THE FOLLOWING ARTICLE HAS APPEARED IN THE RECORD ON May 28, 2003

Part 2:
Did the PQ attempt to hijack
the election?

Although Premier Jean Charest may not have been the only Quebec politician to challenge the accuracy of the PQ election budget projections, he was without a doubt the only one in a position to order an investigation. Even so, an investigation would not have been necessary if, prior to any provincial election, our laws required a budget assessment by an independent agency for the benefit of the voters.

The Premier's astute decision

As such, his decision as Premier-designate to retain an ex-auditor general to examine Quebec's financial books, turned out to be remarkably astute. He obviously understood how important it was to assign a credible investigator. Why, because, like everyone else, he was well aware that newly elected premiers have a reputation of accusing their predecessors of budget shortfalls in order to dodge their election promises.

What is so special about Auditor Generals? Inasmuch as they are recognized for their independence, objectivity and political impartiality, any embarrassing finding, even by an ex-AG, was bound to be far more credible and therefore have a much greater impact. The more the PQ budget would prove to be unbalanced, the more the public would conclude it was misled by the PQ leaders. No doubt, the choice of Mr. Guy Breton to examine the books had as much to do with his impressive CV as his expertise as a chartered accountant. Breton was Quebec's assistant auditor general since 1987 and Auditor General from 1991 to 2001. During his 10-year term he worked under both the PQ and Liberal governments and by law he was in charge of auditing the government's financial state.

The ease and speed in which Breton discovered the shortfall was as significant as the actual amount. Within only a week he determined that it was as high as $4.36 billion and that it had been due to the former Minister of Finance's overly optimistic revenue projections. To no one's surprise, both PQ leaders directed their attack against Jean Charest in the hopes of discrediting Breton's findings. Pauline Marois said ordering it was a " political exercise to help Charest worm out of election promises". The former Premier Bernard Landry reacted by accusing Jean Charest, of waging a political masquerade and playing "pure partisan politics" in discrediting Quebec's public finances.

Why get all worked up?

Why get all worked up, after all it only involves a few billion dollars on paper. Besides, aren't elections budgets like most election promises? My point is that any government budget which is peddled as balanced even though it has a $4.3- billion hole can be just as damaging as any frivolous non-audited financial statement of a well-established corporation. Whether or not important omissions are intentional or due to excessive optimism, negligence or willful blindness they have the nasty habit of misleading voters as much as investors. It is also useful to keep in mind that while an investor may have recourse in damages, a constituent can never take back his or her vote.

And yes, I am well aware that if governments were obliged to keep their books according to standards of the market and conventional accounting practices, their budgets would never come close to being balanced. Still, despite the relatively loose government standards, a non-balanced budget is not a balanced budget. I also realize that if misleading taxpayers were an offence and carried the same penalties as misleading shareholders, there wouldn't be enough room in our prisons to lock up all the guilty parties. One has only to think back to the Enron scandal to realize what can happen to company executives who lie about their company's profits and liabilities including debts that didn't show up in the company's account.

Why sell a budget as "balanced"

Under the circumstances, what was the PQ interest in contending that its budget was balanced, despite the huge shortfall? The desire to be reelected could be one good reason. Balanced budgets have become more than just the rallying cry of most Canadian politicians. They can be crucial during an election campaign. Politicians know very well that most voters want their governments firmly reigned in so as not to impose huge debts on subsequent generations. Furthermore, regardless of their political stripes, governments don't want to be perceived as promoting deficits, especially not in Quebec, which has built up a debt that exceeds $108 billion.

Laws prohibiting deficits

In order to discourage government expenditures from getting out of balance with revenues, a deficit budget in some provinces is practically outlawed. Take Manitoba - according to the Manitoba Balanced Budget, Debt Repayment and Taxpayer Accountability Act, the provincial government is prohibited from incurring a negative balance for each fiscal year. Failure to do so can lead to the docking of Cabinet members' salaries. British Columbia has a somewhat identical law, as does Ontario. For much the same reasons the US Congress contemplated a "balanced-budget amendment," back in the early 80's. The amendment did not gain passage.

Credit rating implications

A further consideration against deficit budgets is their potential impact on government credit ratings. The lower the rating the higher the interest payments on a country's debt. In 1995, following many years of recurring deficits, Quebec was downgraded from Triple AI to A2 by the bond rating agency, Standard and Poor's. As a result it is estimated that it cost the government an extra $26 million a year on its interest payments. The A1 rating was restored in 2001 after the government had achieved either balanced or surplus position during three years in a row.

PQ has special interest

Aside the obvious political interest that every government has in promoting a balanced budget, it is safe to conclude that the PQ has a special interest, which has as much to with preparing the groundwork for a sovereignty referendum as it does being reelected. One has only think back to March 96 when former Premier Lucien Bouchard promised the party faithful that a zero deficit would be the prerequisite to the eventual holding of a ''winning'' referendum.

A workable solution

Since most election budgets are not subject to parliamentary scrutiny and at the same time can influence the outcome of an election, it is all the more important that they reflect an accurate and complete description of expenditures and revenues.

As long as accountability is a cornerstone of good government voters must have access to reasonable revenue and expense projections and not just when an election results in a change in governments. In order to prevent an election budget from being used to hijack an election, one solution, other than prohibiting deficit budgets, would be to have an independent agency provide the voters with an objective assessment of the budget projections. On that score alone, Quebec's Auditor General would meet all of the necessary requirements. At the same time, any new government would be hard pressed to duck its election promises on grounds that it had been misled as to the true financial condition of the province.