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Fun with figures: Yukon’s capital budget is overstated by $110 million

The Yukon’s 2006-07 budget is not what it seems.The government is not spending $191 million on capital projects this year.

The Yukon’s 2006-07 budget is not what it seems.

The government is not spending $191 million on capital projects this year.

It is spending $79 million on tangible capital assets.

The rest is … well, padding.

And running the government doesn’t cost $600 million.

It’s more like $710 million.

Why the discrepancy?

Well, the capital and operation and maintenance budgets don’t jibe because politicians fiddle with the numbers.

Specifically, Yukon politicians want to give the impression the government is lean, so they downplay its operations cost.

They also want people to think they are pumping lots into the economy, so they bolster the capital numbers.

“Political decisions get made at the management board,” Mark Tubman, director of budgets for the Finance department, said on Thursday.

He was explaining how non-tangible capital assets, like calculators, vacuum cleaners and training funds, are counted as capital expenses.

It’s nothing new, said Tubman, who has worked on Yukon budgets for 15 years and seen successive governments of three political stripes pour as much of the territory’s money into the capital side of the ledger as possible.

The push is on from the Yukon Party to continue the trend and claim the highest possible capital spending, he said.

When Premier Dennis Fentie announced to the Whitehorse Chamber of Commerce, the Yukon Party and the legislative assembly in recent weeks that the government is spending $191 million “to continue the stimulus,” he wasn’t lying.

But he wasn’t being entirely accurate either.

Not all that money goes to acquiring physical assets that are normally considered true capital projects.

In the Yukon, capital spending breaks down into three parts: tangible capital assets, other capital projects and purchases, and transfer payments.

Tangible capital assets, as listed in the budget, are any physical objects worth more than $1,000 that the government intends to buy or build this year — $8.7 million to finish construction of the Canada Winter Games athletes’ village, or $345,000 to buy three new ambulances.

They total roughly $80 million, including $2.36 million to finish construction of a multi-level care facility in Watson Lake and  $6.8 million for the Tantalus School in Carmacks.

Shakwak highway construction projects are also considered tangible capital assets, even though the US government will pay back all of the $34.75 million the Yukon will spend.

“We still own the asset, they just happen to be paying for it,” said Tubman.

Tangible capital assets are categorized according to thresholds. For example, any vehicles the government purchases that are worth less than $10,000 are not counted as tangible assets.

They are non-tangible assets that get lumped in with “other capital projects and purchases.”

The Public Sector Accounting Board and Canada’s auditor general, Sheila Fraser, find this practice acceptable, said Tubman.

Fraser recently praised the Yukon adopting full-accrual accounting, which takes all revenues and expenditures, past and future, into account.

In the end, all the receipts add up, and the books balance.

But the government’s “other” category covers a lot of expenses that should be counted as operations and maintenance, said Tubman.

For example, the government counts all its office systems, equipment, systems and space as capital expenditures, not things needed to keep the machinery of government running.

Consider $1 million for FireSmart projects needed to keep flammable brush away from roads and towns.

Or loans for the Yukon Housing Corporation’s $7.35-million home-ownership program.

Or $206,000 for the Chisana caribou recovery project.

The government counts all of these as capital, not operations and maintenance.

The total for “other capital projects and purchases” tops $76 million.

Transfer payments are a little different.

That money is transferred to spending authorities, like schools or First Nations, with the presumption that it will be spent on tangible capital assets, said Tubman.

But in some cases, like a $1.5 million “community training fund” from the department of Education, Finance officials have no idea what the money will be spent on, said Tubman.

Transfer payments account for $35 million of the capital budget, with $290,000 going to “First Nations support agreements” and $200,000 to “youth strategy initiatives” and $250,000 to stabilize the riverbank in Old Crow.

Why are these considered capital expenditures?

Because, as Fentie said, they supposedly create an economic stimulus.

But the money doesn’t buy anything real, concrete, tangible.

The department of Tourism and Culture is buying nothing this year. Zero.

Ditto for the department of Economic Development. It is buying a feasibility study for the proposed Alaska-Canada rail link, for $1.8 million, but the budget explicitly states that feasibility studies don’t count as tangible capital assets.

Even the $1 million in the department of Justice capital budget for a new jail isn’t going to buy a new jail, but a study — not a tangible capital asset.

Other jurisdictions in Canada don’t count studies and agreements and program funding and paper clips as capital spending.

Tubman has written three letters to the management board, requesting that operations expenditures be counted as operations expenditures, not as capital, he said.

“This is the more accurate number representing capital spending,” he said, tapping his finger on the $79 million figure in the budget that he wrote with his staff.

One of the reasons the government does this is to win political points by appearing as though it is operating efficiently — that is, cheaply — and spending more on capital, said Tubman.

Another reason is to simplify things for contractors, who know to look in the capital budget for projects bound for public tender, he said.

Finance officials are working on options to offer the government that would count the two sides of the budget more appropriately, Tubman added.

“It’s something we’d like to change in the near future.”