Premier and Finance Minister Paula Cox made the Government’s financial statements for the 2010 financial year public on Friday.They make for dismal reading.It is important to note that these financial statements are for the financial year ending on March 31, 2010. Estimates on where Bermuda stands in the current financial year (2010-2011) will be released next Friday when the Budget for 2011-2012 is made public. It is not very satisfactory that it takes 11 months to see audited Consolidated Statements for a financial year. But that does not make them irrelevant. The bottom line is that the Island’s public finances were in much worse shape than expected, and that does not bode well for the future.This newspaper has been critical of the quality of forecasting by Government with reason. In this case, Government overestimated its revenue estimate by $50 million, or more than five percent. Government also spent $210 million more on its current account expenditure than it forecast. In part this seems to have been due to some accounting adjustments, but some of the overspending was also due to poor controls.The result? Instead of a $3 million surplus on current account spending, Government racked up a $250 million deficit money which had to be borrowed so that Government could meet its obligations.This is the equivalent of a family borrowing from the bank to pay the rent and to buy the groceries. In an emergency, it might be understandable, but it’s a bad habit to get into. And it is becoming a habit. 2010 was the second consecutive year that Government ran a current account deficit, and given the state of the economy now, 2011 may be no different.Where borrowing can make sense is on capital projects and investment in infrastructure, with the caveat that the money should be well spent. But there are also needs to be a plan to pay borrowing off. At the moment, Bermuda’s borrowing just keeps growing.There is some dispute over just how much Bermuda owes. According to the Auditor, on March 31, 2010 Government owed $730 million in interest bearing debt, up from $415 million a year earlier. In addition, at March 31, Government had an overdraft of $93 millionn bringing the amount Government owed to $823 million. Government had $64 million in its sinking fund, so that can then be deducted from the total, leaving a debt of $759 million.In addition, Government has guaranteed $210.5 million to Butterfield Bank and other entities. These are not debts, but if an entity failed, they could be called, and thus are carried as liabilities. So at the end of March last year, Bermuda had debts and liabilities of $969 million, just $31 million short of the $1 billion legislated limit at that time, and $281 million short of the current statutory debt limit.None of this bodes well for the future. The weakness of the economy now, the fact that businesses are continuing to shed jobs and reduce inventories means that it is possible that Government will miss its revenue estimates for this year as well. It is also clear that last year’s payroll tax hikes have been a jobs killer, stifling opportunities for growth.That might be all right if Government was able to stay within its projected expenditures. But that seems unlikely as well. Certainly, Bermuda’s fiscal position is stronger than many other countries. But the concern is that it has deteriorated very rapidly, and by failing to be prudent in the good years, it is in no position to help to steer the Island out of its current difficulties.Instead, it is faced with increasingly difficult choices, and increasingly limited options. That is not a good place to be.