29 May 2019

Deficit *is* higher than previously announced #nlpoli

The House of Assembly will have to deliver a budget that keeps access to new public debt for the foreseeable future. The politicians must satisfy the bond-rating agencies, not the voters. 
Parties don't matter.  Ideologies don't matter.  Voters don't matter.  
That is the essence of politics in Newfoundland and Labrador in the early 21st century.

Anyone who knows Dwight Ball knows that he does not make simple mistakes with numbers.

Yet, the official explanation is that he made a simple mistake with numbers on Sunday's Issues and Answers when he said the deficit for the current year is between $800 and $900 million dollars. SRBP pointed out his comments on Tuesday.

As NTV's Michael Connors reported first via Twitter and later on the NTV Evening News,  Premier's Office and finance department officials claim that the Premier's comments "were actually looking ahead to 2020-21, which has a projected deficit of $796 million."  The deficit projection for 2019 remains at $577 million, according to officials.

Connors posted this picture via Twitter.
Click to enlarge
So even though the conversation the Premier and Connors had was clearly about the current budget and year  - that is, for 2019 - and the Premier used a range of 800 to 900,  the Premier for some completely unexplained reason injected a specific - and lower - number for the next fiscal year into the conversation, then went back to talking about the budget from last spring and its very specific, official deficit projection of $577 million.


Anyone can see how that happened.

Could happen to anyone.

Except it didn't.

It happened to Dwight Ball, a guy who rivals former finance minister Loyola Sullivan for his Rain-Man-like ability to recite specific digits.

Connors also reported that bond-rating agency DBRS had its own calculation of the deficit in the 2019 budget.  It wasn't $577 million.

DBRS pegged the deficit at $855 million.  The same figure appears in a Telegram story from 17 April 2019.

$855 million is between $800 and $900 million.

So there's a more likely figure that the Premier was talking about in the interview that aired on Sunday.

The problem now is how to reconcile the fact that two groups of people looking at the same numbers came up with two different conclusions.  There is no such thing as finance department math and bond-rating-agency math.  There is just math.

But there is a different way of adding up the numbers,  the same way there is cash-based accounting and accrual accounting. 

That seems to be what is going on here. In all likelihood,  Dwight Ball was reciting the internal deficit calculations used within government that are essentially the same as the ones used by the ratings agencies.  The budget adds them up differently.  It wouldn't be the first time the finance department has had budget figures show one thing only to have rating agencies show a different set of figures. 

Nor would it be the first time the department has delivered a set of figures to meet a political imperative.  Take the 2015 pre-election budget as a good example of figures that were - to say the least - somewhat more of a speculative or an imaginative nature as opposed to ones that Tom Rideout would find backuppable.

Or maybe he had a briefing that relied on DBRS' calculations and those numbers stuck in his head..  In the context of the Sunday comments,  Ball was talking about the need to stick to the existing budget because it made the bond-rating agencies happy. DBRS put the deficit figure higher than the official one, but was still willing to give the government an optimistic rating on the budget.

Either one is a more plausible explanation than the idea Ball suddenly started talking about another year and then switch back again instantly.

Around these parts, we'd suggest  - as we have already - that the budget takes some liberties with accuracy and veracity.  After all, the government has made all sorts of spending commitments, like Bay du Nord, that do not apparently show up in its forecast out to 2022. 

The deficit *is* higher than the provincial government has been admitting. At some point, we might find out precisely how much higher it is. In the meantime, though, the politicians have a bigger problem to deal with. They have to come to grips with the financial reality of the province and get a budget through the House that the bond-raters will approve.

That might not be as easy as people think.