In too deep

The Compass - - EDITORIAL -

Even the prov­ince’s au­di­tor gen­eral, who is­sued the lat­est re­port on this prov­ince’s fi­nances, says it shouldn’t come as any sur­prise. But it sure does bear re­peat­ing. And what the heck - why don’t we just use the au­di­tor gen­eral’s own words?

“The Con­sol­i­dated Sum­mary Fi­nan­cial State­ments for the year ended March 31, 2016, shows a deficit for the year of $2.2 bil­lion, the largest in the prov­ince’s history. Net debt at March 31, 2016 amounts to $12.7 bil­lion, also the largest level in the history of the prov­ince. Deficits of this mag­ni­tude are not sus­tain­able.”

Soak that up for a mo­ment or two. The largest sin­gle-year trip into debt in the prov­ince’s history. The most out­stand­ing debt in this prov­ince - ever.

And on to more words: “In­ter­est ex­pense was re­vised up­ward for 2016-17 by $131 mil­lion to an ex­pected to­tal of $1.1 bil­lion for the year - a 13.4 per cent in­crease from the orig­i­nal es­ti­mate.”

What does that mean? “Money al­lo­cated to ser­vic­ing debt is money that is not avail­able to fund pro­grams and ser­vices. By 2016-17, ap­prox­i­mately 15.9 per cent of ev­ery dol­lar of rev­enue gen­er­ated is fore­cast to be al­lo­cated to in­ter­est ex­pense.” On to con­nect­ing more dots ... “(The) prov­ince is fac­ing deficits that, in re­la­tion to the size of the econ­omy, will be up to 10 times higher than the av­er­age of all the other prov­inces. ... Deal­ing with the an­tic­i­pated deficits the prov­ince is forecasting over the next num­ber of years will re­quire hard choices that will af­fect all New­found­lan­ders and Labrado­ri­ans.”

What choices? “Given that 72 per cent of pro­gram ex­penses are di­rected to­wards health, ed­u­ca­tion and skills de­vel­op­ment and 49 per cent of pro­gram ex­penses are on salaries and ben­e­fits, any mea­sures to re­duce ex­penses in a sub­stan­tive way will, by ne­ces­sity, have to fo­cus on th­ese ar­eas.”

Oh, and just in case you’re hop­ing the au­di­tor gen­eral is wrong, think about this: at least he was po­lite enough not to say, “I told you so.”

Let’s go back to the re­port from the same of-

Oh, and just in case you’re hop­ing the au­di­tor gen­eral is wrong, think about this: at least he was po­lite enough not to say, “I told you so.”

fice in 2010, when the oil money was rolling in: “Much of the prov­ince’s fis­cal per­for­mance re­lates to off­shore oil roy­al­ties which are volatile by their na­ture and de­pend on fluc­tu­a­tions in three main fac­tors: world oil prices, pro­duc­tion and for­eign cur­rency fluc­tu­a­tions - none of which can be di­rectly im­pacted by govern­ment. Fur­ther­more, oil is a non-re­new­able re­source and off­shore oil roy­al­ties will not al­ways be avail­able to fund govern­ment pro­grams. There­fore, the sus­tain­abil­ity of cur­rent and fu­ture govern­ment pro­grams will de­pend on other rev­enue sources.”

The fact is, it’s not just 2010. The same cau­tion was given in the au­di­tor gen­eral’s re­ports in, (take a deep breath) 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014 and 2015.

It bears re­peat­ing? Heck, the AG has been re­peat­ing it for years. And so have we.

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