length from ministers and their staff. Governments would have access to these figures on the same basis as anyone else, without the ability to spin or manipulate them to their advantage.
Watchdogs like the Parliamentary Budget Officer or the Auditor General can only do so much: they can present their findings, but they are not binding on governments, who are free to pretend they are mere matters of opinion, or “accounting disputes.”
Neither are opposition parties much use. As politicians, they have as much of an interest as those in government in pretending resources are more plentiful than they are. Ontario’s current opposition leaders are typical: puffed up with pretended rage at the government’s “fraud,” while quietly basing their own election promises on the same discredited numbers.
That’s not good enough. There’s no reason why everyone — government, opposition, and public — should not be working off the same set of honest numbers. Governments are entitled to their own policies. They are not entitled to their own figures.