John Crosbie calls N.L. finances 'horrendous' as AG outlines grim report

At a talk by the province's auditor general Wednesday, John Crosbie called Newfoundland and Labrador's financial situation "horrendous," saying it makes him glad he's no longer in politics.

"[Dwight Ball] is in a very difficult, sensitive position. I certainly don't envy the job because there's a huge amount at stake," saidCrosbie,a former federal finance minister.

"And Newfoundland people are not in the mood, as I see it, to get caught having to pay any serious increases in taxes or changes to government."

• 'Deficits of this magnitude' not sustainable, Auditor General Terry Paddon warns

Crosbie said that if government doesn't take action, Newfoundland and Labrador could regress to the economic situation of the early 1930s when it had such insurmountable debt it faced bankruptcy.

"I don't say that that's going to happen but the importance of this is that it's a possibility," saidCrosbie.

"We've got to keep our fingers crossed and keep a close eye on this. The two main political parties, they're going to get caught in the middle and they're going to have to make some big decisions."

Auditor General TerryPaddonsaid he doesn't think Newfoundland and Labrador is anywhere near bankruptcy, but agrees government will have to make tough choices on either increasing revenues or cutting spending.

"Some of the cure might be a tough pill to swallow, but at the end of the day, if you don't deal with it, that might be worse," he said.

Report outlines dire financial situation

Paddonspoketo a packed classroom at Memorial University as he outlined his grimrecent report on the province's fiscal situation.

The Newfoundland and Labrador government is expecting a $2-billion deficit for 2015-16, spurred largely by tumbling oil prices.

The financial situation looks worsethan any otherprovince.

In2016-17, its deficit-to-gross domestic productratio is expected to jump to 6.5 percentthree and a half times greater than the next highest province, Alberta.

Throughout the next four years,Paddon says the province is facing deficitsthat will be up to 13 times higher than the average of all other provinces.

"Government has two choices really. It can increase revenue or it can decrease spending, or a combination of both."

Paddon saidhe doesn't think new revenues alone will fix the situation, however, and that spending cuts will likely be necessary.

"While it sounds easy, the executionof spending reductions is very, very difficult and it affects most people in the province if not all," he said.

Most spending in health care, salaries

Seventy percent of government's spending ison health care, education and social services and halfof its totalspending is onsalaries and benefits.

Paddon said it'll be hard to tackle a $2-billion deficit without making cuts in those areas.

While the province is forecastingfuture revenues from the Hebron project and deep-water offshore oil drilling, he said thosecertainly aren'tguaranteed.

Governmentforecasts seeincreased oil production starting in2019, but Patton said that may be overly optimistic.

"Whether that's achievableget the dartboard out and start taking shots," he said.

Paddon also said government's current workforce attrition plan will not be anywhere near enough, as itonly tackles about five per cent of the current deficit.