Government releases independent external review

Loyola Sullivan, Minister of Finance and President of Treasury Board, today released the independent external review of the province�s financial situation completed by PricewaterhouseCoopers (PwC). Minister Sullivan was joined by Michael Gourley, project leader and special consultant from PwC, at a news conference to release Directions, Choices and Tough Choices.

"The independent external review has three primary findings for government. First, government will not be able to meet the fiscal targets outlined in the 2003 budget. Second, if government does not implement significant expenditure management measures, we will have annual deficits in excess of $1 billion, with the cash component averaging $660 million. And third, revenue growth alone is not enough to balance the budget by 2007-08," said Minister Sullivan.

The minister said the consultants have clearly stated the province�s financial situation can not continue. The report states: "Government needs to develop and implement clear and decisive action plans to address the fiscal imbalance and to avert those forecast record levels of deficit for each and every year over the next four years."

"Government has inherited a serious financial situation which is not going to disappear overnight. The time has come to address the situation and government will do just that," said Minister Sullivan. "Securing the financial situation of the province is the number one challenge we must face. In order for government to have the financial resources to ensure that services and programs are available for Newfoundlanders and Labradorians, we must address this situation."

Minister Sullivan said, as pointed out by the consultants, that the fiscal situation is not solely government�s problem. "The consultants have stated in the report that the financial health of Newfoundland and Labrador is the concern of government, its employees and every single resident of the province," he said.

To this effect, tonight, Premier Williams will give an address to the province, and outline how the financial position of the province affects our future and what steps the province must take to address this challenge.

"There is little doubt that government is on a path that will require tough decision-making. These decisions must be made, and will be made, for the good of our province, and for the good of our people," said Minister Sullivan.

For the next four fiscal years (2004-05 to 2007-08), the findings of the review are:

• Government can not balance the budget by the 2007-08 fiscal year with revenue growth alone.
• In the absence of restraint measures, the average deficit will exceed $1 billion annually, with the cash component averaging $660 million annually.
• The debt of the province will increase to $15.8 billion from $11.6 billion by 2007-08. This equates to more than $30,000 for every man, woman, and child in the province.
• The unfunded pension liability will increase to $4.5 billion from $3.7 billion.

For the current fiscal year, the findings of the review are:

• The fiscal targets for the 2003-04 fiscal year can not be met. The deficit must be revised from $665.9 million to $827.2 million. The cash component increases from $286.6 million to $506.6 million.

Government announced its intention to conduct a thorough review of the province�s financial condition November 6, 2003. The successful proponent, PricewaterhouseCoopers, was selected through a request for proposal process and began work on November 18, 2003. An interim report was presented to government at the end of November and the final report was received December 22, 2003.

The independent external review, Directions, Choices and Tough Choices, and Minister Sullivan�s speaking notes are available at www.gov.nl.ca/financialsituation .

Media contact: Diane Keough, Communications, (709) 729-6830

2004 01 05                                       12:15 p.m.