A more than $13B red ink mess with no end in sight
The Daily Gleaner
November 2, 2016
Finance Minister Cathy Rogers predicts the deficit will be erased in four years.
Photo: James West/The Daily Gleaner
Something’s gotta give!
No, it’s not the Hollywood movie starring Jack Nicholson and Diane Keaton that I’m referring to.
It’s the New Brunswick movie starring Premier Brian Gallant and Finance Minister Cathy Rogers that has everyone buzzing.
I’ve seen the movie and I don’t like it.
Minister Rogers recently released the province’s year-end financials announcing that the deficit for the 2015-2016 fiscal year is $260.5 million.
“We are pleased with our year-end result which is an improvement from the budget forecast,” said Rogers. “We budgeted to have a deficit of $326.8 million, not including the contingency reserve, and the reality is we did better than that. We have seen a reduction of $66 million in our deficit.”
“While the net debt grew, we are committed to responsible fiscal management and returning to fiscal balance, “said Rogers. “The statements released today are a good indication that we are on the right track.”
On the right track? I disagree.
There are two critical points here.
First, the deficit hit $260.5 million, the eighth consecutive deficit, a fact that is so very concerning.
Second, I refer to five critical words in Minister Rogers statement, “While the net debt grew.” She did not reveal to us just how much the net debt grew but here are the grim facts.
Our provincial net debt has increased from $6.7 billion in 2007 to its 2016 level of just under $13.7 billion, an increase of $7 billion, more than doubling in just ten years.
Said another way, we have borrowed $694.6 million annually over the past ten years, or about $58 million monthly, to finance operations.
Today, our $13.660 billion net debt represents $18,185 for every man, woman, and child in New Brunswick based on the 2011 census population of 751,171.
The 2015-2016 budget projected a net debt of $12.604 billion as of March 31, 2016. Audited figures show it hit $13.66 billion, over $1 billion higher than forecast.
Stay with me now! And fasten your seatbelt!
In the two years of Premier Gallant’s administration, the net debt has increased a staggering $2.0 billion, from $11.7 billion in 2014 to $ 13.7 billion in 2016, or 17 percent, the greatest year over year increase in the net debt in New Brunswick’s history.
We have borrowed $2.74 million daily over the past two years to finance our day to day operations.
About 68 percent of this amount, or $1.856 million daily, is interest.
Yes, we are borrowing to make our interest payments. Think about it.
Interest payments on the net debt this fiscal year are forecast to hit $700 million, or $1.918 million per day, or about $80,000 hourly. Interest costs for the fiscal year ending March 31, 2016, settled at $678.1 million. Interest payments are only going to escalate with the huge increase in the net debt and anticipated future increases in the rate of interest.
The 2016-2017 budget projects a deficit of $347 million which includes a Contingency Reserve of $100 million to be used only in the event of a revenue shortfall. After factoring in the acquisition and amortization of Tangible Capital Assets, the deficit jumps to $ 468.5 million.
The net debt was forecast to hit $13.458 billion as of March 31, 2017. We have already exceeded that figure by a whopping $202 million.
I predict that the net debt in 2017 will be in the range of $14.2 billion to $14.5 billion, far over the audited figure of $13.7 billion in 2016.
The budget further projects that the next three years will produce deficits amounting to $473 million in total. Only in the year 2020-2021 is it anticipated that New Brunswick will return to a positive financial position with a modest $21 million surplus.
Not gonna happen, folks! Not gonna happen!
Auditor General Kim MacPherson, says, “The Province must be diligent in monitoring the level of the public debt and take appropriate action to control its rate of growth.”
She revealed some governments made difficult choices acting to reduce spending, dispose of assets, and restructure fiscal policies.
She goes on to say that, “Greece and the city of Detroit did not take appropriate action, and their experiences clearly show us the ultimate consequences of a failure to act.”
Something’s gotta give!
Do you consider the actions of our government to be “responsible fiscal management” as Finance Minister Rogers has stated?
Is New Brunswick returning to “fiscal balance”?
I don’t think so!
Minister Rogers says she is pleased with the year-end result.
Les Smith is a former president of the Fredericton Chamber of Commerce. He lives in New Maryland.