Adept at playing the game
Selinger's balanced budget achieved by non-conventional means
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Hey there, time traveller!
This article was published 26/03/2009 (5058 days ago), so information in it may no longer be current.
In his most recent concert film, comedian Chris Rock fends off criticism of his wealth and affluence by telling his audience: "Don’t hate the player, hate the game."
Rock may have no idea where Manitoba is, or who Greg Selinger is, but his punchline seems well-suited to explaining some of the intricacies of the 10th budget delivered by the Manitoba finance minister.
The budget is officially balanced — with a forecasted $48-million surplus — but it was not achieved by conventional means. No, this balanced budget required an elegant exploitation of the budgeting game as it is defined here in Manitoba.
The budget actually sees spending outpace revenues. A deficit was avoided by reducing scheduled debt payments by $90 million for this year and withdrawing $110 million from the province’s much-celebrated Fiscal Stabilization Fund. To reduce debt payments, Selinger will be forced to amend one of the rules of the game, the Balance Budget Law, which among other things, legally defines the province’s annual debt payments.
So, is this a balanced budget or not? The answer is yes, and no.
The province is planning to spend more money than it is expecting to collect, which under normal circumstances would add up to a deficit. However, by tweaking debt payments and drawing a bit from savings, presto-chango, it’s balanced. Opposition critics are likely to howl about how this budget is nothing more than fancy accounting and to a large extent, they will be correct.
But remember, this is about the game, not the player.
The strategy used by Selinger to balance his budget this year, including the impending amendment of the Balanced Budget Law, is entirely consistent with the unique way we approach accounting and budgeting in Manitoba.
A former Manitoba government decided nearly 20 years ago to establish a savings account to help cushion the treasury against dips in revenue. Although proponents will argue the Fiscal Stabilization Fund was created to protect core government services, it has the added benefit of protecting governments from having to face up to a deficit when spending actually outpaces revenues.
That is not to say there is anything untoward going on here; the budget process is quite transparent and all the tricks of the game used to generate the surplus are all clearly delineated in the budget documents. It’s just that governments that spend more than they take in have an out.
The Fiscal Stabilization Fund is just one of several variables that go into the making of a budget, which at the best of times is more about art than science.
The numbers used to build a provincial budget are tricky at the best of times; this year, they are downright slippery.
A massive and precipitous decline in economic activity and government revenues in the final quarter of the 2008-09 fiscal year has everyone walking on thin ice when it comes to accurately predicting what the forthcoming fiscal year holds.
Provincial governments are generally not aggressive when it comes to forecasting revenues. Taking too optimistic a view can only set the table for disappointment and embarrassment as the fiscal year wears on. And yet, no one in the budget lock-up on Wednesday could speak with any certainty on what twists, turns, dips and dives the economy will throw at us.
And that means that this budget, like all budgets, is built on a wing, a prayer and a whole lot of forecasts generated by the Conference Board of Canada.
(To understand just how precarious budget forecasts are, consider the fact that we do not get to see a truly accurate picture of the final results of a government’s fiscal year until about six months AFTER the year ends. The fiscal year ends March 31, but the audited public accounts — which officially close the books — do not appear until September. That means budget documents are built on forecasts compared to best estimates, not hard numbers.)
If there is peril in this budget, it may come from the decision to amend the Balanced Budget Law. There are many who will agree that slowing debt payments to sustain government spending on priority program areas such as health and education is prudent. Others, however, will howl that Selinger is mortgaging our future to protect the government’s reputation today.
Some will accuse Selinger of intellectual dishonesty. And there are legitimate reasons to question the veracity of the balanced budget claim. But in the end, this is a finance minister who knows how to play the game.
So, admire the player, and hate the game.
Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.