Saskatchewan Finance Minister Ken Krawetz presents the province’s 2013-2014 budget tomorrow — and he’ll be the only one among his counterparts to inaugurate the new fiscal year with a surplus. Everywhere else it’s red ink, as lower-than-expected revenues have added resource-rich provinces like Alberta and Newfoundland to the list of long-time big spenders such as Ontario and Quebec. As Maclean’s argues in our guide to the federal budget, the state of provincial coffers matters just as much as that of Ottawa’s finances. Excessive government debt will stifle economic growth regardless of whether its stashed in local or central government balance sheets and if a province’s fiscal situation should become unsustainable — although that’s not in the cards in the near future — it’ll likely be up to federal government to foot the bill for a bailout.
That’s why we’ve created this interactive graphic of provincial balance sheets. As you can see, although Alberta was the worst offender in terms of the discrepancy between how big the government predicted the deficit was going to be in fiscal 2013 ($882 million) and how big it expects it to be now ($3.9 billion), it is still the only province without net debt (that is the accumulated total of annual deficits, which, in turn, result from the government spending more than it generates in revenues every year). Conversely, Ontario, which has by far the largest deficit and debt, managed at least to keep its fiscal shortfall below what it said it would be in its 2012 budget, at nearly $12 billion rather than nearly $15 billion). Canada’s most populous province also looks in considerably better shape than Quebec when one looks at debt-to-GDP ratios, a gauge of how sustainable the fiscal burden is.
How can it be then that Alberta features as the province with the highest probability of defaulting in 30 years and Quebec as the least likely? The numbers are based on a forecast from Marc Joffe, a former senior director at Moody’s Analytics, who looked at long-term provincial fiscal trends in a paper for the MacDonald-Laurier Institute. He figures Alberta has been running large deficits, is vulnerable to price swings in the commodities markets (like, hmmm, this year) and has a population that’ll age more rapidly than in other provinces. Quebec, by contrast, is fairly immune to resource-price volatility and its senior ranks are relatively small. That said, such long-term forecasts are rarely accurate — still, the trends Joffe highlights are food for thought.
Hover over each province to view more information. Click on “exclude” in the pop-up windows to view a graphic without a certain province (you might wish to view the deficit forecast chart without Ontario, for example, whose fiscal shortfall is so large it dwarfs everyone else’s). Conversely, “keep only” allows you to isolate data for a single province. Click the circular arrow at the bottom of the two chart groups to refresh.
MAP: You can zoom-in by double-clicking on the map. To grab and move the map, press SHIFT and click. Click on the “home” symbol to restore the original settings.
This interactive graphic is best viewed in Firefox, Safari or Chrome.
*Note: Deficit and debt numbers are based on the latest available data and might not be strictly comparable due to accounting and reporting differences between provinces. Default risk forecasts are from “Provincial Solvency and Federal Obligations,” Marc Joffe, MacDonald-Laurier Institute, October 2012.
Tuesday, March 19, 2013