Nfld. & Labrador

Not a single happy choice in upcoming budget, Cathy Bennett admits

Finance Minister Cathy Bennett admits the upcoming Newfoundland and Labrador budget will be filled with painful choices.
Since she was appointed to the finance portfolio, Cathy Bennett has been heading an exhaustive look at government spending. (CBC)

When Cathy Bennett delivers her first budget speech next week, she will be doing away with many of the traditions of past finance ministers.

She won't be buying a new pair of shoes. She won't even have a flower in her lapel.

"There is not one single choice in this budget — not one — that is a happy one," Newfoundland and Labrador's Finance minister said during an interview.

Every decision we make will impact somebody somewhere and probably not in a good way- Cathy Bennett

"I'm not filled with pride walking into the House of Assembly next Thursday delivering the budget I have to deliver. It's not something I'm going to shy away from. But it's not something I'm going to celebrate."

Bennett won't say if there will be tax hikes, only that there will be "revenue actions."

She won't say if there will be cuts and layoffs, only that there will be "expenditure actions."

Every indication points to an unpleasant budget

That's a polite way of avoiding specifics answers prior to budget day.

But every indication is that this will be an unpleasant budget as Bennett lays out her plan to reduce and eventually eliminate a projected $2.4-billion deficit. 

Premier Dwight Ball and Finance Minister Cathy Bennett have been leading a line-by-line review of all public spending. (Terry Roberts/CBC)

"Every decision we make will impact somebody somewhere and probably not in a good way," she said.

Sitting in the drab-grey Department of Finance boardroom, Bennett explained how Thursday's budget will be the result of a wide-scale government restructuring process that began in the middle of December.

But this budget will only be the first act in a three-act play. The middle act will come later this year when Bennett delivers a supplementary budget that will include even more restraint measures and cost savings.

By budget day 2017 — the third act — Bennett hopes to finalize her plan to bring the budget back into surplus.

Getting there won't be easy. 

"I don't want anybody to be worried," she said. "But it is impossible not to be worried."

Line-by-line spending review

Since she was appointed to the finance portfolio, Bennett has been leading an exhaustive review of government spending.

In February and March, every government agency, department and corporation had to do a line-by-line spending review in front of Bennett and a committee of cabinet ministers.

If the expense couldn't be justified, it was cut.

"We picked where we thought we could get some quick savings," she said. "It's a $2.4-billion gap we have to close. We're taking every opportunity we can to close it."

The scrutiny on public spending will continue over the next year and go beyond the line-by-line review. Baseline budgets will no longer be automatically approved.

Departments will have to go through a zero-based budgeting exercise before the 2017 budget — essentially rebuilding each departmental budget from scratch and forcing a total re-examination of every dollar spent.

It's part of Bennett's attempt to fix what she calls a "culture of spending."

"Bond raters have been cautioning government for a number of years you have a problem with your spending and you better fix it," Bennett said.

Tackling debt a priority 

In January, one of those bond raters — Standard and Poor's — downgraded the province's credit rating from A+ to A, with a negative outlook. It reinforced Bennett's view that she not only had to manage revenues and expenditures, she also had to tackle the debt. 

Cathy Bennett says she wants to move Newfoundland and Labrador toward a system of zero-based budgeting. (Jeremy Eaton/CBC)

On that point, the government has been refinancing short-term debt into long-term debt to make annual interest payments more predictable. Right now 12 cents out of every tax dollar goes to interest payments and that's expected to grow -- possibly even passing education as a share of government spending. 

"We have to look at ways of lowering our risks from so much of our revenue coming from oil," Bennett said.

The finance minister admitted to being "angry and frustrated" by this budget process. Years after peak oil production and record oil prices during the PC years, she is now facing record deficits and record debt with no money in reserve. 

"We shouldn't be in this situation," she said.

But we are. It may not be Bennett's fault. But it is her problem.

She has inherited a public sector the province simply cannot sustain in an era of low oil. She said her primary focus for reducing the workforce will be attrition. But she admits attrition won't be enough. 

The budget itself is 99 per cent done, but Bennett said she is still finalizing her speech.

The title is "Building a Solid Foundation." The speech will outline the toughest budget measures in more than a decade.  

The second-last line reads, "and we have more work to do."

About the Author

David Cochrane is a senior reporter in CBC's Parliamentary bureau. He previously wrote for CBC Newfoundland and Labrador.

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