Do you remember that old Looney Tunes cartoon where a crippled plane is hurtling towards doom at a fantastic speed but then runs out of gas five feet from the ground, allowing Bugs Bunny to hop casually to safety?
Premier and Air Yukon chief pilot Dennis Fentie drew a similar picture for voters in his budget last week.
As recently as a year ago, Fentie was telling us that the Yukon’s rainy day fund had over $150 million in it (page four of the Financial Information section of his March 19, 2009 budget, in case you’re asking).
This figure has plummeted downwards thanks to some whopping cash deficits, which don’t even include $167 million in borrowing planned by Yukon Energy and the hospital.
But now, according to Fentie, Air Yukon will pull up its nose at the last minute and cruise until 2014 at an altitude of about $40 million. The projections in last week’s budget show $37-40 million in the bank for the next four fiscal years.
Are you wondering why Fentie picked $40 million, when stopping the plunge just above zero would be more dramatic (as the Looney Tunes cartoonists would tell you ... they didn’t have the plane run out of gas 40 feet above the ground)? It’s because about $36 million of the rainy day fund is still frozen in the asset-backed commercial paper debacle.
It’s strange to say, but if it weren’t for the Bay Street villains who blew up the asset-backed commercial paper market, Fentie would probably be blowing another $36 million of taxpayer money out the door in the run up to the next election (in 2011 at the latest).
Undoubtedly, that $36 million would have made it easier for Fentie to keep up the vote-winning spending until polling day. But he’ll probably be able to make it without inflicting major cuts on the electorate, with some more borrowing and financial legerdemain.
In the longer run, a big question is whether the Yukon is headed for a big debt or if Fentie’s long-term financial projections are possible. The kindest way to put it is that Fentie’s projections are not impossible; growth in transfers from Ottawa, a growing economy and iron-fisted spending discipline at home could deliver fiscal rectitude until 2014.
But Fentie’s figures show revenue going up about $120 million between the current fiscal year and 2014, while costs go up just $15 million. That will require the Yukon government to keep growth in departmental budgets significantly below the rate of inflation for several years. Fentie’s math also seems to imply there won’t be a big supplemental budget later this year, something that has been a regular feature in recent years. It also suggests that any wage and pension increases negotiated this year with the teachers and government employee unions will have to be absorbed by cutting other government expenses.
It’s unclear to this economist how the Yukon government is going to keep such a disciplined lid on spending. One wonders if the Yukon government has ever kept cost growth under inflation for two years, let alone four.
Maybe it’s possible.
But Yukoners who grew up wondering why Elmer Fudd kept believing Bugs Bunny may end up wondering why they kept believing Fentie.
Keith Halliday is a Yukon economist and author of the Aurore of the
Yukon series of historical
children’s adventure novels.