Treasurer Gutwein has found something new in his budget bag of tricks.
Establishing a fund to receive amounts from TTLine to enable replacement of the two Spirit vessels in 10 years time as announced with much fanfare is just an accounting ruse.
TTLine has been planning to replace the ferries for years and has been setting funds aside.
Borrowings on Spirits 1 and 2 were finally paid off in the 2010/11 year. Prior to then,TTLine was paying $25 million a year off the debt owed to Tascorp and it was a bit of a struggle.
Since then the cash surpluses have been allowed to build up in TTLine as it was exempted from paying any returns to the Government. Since 2010/11 cash at bank has increased from $16 million to $90 million in 2014/15. The increase in the latter year was only $9 million as the refurbishment of the two Spirit vessels commenced in Feb 2015.
The government now plans to transfer cash reserves from TTLine to a special Fund run by the Department of Finance.
Can’t the Board of TTLine be trusted to look after such a large amount of cash?
The answer is the payment of two special dividends of $40 million in each of 2016/17 and 2017/18 by TTLine is recorded as income by the government and will boost the bottom line by $80 million, a bottom line sadly suffering from Hydro’s Basslink woes.
When the replacement vessels are eventually purchased the accumulated funds will be transferred back to TTLine, but as an equity contribution which won’t affect the bottom line in the year of transfer.
It’s just an accounting trick.
The Treasurer and Infrastructure minister were at pains to stress the Vessel Replacement Fund would be 100% cash backed at all times and that special legislation would ensure this.
Why not leave the cash where it is? That the best and easiest way to ensure the Funds aren’t spent elsewhere? Unless there was a need to tart up the budget?
Governments have allowed TTLine to build up cash reserves to fund vessel replacements rather than pay returns to the State. Choosing now as the time to transfer the cash to the Department of Finance just when the budget is looking a bit sick is a devious ploy.
But not out of character.
Treasurers always have a few options in the budget bag of tricks to categorise transactions within the total state sector in the most favourable light for the government.
· Avoid deficit funding government businesses if possible. Use equity contributions instead. We saw it in the case of Forestry Tasmania. Direct deficit funding hurts the government’s bottom line. An equity transfer from TasNetworks doesn’t.
· Always include capital grants as income to boost the bottom line and treat the subsequent outlay as either a capital payment or an equity contribution to a government business. For instance capital grants from the Feds for TasRail are always included as revenue when received, thus boosting the bottom line, but are treated as equity contributions when paid leaving the bottom line boost unaffected.
· Ensure where possible that one-off transfers from government businesses to governments are special dividends rather than equity withdrawals. The 2014/15 MAIB withdrawal of $100 million is another case in point. This means the government’s bottom line is boosted. Perhaps the only reason the 2014/15 $205 million withdrawal from TasNetworks was treated as an equity amount rather than a special dividend was that TasNetworks being recently established had no retained earnings to use as a source for dividends.
Shuffling money between parent companies and subsidiaries is perfectly acceptable but the current government is falsely creating the impression that we are better off.
There may be an illusory gain for the general government but overall there is no benefit for total state sector.
It’s just smart arsed accounting.