The analysis from Pegasus Economics said ACT budgets had been forecasting a return to surplus for at least six years, but it had never materialised.

"Every year [since 2010-11] the budget is forecast to return to a small surplus in the last or second last year of the forward years," Pegasus comments. "After 2011-12 up to the current budget, the expected deficit has worsened at each successive budget. In each year between 2010-11 and 2016-17 the climb back to surplus has become longer and steeper."

The report, by Pegasus's Alistair Davey and Roger Fisher, was prepared for the ACT's estimates committee which is considering the 2016-17 budget.

It points to an underlying problem – that spending outstrips revenue year after year.

Six years ago, the surplus was $23 million. The deteriorating position since had numerous causes but the underlying explanation was "that the costs of services provided by the ACT government have exceeded the revenue increases over this period".

Spending was $5.1 billion in 2015-16, is budgeted at $5.4 billion this year, and is forecast to rise to to $5.7 billion in three years' time – mainly due to the cost of hospitals, schools, the tram and interest on the Fluffy loan.

Revenue was $4.7 billion in 2015-16 and is $5.1 billion this year – most of the increase due to higher Commonwealth grants, plus $91 million extra expected in ACT taxes and $37 million more from land sales.

The government projects a deficit of $182 million this year, improving within two years, to a surplus of $33 million by 2018-19.

Pegasus said the return to surplus rested on a number of assumptions, including a strong ACT economy driven by increased Commonwealth spending. "This is problematic," it says, describing the 4 per cent growth in state final demand expected from 2017-18 as overly optimistic, with 2.5 per cent more likely, especially given the Commonwealth's own budget pressures. The ACT budget had not incorporated the impact of an extra $1.4 billion Commonwealth efficiency dividend.

"The achievement of an operating surplus in 2018-19 also requires growth in grants from the Commonwealth, growth in own taxation revenue and the generation of a large increase in other economic inflows, as well as the achievement of significant offsets against planned increases in expenditure," Pegasus says.

The budget anticipated paying for a range of new health announcements by saving $130 million in the health budget. Another $104 million in savings elsewhere in the budget was included over four years, but savings were inadequately explained and relied on efficiencies yet to be identified. There was no indication of how the government planned to achieve a budgeted $7.5 million saving in worker's compensation, or another $1 million in spending on maintaining sports assets.

"While some offsets have been identified, they are often unspecific and general in nature, and it is difficult to assess their robustness," the report says.

Pegasus points to the "particularly striking" extent of "vertical fiscal imbalance" in the ACT budget – a reference to the fact only 32 per cent of the ACT's revenue comes from its own sources, with 41 per cent coming from the Commonwealth.

"It is widely perceived that accountability problems arise from vertical fiscal imbalance," Pegasus says, pointing to the difficulty of ensuring efficient spending and holding state governments to account when they don't have direct control of their revenue.

"If sub-national governments are to be expected to act responsibly and in the interests of their residents they should face what is known as a so-called 'hard budget constraint': that is, they should be able to increase or decrease spending only by increasing or decreasing their revenues in such a way that they are publicly responsible for the consequences of their actions," it says.

The ability of state governments to look to the Commonwealth to bail them out "undercuts the incentives for more responsible fiscal behaviour. The provision of health services by the ACT Government... suggests that scrutiny and fiscal discipline is somewhat lacking when compared to other jurisdictions."

ACT health spending was not efficient compared to other states, Pegasus says. Recurrent spending grew at an average 10 per cent a year between 2009-10 and 2013-14, more than twice the national average. Staffing per capita had gone from just below the national average in 2004-05 to the highest in the country.

It also questioned the new "safer families levy" of $30 a year for each ratepayer to pay for domestic violence programs – just one of a number of "hypothecated", or earmarked taxes in the ACT budget.

Pegasus says while such taxes may be regarded as desirable where there is a close connection between the source of the funds and their use, in the case of the safer families levy the link is "tenuous at best suggesting that perhaps an increase in general rates may have been more appropriate".