N.L. auditor general warns unsustainable deficits threaten public services

Newfoundland and Labrador's auditor general is painting a grim picture of the province's finances one week before he retires from the role. 

"While the deficit for 2016-17 has been reduced to almost half the deficit of the previous fiscal year, it is still not sustainable," says Terry Paddon in a media release issued Tuesday. 

"[The 2016-17 deficit] is the second highest deficit ever recorded in Newfoundland and Labrador," he said, describing the $1.1-billion shortfall. 

Paddon said that deficit has also driven up the province's net debt to $13.6 billion — the highest in the history of Newfoundland and Labrador.

Future outlook not any better

He isn't overly optimistic about the next few years, either.

Paddon called the province's fiscal situation over the past few years "a bit of a roller coaster."

He said there is too much hope being pinned on the surplus that government has announced it expects in 2022-23. 

"[The province] continues to forecast significant deficits up to that time.  Furthermore, there is risk that the forecasted results may not be achieved and the province has limited options to address this situation," Paddon said.

He told CBC News a surplus by that time depends on oil prices rising. Possible government action in response to higher electricity prices when Muskrat Falls comes online could also threaten a surplus, since Paddon predicts that "may not be a cheap fix."

The figures are contained in Paddon's audit of the financial statements of the province for the year ended March 31, 2017. The report is being presented to the Speaker of the House of Assembly Tuesday. ​

A spending problem

He said the province generates more revenue on a per capita basis than every other province and has one of the highest tax burdens. 

"So we're generating the revenue that we need to ... I don't think anybody would argue that because we spend more we have the best services in the country," Paddon said.

"When you look at taxes and fees, we're also kind of at the higher end of the spectrum across Canada. So there might be some limited option to raise taxes, you know there's probably not a huge amount," he added.

Impact on services

Paddon warned that the fiscal picture is also affected by the pressure points of the aging population and expansive geography of the province.

"I think that's the real risk here is that the services — in terms of healthcare and those sort of things that people are going to be really looking forward to — are going to be challenged to be delivered," he said.

"We're going to be looking to our governmentt to provide increasingly more and better services, and the province hasn't got the capacity to provide those services. It's going to be a challenge just for people in their day-to-day lives to be able to deal with the basic necessities," Paddon added.

Finance minister responds

Finance minister Tom Osborne weighed in on Paddon's report in a news release Tuesday afternoon.

"The issues identified by the auditor general are well-documented and have helped inform our approach to strong fiscal management," wrote Osborne.

"We remain committed to a course that will return our province to surplus."

Osborne also thanked Paddon for his "dedication and diligence" and wished him well.

Paddon is leaving the position as auditor general and will serve a three-month term as interim chief administrative officer for the town of Conception Bay South starting Nov. 1.