The late James Boren, an American humorist, wrote that politicians:
…without a full briefing on dynamic inaction, decision-postponement patterns, and creative status quo cannot go very far.
To further explain, he defined dynamic inaction:
When in doubt, mumble; when in trouble, delegate; when in charge, ponder.
One of Boren’s fundamental instructions to bureaucrats was to fuzzify, which is:
…the presentation of a matter in terms that permit adjustive interpretation. Particularly useful when the fuzzifier does not know what he or she is talking about, or when the fuzzifier wants to enunciate a non-position in the form of a position.
There has been much mumbling and fuzzifying about British Columbia government debt and contractual obligations, which total close to $170 billion. Despite that inescapable reality, BC Liberals said in the pre-election Throne Speech:
your government is on track to be free of any operating debt by 2021. For the first time in 40 years, children born that year will no longer be asked to pay for the burdens that our generation has placed upon them.
Liberals argue that none of the $101 billion of contractual obligations at the beginning of the current fiscal year represents debt. Regardless of what politicians argue, the claim does not pass a test of common sense.
For example, government wanted a private consortium to build and finance the Port Mann bridge and highway 1 upgrade, in return for a stream of payments over time. The deal fell through so government built the project with public financing, using the crown owned Transportation Investment Corporation. The public-private partnership (P3) would have resulted, according to Liberals, in no increased debt. Because the P3 deal failed, government financed the improvements and total provincial debt increased by $3+ billion and will continue to as operating losses mount.
So, if government owes $3 billion plus interest on Panda Bonds for a self-financed project, Liberals admit that is provincial debt. If government owes $3 billion, plus interest, to a P3 road builder, that is not debt. My grandmother, a sensible Scotswoman, would disagree.
A paper by the International Monetary Fund, in consultation with the World Bank and the Inter-American Development Bank, includes a lengthy discussion about debt recognition. This is relevant:
Public-private partnerships (PPPs) involve private sector supply of infrastructure assets and services that have traditionally been provided by the government.
…it cannot be taken for granted that PPPs are more efficient than public investment and government supply of services. One particular concern is that PPPs can be used mainly to bypass spending controls, and to move public investment off budget and debt off the government balance sheet, while the government still bears most of the risk involved and faces potentially large fiscal costs.
…There is not yet a comprehensive fiscal accounting and reporting standard for PPPs. …In the absence of the internationally agreed guidance on how to do this, the known and potential future cost of PPPs …should be disclosed, and taken into account when undertaking debt sustainability analysis…
…In particular, assessments of debt sustainability are affected in the same way as if the government had incurred debt to finance public investment and provide the service itself…
This being the case, the net present value of future contract payments under PPPs …should be added to government debt when assessing debt sustainability…
In the audited financial statements for fiscal year 2016, auditors reported that contractual obligation categorized under natural resources and economic development totalled $63.165 billion, mostly to independent power producers paid by BC Hydro. Since we cannot see the contracts involved, we can only make an educated guess at the amount that reasonable accountants would consider to be debt. Treatment would depend on the buyers ability to alter the terms, as well as other factors. Take or pay contracts, for example, suggest the present value of future payments would be debt.
The IMF states there is an issue as to whether or not future contract payments should be capitalized and counted as a liability. Governments and institutions prefer not to recognize liability. Independent financial analysts mostly hold the opposite position.
Voters are mostly confused.