The provincial government owes the Government of Canada more than a half a billion dollars in a combination of overpayments for federal transfers and a loan received in 2005.
That’s according to figures contained in the provinces audited financial statements known as the Public Accounts. The federal debt for 2008 was $535,150,000 down from $568,247,000 in 2004.
But in Fiscal Year 2004, the total amount owed to the federal government stood at $191 million, made up entirely of accumulated overpayments for Equalization and health and social transfers.
In the way the transfers are made, overpayments occur for every provincial government and every provincial government has some level of debt from this source. The overpayments result from the difference in using estimates of taxation and population to make calculations in advance and then comparing those with actual performance calculations made after the payments are set and dispersed.
In Newfoundland and Labrador’s case, the provincial government - and some other provinces – took advantage of a federal interest free loan in 2004. Under a measure announced by then finance minister Ralph Goodale, provincial governments who had qualified for Equalization in the preceding the years could qualify for an interest-free loan from the federal government.
Newfoundland and Labrador received a loan of $378.4 million. About $100 million of that has been repaid.