Auditor general Terry Paddon in his audit of the province’s financial statement has expressed worry regarding the deficit for 2016-17.
“While the deficit for 2016-17 has been reduced to almost half the deficit of the previous fiscal year, it is still not sustainable,” Paddon said.
“The deficit as a percentage of GDP in Newfoundland and Labrador for 2016-17 is the highest in Canada and substantially higher than most other provinces. Even though the province expects a surplus in 2022-23, it continues to forecast significant deficits up to that time. Furthermore, there is risk that the forecasted results may not be achieved and the province has limited options to address this situation.”
Paddon delivered his report on the audit of the financial statements of the Province of Newfoundland and Labrador for the year ended March 31 to the speaker of the House of Assembly today (Tuesday).
“While the deficit of $1.1 billion recorded in 2016-17 represents a significant improvement over the deficit recorded in 2015-16, it is the second highest deficit ever recorded in Newfoundland and Labrador,” Paddon said. “The deficit for 2016-17 contributed to a substantial increase in the net debt of the province — now at $13.6 billion — the highest in the history of the province.”
Paddon noted the province generates more revenue, on a per capita basis, than every other province and has one of the highest tax burdens, “an indication that revenue is not the primary issue creating deficits,” he said.
Per capita spending in this province is substantially higher than per capita revenues and the province spends more per capita than every other province, he said.
“Newfoundland and Labrador faces significant challenges in providing efficient and economical public services because of its older population and geography,” Paddon said.
Almost 20 per cent of the population is older than age 64 – and this is a contributing factor to higher demand, and cost, for public services, he said, adding a sparse population, spread out over a large land mass, creates challenges to providing efficient, economical public services.
“If the province is unable to achieve its budget targets, there are limited options available to generate significant additional revenue and, if the province has to reduce expenditures, it will have to consider hard choices around the types of public services provided and how they are delivered,” Paddon said.
Revenues may not rise to expected levels by 2022-23, Paddon warned, noting more than 25 per cent of the revenue growth is expected from oil royalties while oil prices may not rise to expected levels by 2022-23 and expected levels of oil production may not be achieved.
A slowing economy may then impact revenue growth from other sources, including tax revenues, he said.
Also, he noted the province’s forecast of expenses shows an expected decline by 2022-23 but said holding expenses to the forecast levels will be challenging given current and future demands, including demographic change and any potential measures to offset higher electricity rates.
In a news release, Finance Minister Tom Osborne said the issues identified by the auditor general are well-documented and have helped inform government's tofiscal management, "as well as encouraging economic development, attracting immigrants, and supporting healthier communities."
"We remain committed to a course that will return our province to surplus," Osborne said, wishing Paddon a good retirement.