24 October 2008

Premier's comments on public finance confusing; likely no clarity until late November

One the one hand, Premier Danny Williams believes the provincial government will be able to avoid slipping into deficit in this fiscal year:

"I'm confident we will be OK. Now look, if oil drops to $10 a barrel, that is a whole different situation, but we certainly don't see that happening," he said.

In the same interview with CBC's David Cochrane, he said this:

"So if we're [$]120 on the front end and we're [$]60 on the back end, we end up exactly where we budgeted," he said.

"Exactly where we budgeted" is a $414 million deficit on the combined current and capital account and a further $380 million in borrowing to cover other financial transactions for a grand total of $794 million in new debt.

That's not the $544 million surplus the finance minister mentioned in his budget speech.

It isn't the $291 million surplus Dominion Bond Rating Service projected just this week.

And it sure as heck isn't anything close to meeting or exceeding the surplus projections.  In early October, Memorial University economist Wade Locke predicted that the provincial government "should have a budget surplus even bigger than they what they had forecast." That wasn't even likely when he made the prediction.

Oh, by the way, the shortfall last year - covered by new borrowing - amounted to $110 million, not the $88 million reported in the spring budget.  You'll find the revised figure in a report on the government spending for Fiscal Year 2007 published quietly - without a news release or a mention in public - last August.

The confused picture of the provincial government's financial state won't be made any clearer until late November - or maybe early December - when the finance minister issues a "mid-year" financial update. 

The middle of the fiscal year is October.