In the wake of former premier Danny Williams’ sudden departure late last year, Newfoundland and Labrador is arguably a more confident member of Canada’s Confederation, a province now defined as much by the cosmopolitan characters of CBC TV’s Republic of Doyle as by the province’s traditional fishing communities.

But Williams may well have left another legacy: John Noseworthy, the province’s auditor general, recently warned that a return to structural deficits and burgeoning debt are likely unless the government cuts spending or finds new sources of income to replace dwindling royalties from offshore oil.

The province, which from 2006 to 2009 recorded budget surpluses, fell into deficit territory last year — a situation Finance Minister Tom Marshall forecasts will continue in 2011 unless world oil prices rise significantly.

Last year’s deficit figures tell the story.Although the deficit for last year is estimated to be $33 million, the original forecast was $195 million; the improvement has been almost entirely attributed to higher than expected royalties from oil resources.

Noseworthy notes that provincial government spending has spiked in conjunction with higher oil revenue over the past few years. Expenditures have shot up by 37% since 2006, with most of the increase going to health and education.

Provincial government debt now stands at $8.22 billion and, despite the feel-good nature of Williams’ time in office, there has been no improvement in the province’s credit rating. It continues to rank among the worst in the country.

Almost 30% of provincial government revenue in 2010 was derived from royalties on oil production. And oil production figures for 2010 point to a troubling future; both the Terra Nova and Whiterose fields recorded 14% declines last year, while half of the proven reserves at the huge Hibernia field have already been extracted. Another oil project, Hebron, is slated to begin producing oil in 2017, at which time its three predecessors will be well past their peak years. Unfortunately, no other commercially viable reserves have been discovered off the province’s east coast.

Williams’ overwhelming popularity was in no small part due to the province weaning itself from federal equalization payments. Many residents take pride in rising to the level of a “have province” that does not require funding from other wealthy provinces to finance its programs.

But Noseworthy has a warning for those who believe that Newfoundland and Lab-rador is now self-reliant. He writes: “The province is especially vulnerable to changes in world oil prices and production levels. If resource revenues were to decline significantly, it could result in the reversal of a “have province” to [one] that may possibly once more be a recipient of equalization payments from the federal government.” IE