MOODY'S AND FINANCE: WAITING FOR A MIRACLE

First, let’s clear up any confusion. The downgrade in the Province’s credit rating by Moody’s, a credit rating agency, resulted not from a “highly ambitious” deficit plan, as the Agency suggested, but because the Finance Minister’s ambitions about Budget balance in 2022-23 were supported only by talk. Moody's as much as said, “talk is cheap.”

Underlying the issue is a $14.5 billion “Direct” Debt compounded by $9.4 billion of utility debt referred to by the Budget Estimates as “self-financing” — which, of course, it isn't. “Rate mitigation” — required to prevent power costs reaching 23 cents/kWh — means that the Province's $4 billion equity contribution to the project is “sunk cost”. Implicitly, that’s Moody's view, too.

THE BUDGET: TRYING TO HAVE IT BOTH WAYS

On Tuesday, Finance Minister Tom Osborne delivered the Province’s seventh deficit Budget in a row. Only the Atlantic Accord arrangement, amounting to $2.5 billion, salvaged any pretense of the Government’s ability to manage the public accounts.

To hear the Finance Minister, you might have thought the Liberals had spent the last three years as a deficit slayer. In fact, all that has changed is a reduction in the capital funding for the Muskrat Falls project.

The Government’s first Budget in 2016 levied a bevy of taxes and fees on the public. They had no heart to right-size programs and operations. As it stands Current and Capital Account Expenditures have risen to $8.6 billion (Statement III). In contrast Revenues are only $6.2 billion (Statement II). The real deficit, in contrast to the numbers used by the Government ($575 million without the Atlantic Accord transfer) is actually $1.4 billion. Budgetary cash requirements exceed revenues by $1.86B.