28 May 2019

Deficit $250 - $300 million higher than announced before election according to Premier #nlpoli

In the episode that aired on 26 May 2019, Premier Dwight Ball told NTV's Issues and Answers that the deficit for the current budget is between $800 - $900 million.

"Are you prepared to make any specific changes to the budget in order to get their support?" asked Mike Connors.

"I think this budget is the one we ran on... everyone understands this budget is between an 800 to 900 million dollar deficit..."

Minor problem.

When finance minister Tom Osborne delivered the budget on April 16,  he confirmed that the deficit in the budget the Liberals ran on was $575 million, once you took out the payments from the Hibernia Asset-Backed Dividend Agreement.  That's the figure finance officials gave during the budget lock-up to media and other groups.

CBC reported the figure in a pre-election budget story titled "From 'the brink' to a brighter future":
"Without that Accord boost, Newfoundland and Labrador would again have run a significant deficit this year, of around $575 million."
The government *is* actually running a deficit in 2019.  The government may have had to report a surplus but that was just a matter of accounting.  Ball told Connors the government would need to satisfy the bond-raters and while that is true, they weren't fooled into thinking the surplus was real.

The question now becomes how large is the actual deficit.

Then we have to find out what the rating agencies think of the latest revelation that the deficit is actually much higher than the government announced in the spring budget.

There is no telling how they would react to a deficit that was as much as $300 million higher than advertised.

As it is,  Moody's  senior credit officer Michael Yake noted that even with the added cash flow in future years, "the headline signals of the budget are mixed" and that Moody's sees "greater challenges in executing the full plan to balance by 2022/23."

Adding another $300 million to the pre-election deficit would make it even harder to achieve balance by 2022 as promised.

Some outside government  - besides Moody's - don't think it is possible.  None of these calculations include spending commitments the Liberals have made for everything from Bay du Nord to mitigating electricity rates. SRBP estimated in early May that these could drive the deficit to $996 million next year, $1.2 billion in 2021, and $997 million in 2022.

If the Premier's revelation on Sunday is accurate then we could be looking at $4 billion in new debt over the next four years.  Deficits would continue beyond 2022 unless the government found new sources of revenue to cover electricity rates.  Bay du Nord will add a total of $1.0 billion in new debt unless the project experiences cost over-runs  like Hebron or Muskrat Falls.