Many factors make budgeting difficult, but province must control spending: Williams
Amidst increase revenues from the resource sector, Premier Danny Williams says the provincial government still needs to focus on controlling spending. Photo by Keith Gosse/The Telegram
While the province is on track for better than expected financial results this year, Premier Danny Williams is warning that government spending has to be reined in to a "reasonable" level.
The provincial government budgeted to spend $7 billion this fiscal year.
That's 63 per cent higher than the Williams administration's first budget five years ago.
During the same timeframe, the rate of inflation was less than 10 per cent, according to Bank of Canada figures.
The premier said the significant spending increases were necessary.
"We had to do it in the beginning, because we had to play catch up," Williams told the editorial board of The Telegram last week.
"In all fairness to other governments, they didn't have the cash."
Revenues have grown sharply in recent years, driven by peak oil production levels, sky-high resource prices and lucrative benefits deals with Ottawa.
Following years of budget surpluses, the financial news was expected to be less bright for 2009-10, with the province projecting a $750-million deficit.
Williams said the government decided to pour additional cash into infrastructure spending to combat the recession.
But he noted it may be time to rein that in.
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"Now we've got to start to try and find areas where we can contain this, and keep it under control, so that we're going to maintain and keep the lights on in these new buildings, that we've got enough operationally," Williams said.
Higher than projected oil prices should help drive additional revenues into the treasury, cutting the deficit.
"Hopefully, with revenues up now, our deficit won't be as high," the premier noted. "If that's the case, then we'll start to pull back to reasonable spending."
Williams replied "good question" when asked to describe what "reasonable" spending is.
"We have to continue with spending that enables us to have a modern infrastructure, and at the same time try to keep our costs under control."
One of the areas the government is targeting will be politically sensitive.
"We need to try and find savings in health care," Williams said.
The government is spending $1 billion more on health care now than it did five years ago.
"That can't keep going. If revenues are up, we're OK, we can sustain it now. If revenues come down, and we start to lose some of the petroleum revenues, we get back to $4 (billion) or $5 billion (in revenues), then health care is going to have to come back. So then all the layered things that have been put in place are not sustainable."
Halting hikes in health spending may be easier said than done. Recent proposed lab and X-ray cuts at Flower's Cove and Lewisporte led to a public uproar, and the province ultimately reversing the decisions.
Williams said the government needs to "provide centralized, good regional services in the various areas" while finding places to cut or control costs.
On the revenue side of the ledger, the premier acknowledged that forecasting is difficult because of the province's reliance on volatile resource revenues.
"It's a bit of a dog's breakfast, because your revenues are subject to oil prices, to oil production, to corporate taxes that are coming, to mining income - for example, Voisey's Bay has a strike on up there now - so there's a lot of variables. So there's a certain amount of estimating, guessing. It's not a term I like to use, but that's exactly what it is. It's an informed guess based on the best available information."
The province is expected to provide a more detailed update on the fiscal situation later in the fall.