No balanced budget law in NL

Once thing you could say about former finance minister Loyola Sullivan, you could take him at his word even if you couldn't understand it. That stands in sharp contrast with his successor.

On CBC radio this morning is a report that Marshall won't be fulfilling the commitment of his predecessor to bring in a balanced budget law. He says that it's enough for government to merely explain to the public why there will be a deficit and that, in essence, he doesn't want his hands tied.

There are a few things about this worth noting.

A balanced budget law (BBL) does not prevent a government from running a deficit if it has to. A BBL is a law, passed by the House of Assembly which is a pledge, promise or commitment that any budget brought forward will not have a deficit.

Does it tie government hands? Only in a political sense. If circumstances change dramatically and the government is forced to bring in a deficit, it still can. It just has to amend or revoke the BBL to allow it.

But the BBL has the effect of raising the political bar to a budget deficit. If government is going to spend more than it brings in, it has to break that prior pledge not to in a very deliberate and explicit way by amending or revoking it's prior legislative commitment.

Marshall says it should be good enough for government to discharge its responsibility by explaining why the deficit has occured.

Well, minister Marshall, that's not good enough. It's that sort of low to nonexistent bar that has brought us to the position of having the highest per capita debt, and associated service charges, of any jurisdiction in the country.

If there was any time it was safe for this province to make the balanced budget pledge, it is now.

In 2005-06, this government had $500 million net surplus (cash and capital), carried forward $300million and put $200million on debt. In the following year, government still saw a surplus (while doomsaying to the contrary) despite the six month closure of the Terra Nova money flow.

Trends continue to look good for the next 5 to 10 years, and even longer if Hebron and Hibernia South comes on stream. Never in our province's history has the fiscal situation looked so good.

Does this government have to go into deficit even if revenues drop? Not even close. There is tremendous amount of give in the existing expenditure patterns. At $8600 in spending per person, it is the second highest of any province in Canada.

While this government perpetuates the myth that our geography increases the costs of supplying services, in fact doctors and nurses in Stephenville don't make close to what doctors and nurses make in Ontario urban centers. That's why Stephenville can't attract or retain doctors and nurses. That low cost of local labour of all kinds goes a long way to leveling the costs imposed by geography.

And that still doesn't justify the fact that we have more public servants per capita than any other province. We have more people on the government payroll today, in absolute and relative terms despite population shrinkage, than when this government took over.

Government talks a good game of debt reduction. At the same time it has been determined to avoid any kind of concrete pledge or commitment to actually doing anything about it. At the end of the Williams government first mandate, there is no sign of a debt reduction plan in any way shape or form other than an acknowledgement that is exists and it's a problem.

The size of the debt has been a constant refrain in government's case against the federal government in this ongoing equalization war. That plank in the government's case would be more believable if there was a debt reduction plan on the table.

Instead, debt reduction is a mere rhetorical tool to beat up on the feds.

It's not like this pledge was made by another government or that Sullivan made the pledge while he was in opposition (and as we all know, promises don't travel well on the trip from opposition to government). This pledge was made by Loyola Sullivan while he was minister of finance in this very government.

The pledge was good enough for this government then, why is it not good enough now?