Tom Marshall made the rounds on Thursday talking up his latest financial update.
But after a call to Randy Simms on Open Line, Marshall likely felt likely he’d gone a few rounds in the ring. Simms asked a few sharp questions rather than let Tom ramble on with his usual shite. And in asking a few simple questions, Simms just had to sit there and listen as Tom tied himself in contradictory knots. Tom’s been in the state before – like on Muskrat Falls and Bay d’Espoir – but this time Randy wasn’t letting up on him.
Things started badly for Tom when he had to explain right off the bat that all his bullshit on Wednesday about applying the surplus to the net debt was, not to put a fine point on it, just bullshit. No surprise for regular readers of these e-scribbles as Tom explained that net debt is just a calculation of assets and liabilities.
When Randy pressed Tom on what the provincial government will actually do with the cash, Marshall said they’d be spending it on capital works rather than borrow, as planned. Fair enough, but then he noted that the provincial government hasn’t borrowed for capital works in years. Tom wound up going around and around before it became clear that his talk about using the cash to avoid borrowing was not what Tom was trying to make it out to be.
It was, in fact, far less.
To get a sense of what might have buggered up the finance minister, take a look at the Estimates. That’s the budget document that lays out the proposed spending on day-to-day operations and capital works for 2011.
And just so that everyone is on the same page with this, understand that Tom the Finance Minister reports the Estimates on what is called a cash basis while the budget speech and the financial update use accrual accounting.
One big difference in how the two different methods show the government’s financial performance comes right up in the front of the Estimates.
In the budget speech, Tom Marshall talked about a $59 million surplus. What you can see in Statement 1 of the Estimates is a deficit of about $769 million. In other words, when the finance department looked at the actual cash it would receive in 2011 and the bills it would pay, the government planned to spend $769 million more than it would actually take in.
The only way they’d make that up is to borrow cash. Normally, governments would have to go to the bond markets or the banks and borrow the cash.
Over the past few years, the provincial government here has managed to pile up a couple of billions dollars or more in cash and short-term investments. Rather than borrow from the bank, they’ve covered off cash deficits by taking the money out of that pile of cash.
It’s still borrowing, of course, even though it would never get repaid.
And last spring, that’s what Tom Marshall planned to do: borrow cash to cover a deficit. He and his colleagues planned to overspend and they planned to borrow cash from every person in the province to pay for it.
When Marshall announced in May that the surplus would grow to $200 million, that was on the same accrual basis as the $59 million.
But on the cash basis, the deficit would have only dropped from the $769 million Marshall planned for down to a little over $500 million.
But it was still a deficit.
A real deficit.
And Marshall would have had to take a wad of cash from the piles hidden under his mattress to cover it off.
So now that Tom has boosted the accrual surplus to $755 million, some of you might be already leaping ahead.
Yes.
That’s right.
And for the rest of you who resisted jumping ahead, understand that if the new revenue projections hold, Tom Marshall will likely still have to borrow some cash to cover it off. Another $755 million in cash would leave him short about $14 million on that $769 million deficit in the Estimates.
So that borrowing Tom talked about with Randy Simms likely wasn’t about capital works spending. It was likely the borrowing in the Estimates.
When it comes to provincial finances since 2003, about the only surplus there’s been has been bullshit flowing from the provincial government’s spin machine. The latest update is no different.
The provincial government’s financial truth deficit, on the other hand, continues to grow.
- srbp -