A certain ratio

Jerome Kennedy's shop put out the following self-congratulatory bumpf today:

“While it is recognized that volatility in the province’s resource revenues presents budgetary challenges, Moody’s noted that the province’s net direct and indirect debt has fallen from 153.9 per cent of revenues in 2004 to an estimated 71 per cent at March 31, 2013,” said the Honourable Jerome Kennedy, Minister of Finance and President of Treasury Board. “Interest payments as a percentage of revenue also declined from the highest among Canadian provinces (16.1 per cent) in 2003-04 to an estimated 4.9 per cent in 2012-13.”

A couple of important mathematical points.

First, the odd and continuing fixation on net debt. You don't pay interest on your net debt.

Second, the revenue:debt ratio has not improved because of any change on the debt side of the equation. It has improved because of change on the revenue side. The provincial government's revenues, especially own-source, especially natural resource, and especially offshore oil royalties (and to a lesser degree mining ones) are massively higher in recent years than they were in 2004.

This has nothing to do with the wisdom and foresight of the Danny-Dunderdale government, who neither put the natural resources into the ground, nor instituted the revenue mechanisms which govern their extraction.

As all six regular readers here will remember, in all but three of the Danny-Dunderdale years, the "Conservatives" have left the provincial ledger with higher public debts at the end of the fiscal year than they were at the start of it.

The revenue:debt ratio is improving despite the Progressive "Conservative" government, and not because of them. The government of Newfoundland and Labrador, as of the most recent fiscal year (ending 2012), had more debt owing than it did when the "Conservatives" were elected in fiscal year 2003-04.