How did $40M in overspending disappear? Liberals say PC leader Blaine Higgs did it
On the eve of the New Brunswick election campaign, the governing Liberals are launching a new attack on Progressive Conservative Leader Blaine Higgs's record from his time as provincial finance minister.
The Liberals have released a document they say shows that Higgs made almost $40 million in overspending disappear over a July weekend in 2014.
It suggests one motive was to ensure PC cabinet ministers would not have to pay a $2,500 penalty under the Fiscal Transparency and Accountability Act.
The internal email says the province was projecting $40 million in overspending on Friday, July 18, 2014. By Tuesday, a first-quarter budget update was projecting $2.1 million in overspending.
"Over a weekend, the then-minister of finance was able to find $38 million of more savings on the expenditure side," says Liberal cabinet minister Roger Melanson. "It's a bit suspicious, to be quite frank.
"I wasn't there obviously. But how can you identify $38 million over the weekend? It's a lot of money. … How did he do it?"
Misleading document
Higgs says the Liberal description of the document is misleading. The document describes a first-quarter projection based on figures from the first three months of the fiscal year.
The $38 million was to be found not over that weekend but over the remainder of the year, he says.
"It's not unusual to work with the departments and say 'We're going to find ways'" to get spending down before the end of the year, the PC leader says.
"This is the first report for the year. The first one. And it's a projection to year-end. So we're not accepting in the first report that you're going to be over-budget."
Higgs's reputation as a prudent fiscal manager is a key part of the PC election strategy. The Liberals have been trying to dent that image since he became party leader in 2016.
The July 18, 2014, email by Jane Garbutt, then the deputy minister of finance, was obtained by a Liberal political staffer through a right-to-information request. It was then given to CBC News.
$2,500 penalty
In the email, Garbutt wrote that "initial results" for the first quarter of 2014-15 showed spending by departments was on track to be $40 million over-budget.
She reminded her fellow deputy ministers that if the government didn't hit its deficit target, Higgs, then-Premier David Alward and other ministers "would be subject to a $2,500 administrative penalty."
Under the PCs' fiscal accountability act, members of cabinet would be dinged if the budget deficit was not reduced by $125 million each year.
Garbutt said "getting back on track" with the deficit was "of utmost importance" to Alward and Higgs.
She sent the e-mail to her colleagues at 9:18 a.m. She asked them to "revisit your data, and identify any real opportunities to improve your projections."
By the time the Tories released their first-quarter fiscal update the following Tuesday, the $40 million in projected overspending was down to only $2.1 million — a change of $37.9 million.
Savings possible
Higgs says on a total $8 billion budget, shaving $40 million in spending would be simple. His effort to reduce "March madness" — an annual spending blitz of leftover money before the new fiscal year begins April 1 — saved $200 million a year, he said.
"We've seen departments over and over again go right to the last [of the year], and then spend all their budget in the last two months," he said. "So [in the Garbutt email] we're not accepting it's over-budget. It's not unusual at all."
Garbutt was removed as deputy minister of finance in Gallant's first month in office and moved to another position. The Liberals fired her in early 2015, a decision Higgs criticized. She could not be reached for comment about her email.
The July 23, 2014, first-quarter update projected a deficit of $387.3 million, down from the initial budgeted figure of $391.1 million.
The deficit the previous year was $498.7 million, so the 2014-15 figure projected at the time would have been within $14 million of what was required for ministers to avoid the $2,500 penalty.
Hypothetical discussion
Higgs says any discussion of the penalty in July 2014 was hypothetical because it would only be levied after the 2014-15 budget figures were finalized and audited.
The final deficit figure for 2014-15 was $388.6 million, close to Higgs's initial forecast. But that was because both revenue and spending ended up around $300 million more than he'd projected.
Between the first-quarter report and the final numbers, the Liberals were elected and they repealed the accountability law.
They replaced the penalties with a pay cut of 15 per cent for Premier Brian Gallant and 10 per cent for ministers until the budget is balanced.
