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'Not here to scare people,' but P.E.I. watchdog raising alarm bells about historic debt levels
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P.E.I.'s auditor general says the province's net debt, the highest in the province's history, is unsustainable.
Darren Noonan told MLAs the net debt is closing in on $3 billion, or nearly $15,000 for every single person in the province. He said if the current trend continues, that net debt could hit $5 billion in the next five years.
Noonan says the province may need to make some tough decisions soon.
"I'm not here to scare people, but I'm here to let people know that we have to start thinking about this. It has to be paid at some point," P.E.I.'s financial watchdog said in an interview with CBC News.
"Our net debt continues to grow… The only way to bring it down is to address it through increased taxes or decreased spending. It's a tough thing for politicians to have to do."
The auditor general was speaking as the legislature's public accounts committee met this week.
This is not the first time Noonan has raised concerns about the province's mounting debt, prompting provincial officials to describe his comments as "alarmist."
"I wasn't offended at the word 'alarmist,'" Noonan told MLAs at the committee meeting. "In fact, if you have to be a bit alarmist to get some attention to it… that's what it takes."
In a statement, the Department of Finance said it works to ensure the province can manage its debt levels and agrees that it is important to monitor the province's debt.
However, it added, "fiscal planning is complex, and it is necessary to balance a number of perspectives and factors, including Islanders' needs and being prudent financial stewards while monitoring today's uncertainties."
'We're spending money that we don't have'
Liberal MLA Gord McNeilly, who chairs the public accounts committee, said these debt levels are accumulating while the province is getting record transfers from the federal government. He said the province has to control its spending.
"We're spending money that we don't have," McNeilly said. "All Islanders should be concerned about this."
Green Party Leader Matt MacFarlane said the more the province has to pay to service the debt, the less money it will have to deliver programs and services.
"It means that we're losing programs and services and capital infrastructure that we could be having, simply because the debt is growing and growing and growing," MacFarlane said in an interview.
We need the infrastructure, we need the repairs to our hospitals and schools, but what's the cost that's going to come at?... We're going to have to cut programs that we've come to rely on. — Green Party Leader Matt MacFarlane
"We need the infrastructure, we need the repairs to our hospitals and schools, but what's the cost that's going to come at? It's either going to come at increased debt, which we're going to have to keep passing on to future generations to pay… or we're going to have to cut programs that we've come to rely on – social programs – and we can't do that either, really.
"It's a tough position that we're in right now."
Interest costing more than corporate tax brings in
Noonan highlighted some other troubling trends as well.
He said P.E.I.'s economy is more dependent on government spending than the economy of any other province in Canada; the province is the most dependent on federal funding; and interest charges have hit a record high of $165 million, or 5.5 per cent of total revenues.
"One of our significant sources of revenue for the province is corporate income tax, and last year, we took in $157 million in corporate income revenue. Our interest expense was over $160 million," the auditor general pointed out.
Noonan said the government's record-breaking capital spending is also a concern.
His office reviewed eight "significant" capital budget projects, comparing the original budget to the actual completed cost in the last three fiscal years. Those projects were completed at a cost nearly 50 per cent above the amounts originally budgeted, and some were nearly 80 per cent over budget.
The five-year capital plan for fiscal years 2020 to 2024 included total spending of about $610 million, but the actual capital spending over the period amounted to more than $1 billion.
Noonan said his office intends to keep digging deeper into the capital spending, to find out why so many of these projects are going over budget.
"There's been a lot of discussion about investment but there hasn't been any discussion on repaying the debt or how we're going to pay it back," Noonan said.
