Lies, damn lies and budgets

If you were a budget officer for any government in Canada, I’ll bet you would lowball your revenue estimate for the coming year. And (except during election years) you would plan spending based on those estimates.

If you were a budget officer for any government in Canada, I’ll bet you would lowball your revenue estimate for the coming year. And (except during election years) you would plan spending based on those estimates.

I’m ready to bet the authors of a report written for the C.D. Howe Institute would do the same, if they were tasked with budget responsibilities.

And when revenues — surprise! — pan out better than worst-case, I’d bet both you and the people at C.D. Howe would have a list handy, of priorities for the extra cash.

So I have to take some exception to the snarky tone of both their report and the reporting done on their report, which gives half the provinces a failing grade for budget transparency, with most of the other half receiving a barely-passing grade.

In brief, their report says most provinces vastly under-estimate their incomes at budget time, and then use the “surplus” revenue as a type of slush fund for pet projects and goodies, without needing legislative budget approval.

When you look at their chart of provincial spending above budget from 2003-13, you might be shocked.

Saskatchewan overspent its budgets in that period by about 37 per cent, the highest in the country. Their $4.3 billion overspending earned them a D+.

Alberta “only” overspent by about 27 per cent, earning our province a C rating. Strange, though, because the dollar figure is a whopping $10.2 billion.

These budget methods have been the Get-Out-Of-Jail-Free card Alberta has played for as long as most of us can remember.

The A grade given the federal government, in my view, should be classified as an Easy A, because federal revenues are far more stable and predictable, as are their expenses. Transparency, as defined in the report, is politically easier.

On the expense side, the federal government mostly just issues transfers to the provinces, which then have to make the real-world decisions. Then, they need to figure out how many unemployed people there are, and how many babies will need family support payments.

Easy, compared with actually building schools, roads, hospitals and bridges, while delivering the social services (like health care and education) the feds only partially pay for.

The skepticism expressed in the report is warranted, though. But the causes for it are hardly surprising.

Colin Busby is one of the report’s authors, and he discussed it with the friendly audience on CBC’s The Lang & O’Leary Exchange.

“Their revenue targets come in quite a bit higher than they forecast, and that’s normal given that they are getting their revenue from royalties,” Busby said. “But that does spill over on the spending side. For every dollar they get that they didn’t anticipate, about 75 cents is translating into new spending.”

Bingo. But should anyone be surprised? Here’s a better question: would anyone else do it differently?

The best aspect of the C.D. Howe report is the hardest to translate in detail for a TV news audience, or a newspaper critic.

That aspect lies in the methods all the provinces and territories use to report — and to sometimes disguise — their budget estimates, versus the actual outcomes later. You can’t compare apples to apples across the country.

Prince Edward Island overspent its budgets by less than 15 per cent in the decade measured. The dollar figure was $200 million.

That’s just a tiny slice of Alberta’s overspending. Actually, provincial yearly overspending on the island is less than a rounding error on an Alberta budget.

Go figure. C.D. Howe apparently does. PEI was awarded a D- while Alberta got a C. But the mark reflects supposed transparency, not outcome. Which is kind of a joke.

There are lies, damn lies and budgets. Nobody expects Alberta’s estimate for revenue to be anything else than a couple billion or more on the low side.

School boards that have to build honest budgets based on provincial spending predictions must later re-write them when Christmas comes and the province shouts hooray and doles out cash they never thought they’d ever have. For a few days of “good” news, of course. For this, Alberta gets a passing grade?

The federal government doesn’t even know the actual rate of job availability nationally anymore, because of their cuts to Statistics Canada. So they use a data trawl of Kijiji ads instead. And they get an A?

That’s where skepticism passes into cynicism, and reports like this one from C.D. Howe appear somewhat less than reliable.

Follow Greg Neiman’s blog at readersadvocate.blogspot.ca.

Greg Neiman is a retired Advocate editor. Follow his blog at readersadvocate.blogspot.ca or email greg.neiman.blog@gmail.com.

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