There are two words that come to mind after reading budgetary estimates for 2015 in this province: election; and deception. Actually there is a third - tragic. For starters, the biggest bomb of all is that our actual budget deficit for 2015 is $2,092,867 billion. Not the $900 plus million that's being thrown about in the media. Here's how it breaks down:
Total revenue for 2015 is projected to be: $ 5,757,328 billion
Current Account Expenditures for 2015: - $ 6,659,952 billion
Capital Account Expenditures for 2015: - $ 1,143,743 billion
Need to borrow for 2015: $ 2,092,867 billion
Now the politicians are saying that capital spending is not a part of the deficit, but the fact is that it is. The University of Calgary just issued its report stating they saw the deficit coming in at $1.8 billion, so they were actually a little light. The government here likes to deceive people by saying this or that isn't included. Like, for instance former premier and finance minister Marshall's statement that the money allocated to Natural Resources, and then reallocated to Nalcor each year for the last three years does not contribute to the deficit. Yet, his estimates each year clearly show the transfer from the General Revenue Fund to the Department of Natural Resources. That number factors into the expenditures of the department. That is how it's accounted for.
The truth, according to the government's own budget estimates is that fiscal 2014 saw a cash shortfall of $ 1,051,798 billion. In other words, the total amount needed to borrow for last year, and this year is approximately $3.2 billion - which will go directly to our gross debt.
Speaking of gross debt, that is the total money we owe and are making debt payments on, 2015 will see it rise to $13, 889 billion. In 2003, before the oil money really started rolling in, that number was $8,932 billion. This year we will pay just over $770 million in interest charges/debt expenses. In 2003 that number was $520 million. Revenue this year is projected to be $5.7 billion. In 2003 it was $3.7 billion. The total budget expenses in 2015 is projected to be $8.2 billion. In 2003 it was 3.6 billion. So, in other words, after 12 years of oil, and over $20 billion of oil revenue brought in, we are spending over 200% more annually to run the affairs of the province,with revenue that has only increased 65%. That's shocking. That's catastrophic financially. It's called structural deficits with huge debt accumulations.
It's no wonder that Standard and Poors warned the provincial government last year to shed the weight of the public pension plans or face a credit downgrade. They knew the government was heading into massive deficit, therefore added debt, and in order to keep that rating we had to cut the pensions loose. Still, you can expect a credit downgrade imminently at this rate.
Now to the politics. The utter sleazy politics of deceiving your own people to further your political hopes. The PCs have scheduled an HST increase of 2% effective January 1, 2016, or about two months after the next election. They've pledged not to replace 20% of the public service as it retires over the next 5 years... the next five years. They've committed to an all day kindergarten starting in 2016..2016. In other words, none of the big hits or programs start until AFTER the next election. That way, the PCs are serving a budget up they hope won't immediately affect the pocket books of voters - ie: re-election. The horrific truth is that no matter what government is elected in November, 2015, a financial disaster never seen in modern time Newfoundland and Labrador awaits. The Liberals have already said they will cancel the increase on election, but can they?
2016 will not be much better, and likely much worse for the province's finances and economy. We are on the cusp of a provincial recession as it is. Almost 30% of all employees in the province work for the provincial government. They likely compromise about 80% of the higher incomes here. Keep in mind that 30% of residents here are too poor to pay any income tax. The PC's have said the government will have to borrow $5 billion over the next 5 years. That's just an outright lie. Just for starters, the federal loan guarantee is only now starting to kick in for Muskrat Falls. That loan requirement is at least $5 billion, and many experts suggest it could reach $8 billion in additional borrowing beyond the $2.6 billion the province has invested in cash. In fact, the federal loan guarantee won't kick in until at least 35% of the total project cost is paid in cash by the province. That $5-* billion has to be paid within 2 years for the 2017 first power date to be met. Then there is the minimum $750 million investment in Hebron which must be paid upfront. And so it goes. Considering the government is spending $1 billion a year more than it brings in just to operate government - not including fancy projects like Muskrat Falls and Hebron - the next government is looking at massive cuts. A 2% increase in the HST will only bring in about $300 million at the most - if the economy remains at the level it is.
Unfortunately, the economy won't be remaining where its at now. Construction and real estate are falling rapidly. Oil companies are scratching development projects as the international trade war with Eurasia begins to heat up. It's worth noting that Russia is the number one exporter of oil and natural gas in the world, not Saudi Arabia, and they can hit us hard. Expect that to happen as the BRIC countries solidify their oil for food and the like trade deals with Russia and China. None of this is being explained in any way to the people of the Province. The real truth is we had a window, a ten year window, to reap as much as we could from our oil. We didn't. We squandered it in a money-mad drunk fest. Now the party is over. Was Danny Williams the best premier this province has ever had? No. He was the worst premier this province ever had. His actions have caused irreparable harm to the place and the people. That is the truth. The numbers speak for themselves. Don't believe the deception spun by the entrails of the Williams government. Realize that as a people we have been deceived in an almost unimaginable way.
Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.
US computer engineer & industrialist (1955 - 2011)