Well take a gander at finance minister Tom Marshall’s budget update and you can get a good idea of one possible cause.
Last spring’s budget forecast a cash deficit of slightly under $1.0 billion. If you look at the forecast increase in net debt of close to $500 million, you can ballpark the cash shortfall to be at least that much. That’s about where things came in last year.
Marshall is claiming a surplus for his last budget, but people have to remember he isn’t talking about cash flow. Under cash accounting, revenue and expenses are recorded when they are received or paid. You can wind up showing an accrual surplus but have to head out and borrow money to cover the cash payments needed in a given period of time.
For those who keep track of these things, by the way, the provincial government now reports its finances on both a cash and an accrual basis. In 2007 they switched back to showing the annual estimates on a cash basis, but they left the budget speech projections under the accrual method of accounting.
Media reports are likely to focus on the rosier number coupled with Marshall’s claim that last year will look better than originally forecast. But conventional media won’t wade into the deeper picture. For one thing, it’s much harder to understand. They are likely to stick with the same sort of bumpf they’ve been feeding people for the past week or so about a deal on the Lower Churchill.
There are some modest increases in revenue:
- provincial income tax is $31 million above estimate;
- corporate income tax is about $165 million above estimate;
- oil royalties are $65 million over estimate (they were a wee bit optimistic on price);
As for that diversified economy thing Marshall mentions in the news release, let’s just quote a famous politician and say that nothing could be further from the truth.
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