Auditor General, Julia Mullaley, delivered her report to the House of Assembly today on the audit of the financial statements of the Province of Newfoundland and Labrador for the year ended March 31, 2019. The report shares observations about the financial condition of the Province and highlights certain risks to achieving the Province’s budget targets to 2022-23.
Financial indicators continue to show that the Province is not living within its means. While the deficit for 2018-19 of $0.55 billion is an improvement over the deficits reported in recent years, it is still a large deficit. The Province has recently revised the forecasted surplus for 2019-20 downward to $1.56 billion. This surplus includes recognition of $2.5 billion in revenue from the renewed Atlantic Accord agreement for which the related cash flows will be received over the period 2019-20 to 2055-56. In absence of this agreement, the Province would have projected a deficit for 2019-20 of over $0.9 billion.
Consecutive deficits over the last seven years have contributed to a substantial increase in the net debt of the Province – now at $15.4 billion or $29,250 on a per capita basis – the highest in the history of the Province. At March 31, 2019, the Province’s net debt as a percentage of its GDP is 46.3 percent, which is significantly higher than the average of all other provinces. The recognition of $2.5 billion in revenue from the renewed Atlantic Accord agreement in 2019-20 will see a reduction in net debt. However, with deficits forecast for 2020-21 and 2021-22, net debt is expected to increase again to at least $15.0 billion by 2022-23.
Quotes
“There is considerable risk that the budget targets, including a return to surplus in 2022-23, will not be achieved. Should these risks materialize and result in significantly less revenues, or more expenses, than expected, Government would be significantly challenged to address such a situation over the short-term.”
“The Province of Newfoundland and Labrador generates more revenue, on a per capita basis, than every other province. However, per capita spending in this Province is substantially higher than per capita spending in every other province and is also higher than the Province’s per capita revenues. This suggests that revenues are not the primary issue creating the deficits but the level of spending. Continued emphasis on sustainably reducing the Province’s per capita spending will remain important.”
Julia Mullaley
Auditor General of Newfoundland and Labrador
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