Auditor general says N.L. finances are dismal

Newfoundland and Labrador has returned to "have-not" status, according to the province's auditor general, even if it will not receive equalization payments this year.

AuditorGeneral TerryPaddon, whoconcluded his report into the province's finances on Tuesday, says falling oil revenues, government spending and the "unprecedented deficits" contained in past and future budgets mean the situation in Newfoundland and Labrador is dismal.

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"This is as bad as we've ever seen it, I guess," Paddon told CBC's Here and Now on Tuesday night.

"Most sensible people would probably suggest that yeah, we're probably a bit of a have-not province now."

'Unprecedented' situation

Spending in the province rose as the government's coffers filled with oil royalties. However, Paddon says after the "pent-up demands" got addressed, the province has not readjusted spending to the new economic reality.

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Paddon saidthe province cannot sustain the "unprecedented deficits" forecastin the most recent budget.

He says three straight years of billion-dollar deficits is significant. It has broughtthe province's net debt to $12.7 billion, the highest total in its history, and the future is not looking much better.

"The province's expected deficit as a percentage of GDP is forecast to be up to 10 times higher than the average of all other provinces well beyond what would be considered sustainable," Paddon wrote, in his report on the audit of the province's financial statements, released to the House of Assembly earlier on Tuesday.

From 2016-17 to 2022-23, the forecast deficits add up to$5.8 billion.

What's more,measures taken to bring the deficit down through 2022-23, as forecast by the budget will affect services and "every resident of Newfoundland and Labrador."

Paddon told Here and Now that the government will need to take a close look at the areas it spends most, which include health, education and salaries.

"The range of options are probably very extensive, but not very pretty, I wouldn't expect," he said.

Pain all around

The fiscal updateshowed a "deterioration in most economic indicators" from the provincial government's budget expectations, said Paddon, including in employment, which the government predicts will drop 13 per cent or 31,100 people by 2020.

"The wind-down of the construction phases of the Hebron and Muskrat Falls projects will have a negative impact on the economy of the province over the next few years, as well as the treasury," said Paddon.

Meanwhile, the province's forecast of 0.4 per cent growth in program expenses annually through to 2022-23 won't realistically keep up with inflation, Paddon added.

The full report is available on the auditor general's website.