Budgeting transparency

Ottawa could learn from Victoria
April 7, 2004

If the recent federal budget was a conscious attempt by the government to address the fallout from the sponsorship scandal, it failed the test. The budget documents are as opaque as ever in terms of giving Canadians an inkling of how and where the federal government is spending our money. Unlike budgets in provinces such as BC that have made transparency a priority, the federal budget is as clear as mud.

This year's federal budget put a strong emphasis on spending restraint as a means of demonstrating good fiscal management. But this will do little to promote transparency and accountability. After all, the sponsorship scandal occurred during a period of severe spending restraint in the 1990s.

The budget document itself is indicative of how far we still need to go on the transparency front. It is now widely regarded as a document containing projections that do not accord with the underlying fiscal reality. The recipe is straightforward: use cautious economic forecasts, lowball your revenue projections, then pile huge contingency reserves on top for additional "prudence."

The result is that budget observers, whether or not they support this practice, are not given a reasonable estimate of the actual state of government finances when the budget is tabled. Most analysts are already second-guessing the Finance Minister's budget numbers before the ink is dry. It is as if the government has two sets of books: one for the public domain; one for its own purposes.

In this world, the default, unstated priority becomes debt reduction. More than $52 billion in debt has been paid down since 1996/97 even though all of these budgets were tabled as balanced. The only reprieve from debt reduction occurs when portions of the hidden surplus from the year before get doled out. For example, the 2004/05 budget commits new money for health care -- funded out of the 2003/04 surplus.

Figuring out how the government is funding new initiatives can be tricky for a number of other reasons. Most announcements include both new money and old (previously announced or already budgeted) money. And most new funding announcements are multiple year totals to make them sound bigger and more impressive. An example is this year's $7 billion in GST savings for municipalities -- over ten years.

Strangely, despite 390 pages of Budget text, there is surprisingly little detail on federal spending. Want to know what the budget for the Ministry of Agriculture is in 2004/05, and how this compares to last year? Or how the Ministry of Industry budget breaks down? Or what the finances of Via Rail or Canada Post look like for the year to come? Sorry, the budget does not contain any estimates for individual federal ministries or Crown corporations, much less breakdowns of spending within.

These practices undermine the credibility of the budget process. The budget itself becomes a promotional vehicle for any new initiatives brought forward by the government, not a means by which citizens can get the details on how funds are spent.

An alternative to the federal status quo would be to emulate the British Columbia budget. Rooted in budget controversies during the 1990s, the previous NDP government and the current Liberal government have together transformed BC's budgets into the most transparent in the country.

First of all, the BC budget sets out line items for each Ministry with comparisons to the previous year. These numbers are backed up by more technical Estimates documents that delve into the finances at the Ministry level, and by detailed Ministry Service Plans that accompany the Budget documents in thick binders. Ditto for Crown corporations.

The latest BC budget even includes schools, hospitals, colleges and universities. This means that readers can see how much tuition students will pay to post-secondary institutions (too much) right in the budget statements.

Major capital projects are also clearly stated in the Budget, and the net impact of the operating budget and capital budget is reconciled in the provincial debt statistics. And most of this information is updated on a quarterly basis through public reports.

Of course, nobody's perfect. For example, the BC government managed to take the BC Ferry corporation off the books by changing its legal status from a Crown corporation to a publicly-owned but private agency. And the province has been keen to pursue public-private partnerships (P3s), which involve moving substantial sums of public money off the provincial books and into the private sector, away from public scrutiny.

Nonetheless, the BC experience shows that the feds have a long way to go if they want to walk the talk on transparency. This does not prevent governments from putting its spin on the contents, but it does allow the reader to critically assess claims by looking at the numbers. And that is what transparency is all about.

Marc Lee is an economist with the Canadian Centre for Policy Alternatives in British Columbia.