Higgs government accused of manipulating October fiscal update

The New Brunswick government was in much better financial shape than it claimed in October as it conducted wage negotiations with CUPE unions, according to information released this week by the Department of Finance.

Figures disclosed Tuesday in the province's second-quarter financial update show provincial tax revenues were running $304.3 million ahead of budget expectations, as of Sept. 30.

Using that figure, the province nowprojects its own tax and other self-generated revenues will reach $382.7 million beyond original budget targets by the end of the fiscal year in March 2022.

"We are seeing taxation revenue increases reflecting stronger-than-anticipated 2020 results and a stronger economy," said Finance Minister Ernie Steeves.

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But the "higher than expected revenues" are so high they raise questions about the first-quarter update released just last month.It forecastmuch weaker self-generated revenue growth of $145.3 million by the financial year-end.

That's a $237.4-million difference in provincially generated revenue estimates in the two forecasts, even though they were issued just 34 days apart and both had the benefit of being prepared after Sept. 30, when revenues were already documented to be soaring.

'Way too much of a coincidence,' economist says

New Brunswick economist Richard Saillant says he doubts the provincial government could have been unaware of how its fortunes were trending when it released its first year-end forecast on Oct.13, given how much unexpected revenue had arrived by Sept. 30.

He suspects wage negotiations with several public sector unions caused the province to withhold the news from them and the public.

"This is way too much of a coincidence," Saillantsaid in an interview.

"They better have a damn good explanation why all of a sudden, in the space of five weeks, they are comfortable with ramping up their (revenue estimates) by nearly a quarter of a billion dollars."

Quarterly financial reporting has been touted by the government of Premier Blaine Higgs as an important tool to "ensure complete fiscal transparency" for the public.

Beginning in 2019, it began reporting both "year-to-date" budget numbers side by side with "full year" budget projections as part of a promise to make comprehensive and trustworthy financial information widely available.

"This change in fiscal reporting demonstrates our commitment to enhancing transparency and responsible financial management," Steevessaid after launching the expanded reports.

First-quarter report was two months late

The first-quarter report is normally issued at the end of August, but this year came out six weeks late, when the second quarter was already over.

However, that delay did not appear to help the accuracy of the year-end projection.

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For example, this week the province revealed that corporate income tax revenues are likely to finish the year $71.5 million higher than expected because of an upward revision by the federal government of 2020 amounts due to the province from companies.

Most of the increase, $61.2 million, was booked as revenue in the province's accounts as of Sept. 30. Still, that money was not included in the year-end forecast issued two weeks later on Oct. 13.

Instead, the forecast projected no increase in corporate income tax at all this year, helping to keep the surplus projected in October low.

Saillant said the province's "year-to-date" revenue numbers from Sept. 30 that are missing from year-end projections released on Oct. 13 tell him the province was withholding information from the public on purpose.

"Nothing has changed whatsoever that would warrant an upward revision of that magnitude," Saillantsaid of the $237.4-million improvement in the province's self-generated tax revenues between the October and November financial forecasts.

"The only explanation that I can offer to this is that five weeks ago, it wasn't in the government's interest to disclose or to properly reflect revenue growth."

Liberal Opposition Leader Roger Melanson, himself a former New Brunswick finance minister, said he too believes the full-year fiscal forecast issued in October left out revenues the province had to know about by then.

"I'm very suspicious,frankly," said Melanson. "They seem to be manipulating numbers. There has to be some political hands involved here."

In an email, the Department of Finance did not deny having more current financial information on hand than it put in its October update, but said quarterly reports are limited to the fiscal periods they deal with.

"First quarter is based on departmental submissions received in July. Second quarter is based on departmental submissions received in October," wrote Erika Jutras, the department's communications manager.

But if that is a Finance Department rule, it broke it on Tuesday by using wage settlements and retroactive payments that might be made to CUPE members sometime in the future to lower its projected second-quarter surplus by more than $100 million.