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ANDY WALKER: P.E.I. must address financial red flags

Get your financial house in order.

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That was the blunt warning auditor general Darren Noonan issued to the Rob Lantz government when he released his 2025 annual report in late February.

Noonan’s biggest concern centres around the increasing net debt, which grew by 45 per cent, or $904.3 million, to sit at $3.03 billion by the end of the 2024-25 fiscal year. This is by no means a situation unique to P.E.I. Governments across the country have been dealing with one crisis after another over the last several years — natural disasters like hurricane Fiona, COVID-19 and the economic uncertainty U.S. President Donald Trump generates almost daily.

The public looks to governments to help in a way their ancestors didn’t and that help usually requires large sums of money. Paying the interest charges on that borrowed money is one of the largest items in the provincial budget. It doesn’t provide any services to Islanders (rather it takes money away from funding government programs). The money has to be paid to maintain a good credit rating so you can borrow again in the future.

If the present trends continue, Noonan is predicting another $1.77 billion will be added to the total by the end of the decade. The would mean every Islander’s share of the net debt would climb to $32,000 — almost twice the current amount.

Noonan pointed out the province has the second-oldest population in the country and those over 65 are a fast-growing demographic. Back in 2010, seniors accounted for 23 per cent of the population. That has now grown to 32 per cent and is projected to be closing in on the 40 per cent mark by 2040. In fiscal terms, that means slower growth in the labour force since many seniors are retired. They also tends to use more health-care services –one of the most expensive items in the province’s budget.

Auditor general warns P.E.I.’s debt could double by 2031 if capital spending not reined in

P.E.I. fiscal update projects doubling of provincial deficit

Another red flag is the province’s reliance on federal transfers. Despite valiant efforts from governments over the year, P.E.I. has not been able to make a significant dent in its reliance on its fellow Canadians to top up its spending. In the last fiscal year, almost 40 per cent of the budget revenue came from Ottawa. Noonan warns changes at the federal level on the revenue sharing front would have a greater impact here than in other provinces.

Then there are the challenges presented by climate change and a five-year capital budget estimated to cost $1.6 billion. Don’t expect all of that money to be spent over five years, either. That total includes expenditures for the long-awaited mental health campus, first promised by the Liberal government of Wade MacLauchlan, that is still under construction.

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So how should the government tackle this problem? As a start, Noonan recommends regular reporting to Islanders on the fiscal sustainability of the province. Islanders have a right to know the cost of not only what government programs and projects are costing now, but also the price tag that will be paid by future generations. He noted P.E.I. is the only province without an internal audit function, and he said government needs to get a better handle on unbudgeted spending.

They also have to pay closer attention to what the fiscal watchdog is saying. The report notes 58 per cent of the recommendations made to government over the last four years have not been implemented. There also seems to be a wide gap in what implementation entails. A news release issued along with the report noted the office had been told by government 31 outstanding recommendations had been implemented as of last August. A subsequent review pegged that number at eight— quite a substantial difference.

Andy Walker is a P.E.I.-based political commentator and freelance writer. He can be reached by email at andyangelawalker@gmail.com.

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