The Victorian Department of Treasury changed history to conclude the Coalition's 2012-13 budget was in deficit for the first time in a generation under the previous Coalition government.
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The extraordinary revision, identified by The Age after an examination of departmental spreadsheets, has sparked a heated political row, with shadow treasurer Michael O'Brien angrily declaring the change to be misleading and dishonest.
Treasury now records the 2012-13 budget as being in deficit by $316.6 million, after applying new federal accounting standards that were supposed to begin the following financial year.
The hidden deficit was initially questioned as a mistake by both sides. Previously, Treasury recorded a near-mirror-image $316.4 million surplus for that year, with a final tally of the budget signed off on by the Victorian Auditor General in October 2013.
Mr O'Brien said the technical change took effect the following year and had no impact on the 2012-13 budget, slamming the decision to retrospectively change history.
"It is highly misleading – in fact it is dishonest – for anyone to claim otherwise," he said. "Accounting rules changes cannot change the past. It would be like the AFL deciding that the value of goals and behinds were reversed, so Collingwood should be awarded the 1970 Premiership. It is a nonsense."
New accounting standards were introduced in 2013-14, during the Napthine government's final full year. But it appears Treasury decided it must also apply the new rules to the previous year as well to meet the new rules, wiping more than $630 million from the bottom line in the process.
Treasurer Tim Pallas said news of the 2012-13 deficit meant Mr O'Brien "now has egg all over his face and can't be relied upon or trusted".
The revision will be used to undermine the Coalition's attack on Labor after the auditor general concluded the 2014-15 budget was in deficit by $287 million because he disputed a decision to factor in $1.5 billion of federal East West Link cash into the bottom line.
The opposition has leapt on that conclusion as evidence that Labor is unable to manage money and had delivered the first state deficit since the 1990s.
"This is an outrageous example of bad financial management - you have to go back over 20 years to find another government that put this state into a budget deficit," Mr O'Brien said last week.
