Federal budget 2015: How Joe Oliver balanced the books

Finance Minister Joe Oliver unveiled a balanced budget Tuesday that posts a $1.4-billion surplus largely on the strength of money already banked from asset sales and by holding a little less money aside for unexpected pitfalls down the line.

Oliver dipped into the federal government's traditional contingency fund to the tune of $2 billion this year in order to balance its books.

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 As recently as last fall's budget update, after oil prices had started their precipitous decline, the government wasn't expecting to have to use the fund, normally a $3 billion buffer the government gives itself to react to unforeseen consequences such as natural disasters.

From the public's point of view, the oil price drop may well qualify, blowing about a $6 billion hole in Ottawa's finances. Even in November, the government was forecasting an average oil price of about $65 a barrel this year. Today, that's been cut to $53.50.

Mainly because of this reverse oil shock, the government lowered this year's contingency to $1 billion — and expects to do the same for the next two years, before it bounces back to its customary $3 billion of breathing room in 2019 onwards.

"There's not a lot of room to play with," CIBC economist Avery Shenfeld said. "So they pulled out a few tricks."

Without dipping into that contingency fund, there's a very real possibility the government would be in deficit territory. Currently, Ottawa is forecasting two per cent growth in the economy this year – possibly an optimistic view considering the Bank of Canada said last week that there was zero growth in the first quarter.

In its budget document, the government gives a glimpse of just how razor-thin that surplus is. If their projection for two-per-cent growth is off by just a single percentage point, Ottawa's $1.4 billion surplus turns into a $3.4-billion deficit this year. It gets worse over time – if their projections for next year and beyond are off by just a single percentage point, Ottawa could be facing a deficit of $4.4 billion two years out.

"The narrower your surplus is, the less flexibility you have if you get hit by the equivalent of another oil price falling through the floor," former Ontario finance minister Janet Ecker said. "Another major ice storm … pestilence," she quips: "Name your plague."

The government also pocketed billions from the sale of assets to live up to the promise it made during the 2011 election to balance the books. The government booked part of $4.2 billion from the recent sale of GM shares and $2.1 billion from the recent AWS-3 spectrum auction to get the numbers to work.

Those assets are now sold.

And while some of the proceeds will be booked in future years, the lowest hanging fruit may have already dropped.

There is, however, another wireless spectrum auction currently underway that is expected to raise hundreds of millions of dollars. That money isn't on the books yet, so it would be a bonus whenever it comes in, an official at the Finance Department explained Tuesday.

The government is telegraphing more spending for such things as defence, security and infrastructure money for cities starting in 2017, but that money is far from certain. "There's many budgets between the now and the then – when you're supposed to get this money," Shenfeld said.

As Sahir Khan, a University of Ottawa lecturer and former official at the Privy Council Office and Parliamentary Budget Office, said the government's 2015 budget is all about booking as much revenue as possible up front to balance the books, while kicking the spending can down the line.

"They've done everything but the kitchen sink to hit their number and be done," Khan said.