Province anticipating massive deficit forecasts
The provincial government is forecasting deficits of $1.6 billion next year and the year after, for of a total of a $3.2 billion shortfall by April of 2015.
That means as it stands right now, next year’s budget deficit will be more than double the $726-million shortfall that the government is facing this year.
If the forecasts become a reality, the government will run almost $4 billion in deficits over three years.
The news comes as Finance Minister Jerome Kennedy starts prebudget consultations in Carbonear today, and he’s got a simple message: the government can’t keep spending so much money.
“It’s important that people realize that we’re not making this up. The economic situation, both globally and nationally, is not great right now,” he said. “This is the situation. How do you want us to deal with it? What’s most important to you as a member of the public?”
Pre-budget consultations typically start in mid-January, but things were delayed this year when Premier Kathy Dunderdale shuffled her cabinet and moved Kennedy into the Department of Finance.
Today Kennedy will be at Fong’s Motel in Carbonear for two hours from 2-4 p.m.
On Friday, he’ll be in St. John’s all day at the Comfort Inn, listening to people before he heads out across the province.
Kennedy said he’s not really expecting people to come with suggestions for what to cut, but he wants to hear what the priorities are.
“We have to make certain adjustments to our budgetary process, and yes, there will have to be reductions. The question is how much, and where, and we don’t know that yet,” he said. “We have to temper people’s expectations with the reality of the economic and fiscal situation that we find ourselves in.”
He said it’s not just about oil revenue. The government is no longer receiving Atlantic Accord payments, which means about $500 million in lost revenue.
Similarly, Kennedy said the government has cut taxes by $500 million since 2007.
But still, he said, the biggest issue is oil, and on that front, Kennedy said he expects things to get better — eventually.
Oil prices are lower than forecasted, and because of maintenance shutdowns in the offshore, the amount of oil being pumped out of the ground was much lower than in previous years.
“The main issue with oil is the issue with production,” Kennedy said. “We have to take steps now, but these will be interim measures, because in the long term our fiscal situation will improve.”