All aboard; the train is leaving the station, except this time, it’s going backwards. Remember all that talk about how the provincial government and its spectacular financial stewardship was lowering the provincial debt?
Well, Wednesday, Newfoundland and Labrador’s new minister of finance, Jerome Kennedy, said the government is in the midst of driving into a $4-billion budget deficit hole.
Already looking at a $726-million deficit for this fiscal year, Kennedy is forecasting deficits of $1.6 billion for both next year and the year after if there is no new restraint. It would represent new debt of $8,000 for every man, woman and child in this province. It would also mean the virtual evaporation of every scrap of money the provincial government carved away from long-term debt.
Last year’s budget noted, “The province has recorded cumulative surpluses of approximately $5.5 billion in six of the last seven years, with a corresponding reduction in net debt of $4.1 billion to March 31, 2012.”
Another budget quote: “Since 2004, we have made substantial financial progress. We have decreased net debt from a high of $11.9 billion to a projected $7.8 billion at March 31, 2012, a decline of 35 per cent.”
Now, for some simple math: $7.8 billion in old debt plus $3.926 billion in new debt equals $11.726 billion. Progress? Gone, unless there are actually real cuts.
Debt, as the finance minister pointed out last year, “is a drain on resources, consuming money we could be spending on programs or tax cuts. Reducing our burden of debt, as we have been doing effectively, diverts hundreds of millions of dollars from interest payments to high-priority initiatives and tax relief.”
Meanwhile, spending is still chugging along like there’s no tomorrow. Less than a month ago it was Transportation and Works Minister Paul Davis crowing, “This is one of the largest infrastructure projects ever undertaken in the province” as the government announced a federal/provincial $825-million project to pave and widen a section of the Trans-Labrador Highway.
And Muskrat Falls, the multi-billion-dollar power project, is in the midst of spending money faster than water tumbles over the falls.
The Muskrat Falls spending is different, the government will say, because it’s an “investment” that will “generate revenues.”
Fact is, since the revenues will be generated from a legislated monopoly over a captive marketplace — it will be illegal to buy or generate power from anywhere else — the revenues involved will essentially have the same effect of being a new tax on electricity.
A new debt that’s meant to be covered by a new tax, but a new debt none the less.
“I see boundless opportunity and infinite possibilities,” Premier Kathy Dunderdale is much quoted as saying in the government’s Muskrat Falls propaganda.
That might not be what everyone else sees.
We have been pointing out for years that the growth in the cost of government has been vastly outstripping the rate of inflation, and that both the rate of growth and continued high oil revenues were unsustainable, and that the government should be putting aside more of its one-time oil windfall.
Even fiscal chickens come home to roost.