Auditor general warns N.L. 'is not living within its means,' with highest-ever net debt - Action News
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Auditor general warns N.L. 'is not living within its means,' with highest-ever net debt

The auditor general has released her annual look at the finances of Newfoundland and Labrador, and she's warning of mounting debt and high government spending.

Julia Mullaley says spending, and not revenues, is the main reason the deficit is up

Auditor General Julia Mullaley is warning that Newfoundland and Labrador's debt is now at record levels. (Peter Cowan/CBC)

Newfoundland and Labrador's auditor general is warning of mounting debt and high government spending, in her annual report released Thursday.

"The bottom line is we're not living within our means," Julia Mullaleytold CBC News on Thursday.

A deficit in each of the last seven years, totalling$6.4 billion,hasdriven up the province's net debtwhich now stands $15.4 billion. That works out to be $29,250 for each person in the province the highest in the province's history, according to the Mullaley's report.

Mullaley points not to a revenue problem, but to a spending problem

"If you look at our per capita revenue... we're far better off than most of the provinces across country," she said.

However,Mullaleyadded that the province needs to continueto reduce its per capita spending, whichwill remain important moving forward.

Over the last 10 years, government spending has increased by a third. It's up $2.1 billion from where spending was in 2009.

During the same period, government revenues shrank, down almost 10 per cent.

Mullaley said Newfoundland and Labrador's debt, compared to the annual output of the provincial economy, is over 46 per cent the highest in Canada.

"It is significant, and it does impact future generations on how do you bring that back down to a more manageable level," Mullaley said.

Balanced budgets at risk

The government forecasts a balanced budget by 2022-23, but the auditor general lays out a number of risks that could impact meeting that target. Government will have to reduce its expendituresby over $570 million a year,while inflation and promised wage increases to workers continueto increasethe cost of goods and employment.

"[It's] a big challenge to pull that amount of money out of your budget over that short period of time," Mullaley said, adding that it will cost $35 million across the entire public sector for every one per cent wage increase.

A large government building surrounded by green trees.
The Liberal government is still sticking with a pledge to get to a balanced budget by the 2022-2023 fiscal year. (CBC)

Mullaley also said the commitment from government on rate mitigation for Muskrat Falls is a risk, given that it will take several factors including federal help to come together in order for it to work out. If it doesn't, there has to be another solution.

"I think the whole electricity rate mitigation is certainly a huge, huge risk to our forecast for sure," she said.

"With all those expenditures and all the risks around making that mitigation plan work, it's a lot of risk around those numbers."

In a media release issued shortly after the auditor general's reports were published online, Finance Minister Tom Osborne said the challenges that Mullaley has identified are "well established."

"We continuously evaluate and update our fiscal approach to overcome challenges that arise each year," he said in the statement.

"We remain committed to our balanced approach to fiscal management as we work to return our province to fiscal balance."

Read more stories from CBC Newfoundland and Labrador