Tag Archives: New Brunswick deficit

Burning down New Brunswick’s fiscal house

New Brunswick is surely on the horns of a dilemma

New Brunswick is surely on the horns of a dilemma

 

We’ve knelt around this bonfire before, watching the flames grow higher, hungrier. The kindling is the first to go, then the wild alder branches, and finally the great stumps of driftwood, charred black, vanish in the inferno.

Inevitably, we reach the point of knowing that time is short and we’re running out of fuel. Still, we can’t seem to move. Our feet and hands are stuck in the sand, to be followed, any day now, by our heads.

“Net debt is one of the most important measures of the financial position of the province,” New Brunswick Auditor general Kim MacPherson reminded us, with the patience of a camp counsellor, last week in her annual report. Although she’s led this sing-a-long for months, we still can’t remember the words.

“For the year ended 31 March 2013, net debt increased by $931.8 million to $11.1 billion. Net debt has increased $4.3 billion since 2007. The 2013-2014 Main Estimates budgets for an increase in net debt of $594.4 million for the year ended 31 March 2014. Based on 2013-2014 Main Estimates, net debt of the province could be in excess of $11.6 billion for the year ended 31 March 2014.”

We interrupt her just long enough to toss another log from our dwindling stash onto the fire. Excuse us, Ms. MacPherson, you were saying. . .

“This continued increase in net debt represents a very disturbing trend. An even higher demand will exist on future revenue to pay past expenses. Such continued negative trends impacted the Standard & Poor’s decision to downgrade the province’s bond rating from AA- to A+ in 2012. This rating change will ultimately result in more

expensive borrowing costs. As well, New Brunswick’s increased borrowing may constrain future borrowing capacity and affect future provincial operations and delivery of services. The A+ rating remained unchanged in 2013.”

That does sound serious, Ms. MacPherson. Do go on. . .

“Another way to assess the significance of the size of the province’s net debt is to compare it to the net debt of provinces with similar populations as New Brunswick in absolute amount, per capita and as a percentage of GDP.  Comparable provinces include Nova Scotia, Manitoba and Saskatchewan. . .Over the last five years, within this comparable group, New Brunswick has had one of the highest increases in net debt (45 per cent) The rate of Net Debt growth has also increased in the past year (growing by nine per cent).”

You don’t have to be Finance Minister Blaine Higgs to realize that all is not well in the purple violet province, where the annual deficit now looms large at $538.2 million. But, it helps. He may be the only citizen of New Brunswick who isn’t stoking the all-consuming fiscal fire.

“While it is true that our expense reductions have prevented a much larger deficit, we cannot turn a blind eye to the revenue challenge that our province now faces,” he said following Ms. MacPherson’s report to the Legislative Assembly. “No one is immune to the fiscal situation we are facing in this province and we are asking our stakeholders to be prepared to discuss how we can get back to balanced budgets.”

Translation: Hey stakeholders, be prepared for more cuts.

In Higgsian terms, is New Brunswick’s infrastructure “bigger than it needs to be”? Is he correct when he says “we need to work on that”?

Is the solution, effectively, to downsize our infrastructure and with it our appetites and expectations?

Says Mr. Higgs: “When you look at he situation we have in the province with declining enrollment in our schools and the number of schools we have. . .if you look at the number of hospitals we have for a province our size. . .you look at the roads we maintain for a province our size. . .we have to look at serious changes in how we do business and how we can deliver services on a continuous basis in a more effective way. . .How do we give the best education unless we have the critical mass there to do that and do that reasonably?”

Of course, right-sizing the province would be the antithesis of “politics-as-usual”.

Then again, this is the one highly combustible commodity that we, in New Brunswick, should be happy to see finally go up in smoke.

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Sticking out our economic chin

Oh yeah, baby, we are stuck where the sun don't shine

Oh yeah, baby, we are stuck where the sun don’t shine

Of course, precisely 11 months before the next provincial election in New Brunswick, the urgent conversation would have to shift, the channel change, the page turn. After all,  there’s only so much bad news one person can digest before he succumbs to the hallucinogen of wishful thinking.

Now, the question for all to ponder is whether we are, at base, a glass-half-empty or a glass-half-full kind of folk. And in so doing, the campaign slogans of yore will no longer suffice. We will no longer respond to heady promises of prosperity any more than we will believe desperate warnings of imminent penury.

Right down the middle, between all possible extremes of human circumstance, is where we are and where we want to stay. The political party that understands the true power of self-delusion will win the day, as it brands its march to the ballot box with a few, well-chosen words: “Hey, here in New Brunswick, it could be worse.”

The province’s annual deficit is now projected to reach $499.9 million by the end of fiscal 2013, the result of lower-than-expected revenue. “That’s due mainly to weaker than anticipated results from NB Power,” Finance Minister Blaine Higgs told reporters last week. “We’ve had this information on the first quarter for a few weeks but we were intending to be able to line it up to the year-end results from last year.”

As for the three-month period ending this month, he’s no more sanguine: “We’ve seen some signs of growth in sectors like in the forestry sector, but I’m not expecting a huge uplift in revenue for the second quarter.”

Cheer up, though: .

“If we had not made that decision (to cut government spending) early on, looking at the continued economic performance and the issues of revenue, we as a province would be in very dire straits,” Premier David Alward reassured the press corps.

Unsaid, but implicit, was the proposition that a province of 756,000 souls, with an annual lien of half-a-billion bucks and a structural long-term debt approaching $12 billion, is not, technically speaking, in dire straights. Clearly, Mr. Alward’s definition of the word ‘dire’ departs somewhat from the Fraser Insititute’s, which concluded in April, “It’s hard to deny that New Brunswick’s finances are in a dire state.”

Indeed, wrote the Vancouver-based think tank, “The province has splashed red ink every year since 2008/09. . .With the provincial government persistently spending beyond its means, New Brunswick’s net debt (financial liabilities minus assets) is set to dramatically increase from a recent low of $6.7 billion in 2006/07 (25.4 per cent of GDP) to $11.6 billion in 2013/14 (34.2 per cent).”

On the other hand, that’s just the Fraser Institute: Always raining on everyone’s parade. Should we more properly worry that we continue to lose the tax base we need to get our finances shipshape and Bristol fashion?

This week, Statistics Canada reported that New Brunswick shed 947 people during the 12-month period ending July 1, 2013. Michael Haan, a population expert at the University of New Brunswick, told the Telegraph-Journal, “I would estimate we will see year-over-year declines for the next five years or so. We are at a point in history where we have a large group at the age of migration. The baby boomers’ children are between 15 and 30 now. The prime year for moving is around 28.”

Again, however, it could be worse. The year before, New Brunswick lost more than 2,000 people to better jobs and rosier opportunities in Ontario and Alberta. Besides, at least we’re not Greece or even Spain where, as Bloomberg Businessweek reported in June, “The nation’s population fell last year for the first time since records began in 1971, and the main reason was an 18 per cent increase in the number of foreign nationals leaving the country. Romanians, Moroccans, and Ecuadorians led the way out.”

Rest assured, gentle reader, all is not woe in New Brunswick.

In fact, given our stubbornly sunny disposition, it’s remarkable we’re not all on skid row.

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