RANNSACKED – THE FINANCIAL LEGACY OF MIKE RANN AND KEVIN FOLEY
[This is the first of three part Special Kryztoff Investigation into the condition of this State’s Finances in the wake of the Rann / Foley Years.]
Finally the realities of this State’s financial position are being revealed, due in no small part to the mismanagement of our unfunded superannuation liabilities (as discussed previously at www.kryztoff.com/RAW/?p=3174 .)
On Friday, September 23, rating agency Standard & Poors placed the state on a negative financial outlook. As reported in The Weekend Australian (24/9/11) by Michael Owen, S&P are reviewing the state’s AAA rating because we are exceeding our non-financial public sector net financial liabilities ratio, which was set at 80-90 per cent of operating revenues.
Owen went on to write ‘The [S&P spokesperson] said that during the past three state Budgets the agency had assumed the rise in the ratio was temporary and reflected changes to the discount rate. “We note that the breach is appearing more permanent and its decline back into the (set) range in 2015 is dependent on the delivery of the ambitious savings measures.”’
So how did we get to this position?
Let’s start at the end of the above statements and work back.
Smoke and Mirror Budget Projections
A review of the State Government’s budget papers since the Rann election in 2002 reveals a systemic habit of presenting a face of fiscal rectitude, responsibility and prudence about the future that history shows never comes to pass.
In his first budget in 2002, Treasurer Kevin Foley provided four year estimates that projected increases in revenue and expenses of about 9% but at the end of those four years delivered actual increases of 45%.
A new Government’s exuberance?
Well no, because in 2006, he again projected moderate increases for the four years to 2010 of about 8% for revenues and 12% for expenses but come 2010, the actual increases were 38% for revenues and 50% for expenditures.
Either Treasury, (the organistion that puts the budget numbers together) is hopelessly incompetent or this was deliberate government strategy. Either way, with journalists merely focusing on the future, this explosion in the size of the government’s operations has never been much noticed, at least not until now.
In total, over the eight years to 2010, state revenue actually grew by 56% and expenditures by 63% when the overall impact of inflation and population growth would have it at 40%.
Given Federal Grant money has matched that inflation and population growth figure (and this government has not indulged (at least until now) in the privatisation or selloff of government owned assets), the biggest percentage increases in state revenues have come from general taxation. Of that, the component with the biggest increase has been property taxes which have more than doubled since Rann and Foley came to power. They are now at more than $1.5b a year, projected to increase to over $2 billion by 2015.
The New Savings Paradigm
As for new Treasurer Jack Snelling’s savings measures, you be the judge of whether they will ever come to be. Mr. Snelling projects increases in revenue of 8.3% over the next four years but an actual reduction of expenditure of 1% over that timeframe. Please note that inflation and population growth would suggest 15% increases are necessary for the state government’s operations just to mark time.
The biggest percentage increase in revenues will again come from general taxation, which he is looking to lift by a further 28%, with property taxes up a further 43% and payroll taxes by 40% -, somewhat unlikely in an environment of stalling employment growth and given that in the eight years to 2010, payroll taxes in this state increased by only 52%.
Having grown the size of the public service by 25% since the Labor Party came to power, about double what may be considered necessary based on our population growth (that excess employment now costing the state about $600m per year), Snelling now projects a reduction of 1,400 Full Time Equivalent public service positions in the four years to 2015 (or less than 2%).
With the Public Sector Unions already in uproar with public sector employment actually still rising, just imagine the furore if Snelling, Weatherill and mates attempt to actually implement this. Let’s not forget at the last Labor State Conference these unions called for Rann and Foley to go. Guess what? As demanded, a year on they are both gone.
Across the whole government sector, the size of the Budget has nearly doubled since Rann came to power (expenditures up from $9.7b to $19.0b this year). The previous doubling (of just $4.7b) took some 16 years.
Part 2 to follow Wednesday, 2nd November.
Anyone wishing to site evidence from Budget papers and related calculations, please contact editor@kryztoff.com.
Recent Comments