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What you need to know about COVID-19: August 7, 2020
As a general rule, it’s better to have more money than less.
But in the case of the Progressive Conservative government’s announcement of a $57-million operating surplus, it also raises the same serious questions as a $57 million shortfall would – what is behind the radical discrepancy between the actual surplus amount and the initial $1.5 million that was forecasted by the previous governing Liberals?
Finance Minister Darlene Compton explains that the discrepancy is the result of higher than anticipated revenue from corporate, sales and income tax. The other explanation is that the surplus is the result of growth – population, economic and employment. All good news.
But those are basically the same explanations the Liberals gave the public when it generated a $75-million surplus in 2017-18 after forecasting a $600,000 surplus, and those explanations aren’t good enough.
Why? Because it’s unclear if this surplus is the result of an underestimation of anticipated tax revenue or an over-taxation.
If it is the result of an underestimation, then we need to improve the forecasts of our annual provincial budgets and make sure the calculations are done in a competent manner. If it’s the result of over-taxation, then the surplus should be reimbursed to consumers and corporate taxpayers in the form of badly needed tax cuts.
In fact, the surplus, as with the previous $75 million Liberal’s surplus, isn’t going to reimburse anyone but is going straight towards the debt. This will certainly make credit rating agencies look at us in a better light, but we need to make sure that programs and services Islanders rely on are still being properly funded and are not falling victim to underspending and efficiencies.
We do need to be mindful of the fact that generating surpluses is a good news story, and can be used to enhance a governing party’s image. A surplus gives the appearance that the government is responsibly managing our money while constant deficits gives the appearance that a government is spending recklessly and can’t manage a budget.
That’s why forecasted surpluses that are out of whack with actual budgets needs to be independently investigated, so any concerns about how the surplus was generated can be publicly disclosed, and in a timely manner, so that any changes to practices can be implemented. We look forward to the auditor general’s take on P.E.I.’s finances.
To be fair, having a surplus is better than running a deficit since we’re not borrowing more and adding to our debt to pay for programs and services. But as taxpayers, we need to be reassured the finance minister, her department and the provincial government have a firm grip on the province’s finances.
We do need to be mindful of the fact that generating surpluses is a good news story, and can be used to enhance a governing party’s image.
To be fair, having a surplus is better than running a deficit since we're not borrowing more and adding to our debt to pay for programs and services. But as taxpayers, we need to be reassured that the finance minister, her department and the provincial government have a firm grip on the province's finances.