The deficit facts of life

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Balance the budget, certainly; but not just yet. In a nutshell, this was what New Brunswick Finance Minister Roger Melanson told assembled ladies and gentlemen of the press and other observers at Tuesday’s provincial budget announcement.

Still, though it seemed to take almost everyone off guard, the news that annual deficits – despite this year’s combination of tax hikes and spending cuts totaling nearly $600 million – would be facts in our lives until at least 2020-21 was not actually surprising.

In fact, a careful review of the budget measures reveals that some sort of pernicious shortfall was always in the cards.

On the revenue side, yes, the Gallant government raised the Harmonized Sales Tax to 15 per cent, from 13 per cent, effective July 1. And, yes, it also goosed the corporate income tax rate to 14 per cent, from 12 per cent; increased tobacco taxes by three bucks a cigarette; boosted the one-time property transfer tax; and hiked capital tax rates on banks.

On the other hand, the finance department decided against tolling any roads in the province, and even snuck through a modest decrease in the income tax rate the province’s top earners face.

On the spending side, yes, the government announced it was slashing 1,300 civil-service jobs over the next five years; 30 per cent of middle-manager positions were on the chopping block. And, yes, it also terminated the Gagetown ferry; amalgamated its 40 contact centres across the province into four; and froze operating grants to universities.

Again, though, it left both the departments of education and health virtually untouched – at least, in any significant way. Both Mr. Melanson and Health Minister Victor Boudreau recently confirmed that there’s very little appetite among the voting public for dramatic cuts to these, the province’s largest and most expensive program portfolios.

The results, then, are largely predictable: a deficit this year of $347 million; a deficit of $267 million in 2017-18; $167 million in 2018-19; $49 million in 2019-20; and a yet-to-be determined surplus in 2020-21.

Said Mr. Melanson about his “fun-with-figures” exercise over the past few weeks: “The decisions we are announcing today on expenditures and revenues will lead us to a balanced budget and meet our commitment to get our finances in order. This is very important because we currently spend more on serving our debt than we do on post-secondary education.”
Complicating matters, of course, is the economy, which isn’t broadcasting especially cheerful signals these days. “Economic activity is expected to be tempered by demographic realities, private-sector investment, fiscal measures, and the recently announced suspension operations at the Picadilly mine,” Mr. Melanson reported.

Naturally, what frustrates close political watchers in this province is the fact that a $300-million tax-revenue boost haul will have only a modest impact on New Brunswick’s bottom line.

The deficit is now running at approximately $466-million. If the Province’s projections prove to be accurate (and, be honest, when have they ever?), the next-year-over-this-year improvement in the annual shortfall will be somewhere in the neighborhood of $100-$120 million.

That’s not bad, but it’s nothing to write home about. And it’s certainly not likely to quell the concerns of business lobbyists, who think taxes are the devil’s work, and fiscal hawks, who believe New Brunswick can find multiple savings in its health and education systems if its political leaders are willing to close surplus classroom, consolidate hospitals and clinics and take a meat cleaver to the associated labour force.

To be fair, though, who’s going to do that?

Our deficit, it seems, will be with us for a while.

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