The 2024 fall economic statement (FES) 2023-24, released the same day as former finance minister Chrystia Freeland’s shock resignation, contained a surprise of its own — a $61.9-billion deficit that was more than 50% higher than Budget 2024’s estimate of $40 billion.
The government attributed the higher deficit to additional contingent liabilities, primarily potential future payments to resolve Indigenous court claims. However, a new analysis released Wednesday by the Parliamentary Budget Officer (PBO) suggests that the deficit would’ve exceeded the $40.1 billion threshold even excluding exceptional or one-time items. The report also highlighted the tardy release of public accounts financial statements.
The 2024 FES indicated that the deficit would have been $40.8 billion had it excluded $21.0 billion in one-time or exceptional items.
However, the PBO found that many of the one-time and exceptional items were already included in the fiscal framework by the time Budget 2024 was released. For example, budgetary revenues in 2023-24 were down $5.5 billion in Budget 2024, and all else equal, the deficit would’ve been $45.5 billion.
The government primarily attributed the higher deficit to “future potential payments to resolve Indigenous claims.” These payments have ballooned from $12 billion in 2015 to $56.6 billion in 2024, with a peak of $76 billion in 2023.
These expenses have a “substantial impact” on the federal budget as actual payouts can vary significantly from the original estimate, especially with claims proceeding through courts and alternative dispute resolution mechanisms, according to the report.
“There is a clear and pressing need for additional transparency in the Government process for estimating contingent liabilities,” the PBO said.
The government has committed to establishing an internal working group on this issue, but the PBO recommends instead that Parliament study contingent liabilities.
The $61.9 billion-deficit also exceeded the Parliamentary Budget Officer’s (PBO) previous forecast of $46.8 billion in the October Economic and Fiscal Outlook.
In addition, the government’s ability to release quality financial statements on time has deteriorated. It took the Auditor General a record-long 253 days after the fiscal year ended to sign public accounts.
“Even worse, the audited financial statements were inexplicably tabled the day after the FES, rather than prior to, or alongside, the Government’s economic and fiscal plan,” the PBO said.
Although long delays are typical with fall elections or a global pandemic, the PBO could not find a clear reason for the delay in 2024.
The PBO recommended moving the publication date for public accounts from Dec. 31 following the end of the fiscal year to Sept. 30.