There is always something interesting in the province’s audited financial statements and – sadly – it is often at odds with what the politicians have been saying.
On Tuesday, the provincial government released the audited statements for Fiscal Year 2012 (01 Apr 12 to 31 Mar 13) and they are no exception.
How much did they overspend?
The news release accompanying the statements has a big headline: “Strong Financial Management; Responsible Decisions.”
The first sentence tells us that “the deficit for the 2012-13 fiscal year was $195 million”.
That’s true, if you only look at the deficit for all government departments, plus the health and school boards. Those are in Volume I of the Public Accounts.
Volume II contains the financial statements for the Consolidated Revenue Fund. That’s the spending of government departments themselves. The deficit there was $467 million.
To get a clear picture of the provincial government’s financial position you have to look at both. Focussing on one will give you a false picture.
Dependence on Oil
The provincial government had $1.3 billion less income in 2012 compared to 2011.
The largest single drop was in oil royalties: $964 million due to lower prices and decreased production. The next largest drop was in mining royalties ($181.4 million) due to a drop in value and volume of shipments. (Volume I, pp. 7-8)
Total provincial liabilities according to Volume I (p. 10) stood at $13.4 billion at the end of March 2013. That consisted of:
- borrowing net of sinking funds = $5.15 billion
- unfunded pension liability = $3.27 billion
- group health and life insurance retirement benefits = $2.32 billion
- other liabilities = $2.72 billion
Debt is only the beginning
Note 17 on page 56 of Volume I pegs the provincial equity contribution to Muskrat Falls at $1.9 billion. The provincial government plans to raise that money by borrowing.
That’s light by about $300 million based on a straightforward assessment of the amount borrowed and the implications of the federal loan guarantee.
Then there are these unknown amounts:
“in addition, the Province has committed to funding all contingent equity which may be required to cover cost overruns on each aspect of the Project. [sic]”
“The Province has also provided a guarantee to the Government of Canada to compensate it for any costs under this Guarantee which are triggered by legislative or regulatory actions of the Province.”
That last one is a direct consequence of the 2008 seizure of hydro assets belonging to three private companies. It doesn’t the provincial government will pay. It means that if the provincial government causes the federal government any problems because of another move like the 2008 seizure.
Consider $1.9 billion to be the lowest cost. We’ve got a long way to go before we ever find out the real cost of that equity. The estimate of equity (i.e. debt) in Note 17 is just the beginning.
Bad investments still called assets
Page 58 in Volume I.
Run your finger down the page and see $500,000 loaned to SAC Manufacturing.
Regular readers will remember this as SAC Manufacturing is the company that went tits up in 2008 four months after sucking up federal and provincial cash.
There’s another entry for Consilient, a company that is also deader than a doornail.
Both are still on the government books as if the total of $1.0 million public money in both companies was recoverable.