Closing the books on the Dexter government

The voters closed the electoral books on the Dexter government last October, and yesterday Finance Minister Diana Whalen closed the financial books.

The audited financial statements for the fiscal year ending March 31, 2014 — that's the last seven months of the Dexter government, and the first five months of the McNeil government — show a deficit of $678.9 million. 

For the Department of Finance, yesterday was "like Christmas," as one senior staffer said. There's nothing that satisfies an accountant quite like financial statements with a clean auditor's certificate.

For the rest of us, a deficit of $679 million — and $819 million added to the province's net debt — is the opposite of Christmas.

To her credit, Whalen did not blame the NDP yesterday, though I doubt her Liberal colleagues will be as fastidious in the weeks and months to come. She did stress how different the final figures were from the budget delivered in April 2013 by NDP Finance Minister Maureen MacDonald, but that's just a fact.

What happened?

So what happened? How did the NDP fall so far short of balancing the budget?

The bulk of the deficit was attributable to "one-time, unexpected occurrences," said Whalen. They were "events out of the control of any government."

There was the auditor general's insistence on the revaluing of the province's pension liability, to the tune of $318.3 million. Whalen had revealed $280 million of that little gem last December.

Then there was the prior years' adjustment (PYA) — the bane of a finance minister's life — amounting to $258.5 million. These PYAs are entirely unpredictable, but can be very large. 

This year's PYA was unpleasantly large because of news received by the McNeil government in April about decommissioning costs of the Sable offshore energy project.

With these two items alone, we have $576.8 million of the deficit. The rest is attributable to lower than expected revenue, and higher than expected expenses, though neither was especially large in the context of a $10-billion budget.

So now we know the final numbers: The NDP tried to reach a sustainable balance, and failed.

The Dexter government failed to balance the budget even though it raised more revenue through the HST.

The Dexter government failed to balance the budget even though it exercised real restraint on program spending.

The Dexter government failed to balance the budget even though it was consumed by the search for economic stimulation and jobs.

Even with the measures it took, and the unpopularity that ensued, the Dexter government left a structural deficit in the range of $250 million. That's the hole from which the McNeil government starts.

When will we know if Liberal plan is working? 

Apart from their plan not to be the NDP, the McNeil government does not yet know how it's going to get out of that hole. Whalen had no meaningful answers yesterday on revenue or spending. 

The next significant milestone is receiving, sometime in October, Laurel Broten's commissioned study on taxation. Any changes resulting from that review will be in the spring budget. The only hint Whalen gave yesterday is that she expects a different mix of taxes, not a reduction of taxes.

There's also an internal program review, which Whalen described yesterday as "laborious." We don't know who's doing it, what their mandate is, or when it will be done. The results may be in the spring budget, or maybe not.

The rest of the Liberal plan is searching for that magical unicorn that has eluded every previous government: pressing the right buttons and pulling the right levers to "grow the economy" and magically produce enough new revenue to balance the budget and pay down the debt.

Every government we've had over the past twenty years, at least, has come into office saying that they know how to find the unicorn. 

That's every government, of every stripe.

We're still looking.

Whalen's next budget will be delivered in early April 2015, a year and a half into the Liberals' four-year mandate. That's when we might — might — see the elements of a Liberal fiscal plan.

We won't have the audited results for that budget until August 2016, almost three years into the mandate. In other words, we won't have a hint, until two years from now, of whether the Liberal plan is working.

At that point, they'll be getting ready for the next election, and fiscal discipline goes out the window.