Rough report on record debt
Auditor general details sorry state of N.L. finances
The provincial government’s finances are in rough shape, according to the latest annual report from auditor general Terry Paddon.
The net debt of the province will climb to $14.6 billion by the end of the fiscal year, the highest it’s ever been in the history of the province.
The province’s deficit is driven by high spending. Even though Newfoundland and Labrador brings in more revenue per capita than any other province, the government spends by far the most per capita in the country. The N.L. per capita expenditure is 21 per cent higher than Saskatchewan, the next-highest-spending province.
Written in the careful language that is typical of auditor general reports, Paddon warns “there is considerable risk” that the government won’t be able to hit its six-year target to return to a balanced budget in 2022.
For one thing, oil revenue might not be high enough. Moreover, Paddon warned that tax revenue might be lower than anticipated because the province’s economy is in rough shape, and the Muskrat Falls hydroelectric project could impose even more costs in the coming years.
“The province is forecasting a return to a balanced budget if oil prices increase, production increases, economic activity occurs as predicted and spending is constrained over that period,” Paddon wrote. “If this does not occur, the province will have to look at other means to move to a balance.”
Cutting spending will be difficult, though, because Newfoundland and Labrador has among the oldest populations in Canada, with almost 20 per cent of residents older than 60. Moreover, the province has the lowest population density of any Canadian province, and lots of roads for a small population. All of that is expensive to maintain.
Adding to the problems for the government is a forecast decline in employment and capital investment in the province over the coming years. Employment is forecast to drop by 16,800 people in the next four years, which will mean less income tax revenue, along with various spinoffs such as lower HST and gas tax revenue.
As the debt goes up, the government will have to spend money paying the interest; over the coming five years, the government is forecast to spend nearly 15 cents of every dollar of revenue on interest payments.
None of this is really new. There’s a record, going back years, of auditor generals sounding the alarm about unsustainable government spending.
In a news release Tuesday afternoon, Finance Minister Tom Osborne acknowledged the report.
“The issues identified by the auditor general are welldocumented and have helped inform our approach to strong fiscal management, as well as encouraging economic development, attracting immigrants and supporting healthier communities,” Osborne said. “We remain committed to a course that will return our province to surplus. I would like to thank Mr. Paddon for his dedication and diligence while fulfilling his duties as auditor general since 2012, and I wish him the best in retirement.”
With Paddon scheduled to retire at the end of the month, this will almost certainly be his final report as auditor general.