Wednesday, April 5, 2006

Cynical surpluses

As William Robson noted in the Financial Post last week, the strategy of federal Liberal governments in the past decade of underreporting revenue to produce enormous year-end surpluses provided enormous political benefits for the government — not the least of which was a general complacent attitude in the electorate that the government was managing the economy well as though revenue from taxes and monopolistic services were a direct function of economic well-being. Two further political benefits were realized: first, fans of fiscal prudence were placated by the fact that much of the surpluses were earmarked for paying down debt without the government having to go to the trouble of antagonizing socialists by making significant debt repayment a line item in the budget; and, second, the government found itself with plenty of extra money to throw around to coddle protected special interests.

London city council has been learning the trade from their federal Liberal counterparts and reported a surplus of $9.8 million from the last fiscal year after reporting a $12 million surplus in the previous year. This being an election year, council elected not to commit itself to very many future expectations and used $5 million to retire debt. However, $300,000 remains uncommitted and rather than returning the money to its rightful owners, the city is entertaining requests for the money for the Children's Museum, the Palace Theatre, splashpads in the Pond Mills area, and the London TechAlliance — but not only for that portion of last year's surplus but for this year's projected surplus, according to the London Free Press. This raises the question: if city hall can already project surpluses, why is that additional revenue not being reported in the budget which was passed little more than two months ago? Answer: as with the federal Liberals, surpluses at city hall are a cynical political tool. If revenue is not budgeted, the city cannot even begin to pretend that it is a legitimate municipal asset.

More on municipal surpluses here, here, here and here.