Canadian governments Pinocchios at budget time, study says

When it comes to matching their budgets to actual spending, most Canadian governments are Pinocchios according to a study by the C.D. Howe Institute.

Some overspend more than others, says C.D. Howe Institute

Cumulative spending overruns from 2003-04 to 2012-13 as a per cent of each province's budgeted spending. (C.D. Howe Institute)

When it comes to matching their budgets to actual spending, most Canadian governments are Pinocchios according to a study by the C.D. Howe Institute.

Over the last 10 years, the provinces and the federal government regularly missed spending targets set in their spring budgets, according to an annual study of fiscal accountability by Colin Busby and William Robson of the independent right-wing think-tank.

"I guess you could say we get a bit sceptical when we see the same pattern over 10 years," Busby said in an interview with CBC's The Lang & O'Leary Exchange. 

The report estimates the cost overruns at a cumulative $47 billion. Some provinces have longer noses than others, with Alberta and Saskatchewan the most likely to spend more by the end of the year than they budgeted — an average of four to five per cent annually. 

Report card on transparency

  • Federal: A
  • N.L.: D+
  • P.E.I.: D-
  • N.S.: C+
  • N.B.: B-
  • Que: C+
  • Ont.: A
  • Man. C
  • Sask: D+
  • Alta: C
  • B.C.: B+
  • Yukon D
  • N.W.T.: D
  • Nunavut: E

"Their revenue targets come in quite a bit higher than they forecast, and that’s normal given that they are getting their revenue from royalties but that does spill over on the spending side," Busby said..

"For every dollar they get that they didn’t anticipate, about 75 cents is translating into new spending," he added. 

But you won’t necessarily be able to tell that when you look at their books.

The study finds Ottawa and Ontario have quite transparent financial reporting, both using a clear accounting system that the average voter can understand, but other provinces and territories are not so careful about presenting financial information.

"In many provinces and territories, the average citizen or legislator would have trouble simply finding and comparing the key numbers in the budget and in the end-of-year financial reports," Busby said.

After rating each province on whether it prominently displays one set of revenue, spending and balance figures and makes it easy to compare the budget projections to actual spending, the report awards an 'A' to Ontario and the federal government.

But the Yukon and Northwest Territories and Saskatchewan, Quebec, Prince Edward Island and Newfoundland and Labrador got very poor marks in the D and D+ range.

Canadian governments, except for Ontario, tended to underpredict revenue by substantial margins, while all but Newfoundland and Labrador tended to spend more than they budgeted, the study found.

The good news is, both Ottawa and the provinces are coming closer to hitting their budgeted income and spending targets in the past five years, Busby said.

That was true despite the rough ride the economy has given Canada in that period, he said.

The study did not try to assess the question of whether taxes and spending  are too high or too low.

Budgets get a lot of attention, but people don't always focus on the follow-through, Busby said, one reason why the C.D. Howe Institute does this report.  

"I think we’re trying to focus on a very important aspect of government accountability and government oversight that probably does get lost in the high level discussion of budget item X or Y," he said.


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