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Winnipeg Free Press - PRINT EDITION

East Coast being pounded by waves of red ink

Posted: 04/8/2013 1:00 AM | Comments: 0


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It's budget season on the East Coast and only one of the region's provincial governments has managed to turn back a tide of red ink.

The four Atlantic provinces will record a combined deficit of $1.1 billion in the coming fiscal year. The region's net debt already tops $35 billion -- more than double that of Manitoba.

Nova Scotia alone has bucked the trend. On Thursday Finance Minister Maureen MacDonald ended a string of hefty deficits with a pre-election budget that inflicts little tax pain, offers modest spending increases and posts a $16-million surplus.

New Brunswick and Newfoundland and Labrador tabled bad-news budgets in the last week of March. In Fredericton, Finance Minister Blaine Higgs forecasts a $479-million shortfall next year, almost $70 million more than the deficit in the fiscal year just ended.

Higgs's counterpart in St. John's, Jerome Kennedy, is patting himself on the back for slashing a projected $1.6-billion deficit in the coming year to the half-billion-dollar range. That's on top of last year's deficit of $430 million.

Prince Edward Island's 2013-14 budget, unveiled the same week, came in with a $59-million deficit. That's almost double the figure predicted last year and pushes the net debt of Canada's smallest province toward the $2-billion mark.

It adds up to some tough deficit-fighting measures.

Newfoundland's Progressive Conservative government, which overestimated the price of oil last year and came up far short of revenue projections from offshore wells, is slashing 1,200 civil service jobs. Newfoundlanders also face higher tobacco taxes and higher fees for hospital rooms, ferry rides, visits to provincial historic sites and other services.

New Brunswickers should be so lucky. PC Premier David Alward's government is increasing business and personal income taxes. Islanders will be digging deeper into their pockets, too. The Liberal government of Robert Ghiz expects that adopting a harmonized sales tax will boost its revenues by $26 million in the year ahead. The HST will drive up the cost of gasoline and smokers will pay more for a carton of cigarettes.

In Nova Scotia, Premier Darrell Dexter delivered the balanced budget he has been promising for weeks. His NDP government is counting on the economy to improve, boosting income tax revenues, and expects an extra $108 million in equalization payments from Ottawa.

There's more money to help small businesses, parents of children with diabetes, welfare recipients, seniors and students. Only smokers face a tax increase -- a hike of two cents per cigarette will bring in an additional $18 million.

But this rosy picture of the province's finances has been met with skepticism. Nova Scotia's auditor general recently revealed that the NDP knew the $211-million deficit projected in its last budget was understated by $27 million, yet failed to revise its figures.

The latest numbers are raising eyebrows as well. That underestimated deficit, it turns out, has ballooned to $356 million. And a change in accounting practices takes $50 million off this year's books, more than enough to claim a surplus.

MacDonald says she's ready to fight an election on her budget, and she's likely to get the chance. Dexter's government, which trails the opposition Liberals in the polls, must call an election within a year and a fall vote is possible. The NDP swept to power in 2009 vowing to balance the books and can now boast of a promise kept.

Alward can take a little comfort from the fact New Brunswick's next election won't be held until September 2014. He had little choice but to take the unpopular step of raising income taxes to boost revenues -- under provincial law, the more subtle option of increasing the sales tax would have required a referendum.

His Tories came to power in 2010 promising a balanced budget within their first mandate. New Brunswick's finance minister now says that target won't be reached until at least the 2015-16 fiscal year, assuming the economy and revenues improve.

Newfoundland's PCs are projecting a $230-million surplus by the time they face re-election in 2015. The Ghiz government, meanwhile, has bumped ahead its balanced-budget target date by a year, to 2016. With a fixed-term election set for the fall of 2015, voters will have had their say by then.

The region is not alone in its struggles. Only three other provinces balanced their books this year, and missed targets for eliminating deficits are nothing new to Manitobans.

With a fresh round of elections about to begin, Atlantic governments will soon find out if there's a political price to pay for job cuts, tax hikes and higher fees -- let alone botched deficit projections and broken promises.


Dean Jobb, a professor of journalism at the University of King's College in Halifax, is the Winnipeg Free Press East Coast correspondent.


Republished from the Winnipeg Free Press print edition April 8, 2013 A9

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