N.L. too dependent on oil: audit

Newfoundland and Labrador's auditor general warned the government Friday it has come to rely too heavily on oil revenues, while also pointing out that its startling financial success is in the past.

"The large surpluses seen from 2006 to 2009 are gone," John Noseworthy said in a bluntly worded statement released with his annual audit of financial statements.

"The level of expenditure is incredible," Noseworthy later told CBC News in an interview.

He pointed out that about $4.1 billion is now spent annually on health and education alone.

"Our total budget for everything in the province back in 2000 was only $4.1 billion. So health and education today is what we spent on everything back in 2000."

Noseworthy said offshore oil royalties over the last five years helped the province shave billions of dollars from its accumulated debt.

However, he said that government spending on infrastructure and social services has skyrocketed.

"That's an increase of 47.4 per cent in just five years," Noseworthy said in an interview. "It's huge."

Finance Minister Tom Marshall told CBC News that the oil windfall of the last few years allowed the government to play catchup after decades of deficits. As well, he said the global recession forced all governments to hike spending to keep economies afloat.

However, Marshall said government spending should level out.

"So now that we are going back to growth, we can go back to our plan," Marshall said.

"We can't get there right away but we will get back there, where we start running surpluses again and start paying down that debt again."

Beyond government control

Noseworthy said while Newfoundland and Labrador's economy continues to be robust — and is receiving glowing predictions from banks and other forecasts — the government is nonetheless in a risky position.

"Much of the province's fiscal performance relates to offshore oil royalties which are volatile by their nature and depend on fluctuations in three main factors: world oil prices, production and foreign currency fluctuations — none of which can be directly impacted by government," Noseworthy said.

"Furthermore, oil is a non-renewable resource and offshore oil royalties will not always be available to fund government programs. Therefore, the sustainability of current and future government programs will depend on other revenue sources."

The audit shows that the net debt stood at $8.22 billion in 2010, up by $254 million from the preceding year. The average debt per capita stands at $16,126, or the second highest in the country.

Noseworthy's report comes a day after the government filed its own financial report.

Marshall said while the government finished the year with a deficit of $32.6 million, it was substantially less than the $750-million deficit projected in the 2009 budget, as well as the later revised budget of $294.9 million.

The government said in December it was expecting to finish the current fiscal year in March with a small surplus of just over $12 million. In March, it had projected a deficit of more than $194 million.