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Premier provides update on fiscal situation

July 23, 2012

Premier Available to Media

Premier Kathy Dunderdale will be available to media today (Monday, July 23) at noon in front of the House of Assembly, East Block, Confederation Building.

Link to the original news release

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Below are selected news stories related to this update.

 

Dunderdale issues ‘reality check’ as oil prices drop:
N.L. premier says next year’s deficit could head towards $1 billion; province seeks savings

By Rob Antle, CBC News
Posted: Jul 23, 2012 2:14 PM NT
Last Updated: Jul 23, 2012 5:04 PM NT

Link: http://www.cbc.ca/news/canada/newfoundland-labrador/story/2012/07/23/nl-dunderdale-oil-prices-723.html

Newfoundland and Labrador Premier Kathy Dunderdale says the province will cut back on travel and leave some vacant positions unfilled for now as oil prices bubble well below government forecasts.

The province is looking for tens of millions in savings this year, but is facing a potential shortfall of hundreds of millions more than expected.

“We haven’t revised the budget, but we’re taking some measures, because we need to be really mindful,” Dunderdale told reporters at Confederation Building Monday.

“I don’t want to leave it till the end of the year and then try to figure out where we are.”

According to the premier, every $1 drop in the price of oil below government estimates results in nearly $20 million less being funnelled into the provincial treasury.

Newfoundland and Labrador has budgeted for oil to average $124 a barrel in 2012-13.

It began the fiscal year in April near that level, but bottomed out near $90 last month before rebounding back above $100.

Brent crude — a close, but not exact, reference point for Newfoundland product — stood at $103 a barrel on Monday.

“Everybody sees what’s happening with the price of oil, and I see every day what that’s doing to our budget,” the premier said.

She is calling the situation a “reality check.”

Dunderdale said this year’s deficit could be “significantly higher” than the initial estimate of $258 million.

She says that number could go as high as $600 million or $700 million.

And, she warns, things could get worse.

“I’m not so worried about this year,” Dunderdale said. “I’m more worried about next year. Because if oil stays where it is, our deficit could be around $1 billion next year.”

The premier said the province is not immune from the impact of global events.

“We don’t live in a bubble,” Dunderdale said. “What’s going on in China, what is going on in India, what is going on in Europe, has a direct effect on Newfoundland and Labrador. And we need to be mindful of that all the time.”

But at this point, no deeper cuts are planned.

“I’m not there yet,” Dunderdale said. “No, I’m not there yet. I’m seeing how this goes. We’re keeping a close eye on it.”

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Falling Price of Oil Changes Spending Habits
VOCM News, Monday, July 23 2012

Link: http://www.vocm.com/newsarticle.asp?mn=2&ID=25145

The Premier has ordered a stop on all discretionary travel after energy forecasts put oil under $100/barrel through 2013.

Kathy Dunderdale says the budget hasn’t been revised just yet, but steps are being taken to adjust spending. Dunderdale says the hold for the next couple of months also includes keeping job positions open where possible. These measures she says will save just tens of millions of dollars when the province is looking at hundreds of millions in shortfalls.

Dunderdale says she worries about the price of oil but not to the point were it keeps her up at night. It is what it is she says, reinforcing again the need to move away from a reliance on oil and therefore another reason to develop Muskrat Falls despite its $6-billion plus price tag.

The Premier says for every dollar that oil goes down it has a $20-million affect on the budget. That means if everything stays as it is, the deficit could reach $600-$700-million this year and a billion dollars by next year.

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Low oil prices concern for government: Dunderdale
The Telegram, Published on July 23, 2012

Link: http://www.thetelegram.com/News/Local/2012-07-23/article-3037165/Low-oil-prices-concern-for-government%3A%E2%80%88Dunderdale/1

Premier Kathy Dunderdale is worried about the price of oil and asking her ministers to tighten their belts.

Speaking to the media around lunchtime, Dunderdale said that low oil prices are a concern, and the government needs to manage the situation.

With oil prices currently more than $20 per barrel below where the province forecast it, that could mean hundreds of millions of lost revenue.

Dunderdale also talked about an upcoming meeting of Canada’s premiers. She said the top issues for her are health care and energy — especially the Muskrat Falls hydro project.

Dunderdale said on national issues, she’s disappointed that there hasn’t been more leadership from Prime Minister Stephen Harper.

More coverage in Tuesday’s Telegram print edition.

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Premier warns province faces billion-dollar deficit next year
NTV News, July 23, 2012 6:45 pm

Link: http://ntv.ca/?p=4950

Premier Kathy Dunderdale delivered a “reality check” about the provincial deficit Monday. The government is cutting back on non-essential travel as new forecasts show weaker oil prices could be here to stay. Dunderdale warns the deficit could rise to $1 billion in 2013-14. NTV’s Michael Connors reports.

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Tumbling price of oil prompts Newfoundland and Labrador to tighten fiscal belt
Sue Bailey, Canadian Press, Monday, July 23, 2012 2:19 PM

Link (Global News): http://www.globalnews.ca/entertainment/money/tumbling+price+of+oil+prompts+newfoundland+and+labrador+to+curb+spending/6442684179/story.html

ST. JOHN’S, N.L. – Newfoundland and Labrador Premier Kathy Dunderdale is reining in travel and other discretionary spending as her government faces a deficit that could top $600 million — up from a projected $258-million shortfall.

Cabinet ministers have been asked to review departmental travel and other budgets in a bid to save tens of millions of dollars, Dunderdale said Monday outside the legislature.

At issue is the price of Brent crude oil which at around US$103 per barrel is far lower than the US$124 per barrel on which the provincial budget relies.

“For every dollar that oil goes down, it has an effect of almost $20 million on our budget,” Dunderdale said. “So … if everything stays where it is now, our deficit could be up around $600 million or $700 million.”

Dunderdale said she’s even more worried about 2013-14, when a deficit of almost $433 million is already projected.

“If oil stays where it is, our deficit could be around $1 billion,” she said. “Now that’s a reality check for everybody in the province.”

Dunderdale said she’ll be watching expenses closely over the next few months and some government job vacancies may not be filled. But she said it’s not yet time to consider deeper cuts to programs or services.

Finance Minister Tom Marshall opted for two years of overspending rather than austerity as he tabled his budget last April. He blamed a $1.1-billion hole in the province’s finances due to a dip in oil production during refits and maintenance plus the loss of federal cash as the Atlantic Accord expired.

The joint offshore management program with Ottawa put $536 million in provincial coffers last year.

Marshall predicted a return to the black in 2014-15 with a $44-million surplus as higher offshore oil royalty rates kick in.

The last budget was a far cry from surpluses worth $5.5 billion racked up in six of the last seven budgets —largely thanks to higher oil production and prices. It was also a sobering reminder of the province’s risky addiction to fossil fuels.

Dunderdale said it’s a reality that bolsters the government’s support for the proposed $6.2-billion Muskrat Falls hydroelectric project in Labrador. The plan to harness power from the lower Churchill River would help wean the province off oil, she said.

An all-party debate on Muskrat Falls is planned this fall before the government decides whether to go ahead.

Some critics say the government squandered a chance to pay down more debt when it was flush with surplus cash. Before the price of oil dropped, net debt was expected to reach $8.5 billion by the end of next March. That’s up from $7.8 billion last year but down from a high net debt of almost $12 billion in 2004.

The Progressive Conservative government anchored its budget, as it has for the last nine years, using an independent average oil price provided by New York-based consultant PIRA Energy Group.

Dunderdale says the volatile fossil fuel market is being dragged down by economic slowdowns in Europe, China and India.

“I worry about it,” she said. “It doesn’t keep me up at night — it is what it is — and I think it just reinforces again our argument that we need to move from a place where we’re so reliant on the revenue from oil.”

Newfoundland and Labrador depends on offshore oil for about one-third of its revenues.

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