Oil-dependent Newfoundland and Labrador now expects this year’s provincial budget deficit to balloon to $916 million, as petroleum prices continue their drop to five-year lows.
That’s a forecast increase of $378 million in red ink on the government ledger for 2014-15.
Finance Minister Ross Wiseman said the worsening fiscal results can be blamed on “one reason ... that reason is oil.”
Wiseman noted that the province has “zero control” over global oil prices.
And those cratering prices are blowing a massive hole in the government’s balance sheet in 2014-15.
Newfoundland and Labrador will take in $791 million less in oil royalties than initially expected this year.
The province did its budget math based on oil at $105 US per barrel.
The new forecast average is $86.49 US. The fiscal year runs to the end of March 2015.
Brent crude is currently below the $60 US barrier.
Wiseman told reporters the return of $100 US oil “won’t be in the near future.”
No prediction on return to surplus
Less than nine months ago, the province forecast a return to surplus in 2015, an election year.
Wiseman told reporters Tuesday it is now “premature” to project when the province could balance the books.
While revenues are down, largely because of oil volatility, so are expenses.
The province is paying out $300 million less than expected this year. Two-thirds of that is in program spending, the rest in lower debt-servicing costs.
The finance minister said the province needs to “rein in expenditure growth.”
But Wiseman declined to be drawn into specifics about what the implications of that could be for the civil service or government programs.
"It would be highly speculative on my part today and premature to start identifying what the order of magnitude of that might be," Wiseman said.
Last month, Premier Paul Davis announced restrictions on travel and hiring.
Wiseman insisted that the growing blot on the government’s balance sheet is not indicative of the province’s overall fiscal health.
“Newfoundland and Labrador still has a strong economic performance,” he said.
“This is still an attractive place to do business.”
Highest deficit projection
The revised 2014-15 deficit projection, if accurate, would be the worst fiscal performance for the province since the Progressive Conservatives took power more than a decade ago.
The final deficit figure for 2003-04 came in at $914 million. The Liberals and Tories both governed for roughly half of that fiscal year.
The biggest deficit during the remainder of the past 10 years of PC rule occurred in 2004-05. At $488.8 million, it is far below the updated 2014-15 projection.
When this year's budget was tabled in March, the Tory administration offered up new and enhanced benefits for families, students and seniors, despite expecting to add a half-billion dollars’ worth of red ink to the province's tab at that time.
Those big ticket items included:
- full-day Kindergarten, to begin in 2016;
- the replacement of student loans with grants;
- an enhanced low-income seniors’ benefit;
- increased tax exemptions for low-income residents and families;
- a five-per-cent jump in income support rates.
"It's a budget that shares the wealth we are currently seeing in the economy," Charlene Johnson, the then-finance minister, told reporters at the time.