Auditor-general Maxine Cooper highlighted the precarious position of the ACT Budget in an audit released on Friday, pointing to its heavy reliance on land sales from the Fluffy demolition.
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Dr Cooper also highlights the severity with which expenses must be cut or revenue increased to achieve the budget results forecast over four years.
Chief Minister Andrew Barr released his mid-year budget review on Friday morning, revealing a deficit that has worsened from $408 million forecast in the June budget for 2015-16 to $479 million. But he is still forecasting a slim surplus in the final year of the forward estimates, 2018-19.
Dr Cooper's audit of the 2014-15 accounts, though, points to a significant difference between revenue and expenses, with revenue at $4.843 million and expenses at $5.489 million, resulting in a $646 million net operating deficit, and a forecast $649 million in 2015-16.
Dr Cooper's figures differ from those quoted above because she doesn't restrict the analysis to the general government sector but looks at the total territory deficit, including territory-owned companies such as Icon Water.
The budget predicts a sudden turnaround in fortunes in 2016-17, when the net operating deficit shrinks from $649 million to $269 million. And when Mr Fluffy land sales are included, the picture improves still more dramatically, to a balanced budget (using total territory figures).
Dr Cooper pointed to a big deterioration over recent years, with a break-even result in 2010-11 but $646 million in the red by 2014-15. The deterioration was mainly due to the $336 million cost of the Fluffy scheme plus higher superannuation and staff costs, she said.
The long-term financial position of the territory was much weaker than the budgeted position and significantly weaker than in 2011, she said. Unfunded liabilities in June this year were $8.63 billion, $2.6 billion over budget.
Unfunded liabilities had increased by $5.13 billion since 2011, an average annual increase of 37 per cent. The expected strengthening over the coming years was based on the assumption that there would be substantial decrease in the unfunded superannuation liability (from $5.16 billion this year to $2.42 billion in 2019), which was assumed to be enough to counter the large increase in borrowings.
Borrowings were expected to increase significantly from $4.59 billion in June this year to $6.37 billion in 2019 to fund light rail, the court facilities and the duplication of Horse Park Drive, Gundaroo Drive and Ashley Drive.
Dr Cooper said, "The capacity of the ACT Government to meet its financial obligations will require, as always, giving attention to managing risks. If unexpected adverse events occur, or forecast costs of major capital projects significantly increase, then the challenge of meeting financial obligations increases."
When he released the mid-year review of the 2015-16 budget on Friday morning, Mr Barr said it confirmed the government was "keeping the territory's economy on track, despite the financial pressures caused by reductions in Commonwealth grants, cuts to health funding and the ongoing response to the Mr Fluffy legacy".
"Rather than cutting services that many people in the community rely on, the ACT Government is managing the economy carefully in the short term while returning the budget to balance over the medium term," he said, pointing to the ACT's maintenance of a triple A stable credit rating.
"Unlike Liberal Governments in this country, we are ensuring economic pressures don't affect the vital health services Canberrans rely on most, as we have continued investing in Canberra's hospitals and begun construction on our newest public hospital at the University of Canberra ...
"As we move into planning for the 2016-17 ACT Budget, Canberrans can be assured we will continue vital funding for health and education services. We will continue reducing stamp duty on Canberra properties and we will be announcing the next five-year plan for tax reform in the ACT – building a fairer and more sustainable revenue base for the territory's future."
