Parties spar over YG deficit projections, maintenance costs

The official Opposition spent much of the last few days slamming the government over its budget and the possibility of deficits and net debt in the future.

The official Opposition spent much of the last few days slamming the government over its budget and the possibility of deficits and net debt in the future.

But at least one of the accusations being thrown around isn’t being backed up by the finance department.

After issuing his 2017-18 budget with a small $6.5-million surplus, Premier Sandy Silver is projecting deficits through 2021.

The premier insists his budget shows “the real cost of government for the first time” and blames the previous government for the state of the territory’s books. He’s alleging the Yukon Party did not plan properly for the operations and maintenance costs of major government projects.

The costs to run the new Whistle Bend continuing care facility have gotten a lot of attention.

“We have a $150-million build that was not planned for. It was rushed,” said deputy premier Ranj Pillai May 1. “We have problems with the actual structure and now we have to figure out how to staff it. I think there about 200-plus people who have to go into the facility to work there. There is not even a proper human resources strategy in place, and I think the cost is about $36 million.”

The Yukon Party has said it did plan for the operating costs of Whistle Bend, pointing to comments made by former minister Mike Nixon last year.

In April 2016 Nixon told the legislative assembly the facility would cost about $28 million a year to run. “We have included these O-and-M costs in our long-term fiscal plan,” he said.

While the government of the day knew those numbers, deputy minister of finance Katherine White said they didn’t make it into the Yukon Party’s long term figures in the budget forecast.

“Twenty-eight million dollars was not included. There was a much smaller amount included but nowhere near $28 million or the $36 (million) that we’re thinking it’s probably going to cost now,” White said.

For four years starting in 2018-19, the former government included a total of about $20 million in its budget projections for the facility, White said.

“It wasn’t $28 (million) annually, it was $20 (million) total over the four years. That’s why we say there was just a small fraction of the annual costs.”

It’s not clear why the former government would choose to leave out that figure.

Ted Laking, chief of staff for the Yukon Party, said he “couldn’t comment on what officials have said and will point to comments the previous minister said in the legislature.”

Operation and maintenance costs are not the only figures to increase in Silver’s projections. In 2018-19 the Yukon Party was planning on spending $175 million in net capital expenditures. The Liberals have bumped that up to $220 million.

Silver has said he wants to be able to take advantage of federal money that requires the territory pay a portion of the costs.

Silver’s first budget as premier doesn’t paint a sunny picture for years to come. Along with running annual deficits starting in 2018, the premier’s projections suggest the territory will continue to eat into its net financial assets.

By the end of the 2018-19 fiscal year the premier is projecting the territory will be in net debt to the tune of $77 million. That grows to $216 million by 2020-21 if things don’t change, the projections say.

That has provided plenty of fuel for the Opposition.

“The massive new debt that the premier is getting us into is a scary thing. It means our children and grandchildren are going to have to pay for the reckless spending of this premier,” said Yukon Party MLA Scott Kent May 2.

Going into net debt doesn’t mean the government will immediately have to borrow from a bank.

Even when the Yukon’s net financial assets are low, there is usually between $100 million and $300 million in cash in the government’s bank account, said White.

That’s because the “liability” side of the government ledger includes money that would be needed for pension obligations and potential catastrophes.

“You’re responsible for things like future pension liabilities which are included in that figure, but you don’t have to pay out until a person retires,” White said. “You do have to maintain that ability incase everybody decides to retire tomorrow.”

Other long-term liabilities include keeping cash in the bank in case people don’t pay back their government debt.

“It doesn’t mean that all of that liability comes to fruition. Sometimes people do pay us back.”

If things continue the way they are now, White said she wouldn’t start worrying about needing to approach lenders until around 2020.

“Of course the government could make a decision in any given year to do a project that’s very expensive, or we could have a natural disaster. So we’re always ensuring that we never run into a cash crunch,” White said.

“But we don’t see ourselves, even on this current fiscal path which we don’t plan on staying on, having to look at that until around the year 2020.”

The government is attempting to right the ship by bringing in an independent financial advisory panel.

Over the summer the panel will be coming up with suggestions for how to improve the Yukon’s financial future. Silver has promised the panel’s suggestions will be made public.

The Yukon Party took the opportunity to suggest the premier was planning layoffs.

“If the options he has asked the financial advisory panel to consider include layoffs, it would be interesting to know where he would consider these,” said Kent. “Is everything on the table? Are there some departments or positions that would be protected from the premier’s layoffs?”

Silver accused the opposition of “fear mongering.”

“Nobody is contemplating any cuts to the public service,” he told the media after question period.

It’s a position echoed by White.

“There was a question out there about whether the government’s planning on laying a whole pile of public servants off in order to balance the budget. We would never do that.”

If the advisory panel recommended shrinking the size of government, and the Liberals decided to head in that direction, her department would look at who is retiring or nearing retirement and offer them retirement packages, she said.

Contact Ashley Joannou at ashleyj@yukon-news.com

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