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New Brunswick Budget: Province Tightens Purse Strings to Tackle Debt

Mar 20, 2019

The Conference Board of Canada’s Senior Economist Lois Mainville offers insights on New Brunswick’s 2019 Budget:

Quote

“New Brunswick’s 2019 budget showed the province has balanced its books much earlier than expected. However, as outlined in its budget, maintaining that surplus is contingent on the province following a very stringent spending plan. If they are able to follow through on their plan, the province will be able to lower their net debt and decrease interest payments.”—Lois Mainville, Senior Economist, The Conference Board of Canada.

Insights

  • The 2019 New Brunswick budget, released March 19, showed the province is back in surplus well ahead of schedule. Going forward, its plan is mainly focused on maintaining its surplus. This will allow the province to finally begin tackling its mounting debt.
  • For the first time in 13 years, net debt is estimated to decrease, dropping by $49 million in 2019–20. This is welcome news as it will ease pressure on interest payments. Net debt is currently estimated at $14.1 billion, or 38.3 percent of GDP and debt payments eat up 6.8 per cent of provincial revenues.
  • The budget predicts modest surpluses throughout the forecast. Notably, there were no new tax or fee increases announced. As such, the government plans to accomplish the difficult task of maintaining a balanced budget through a very stringent spending plan, one that is similar to the restraint seen in the mid-1990's.
  • The government plans to cap growth in total expenditures (which include debt repayment charges) to a rate of 1.4 per cent over the next four years; well below the pace of population growth and inflation over the same period.
  • Few details were given on how this spending target will be achieved following 2019–20, but one plan is to reduce the size of the civil services by around 100 jobs, mostly through attrition.
  • Faced with a rapidly aging population, the budget outlines spending increases to attract nurses. The New Brunswick Tuition Tax Deduction will be reintroduced with hopes of growing the workforce in the future. The provincial government will also be announcing a renewed bursary program for post-secondary education.
  • The 2019 New Brunswick budget is based on a real GDP forecast of 0.6 per cent in 2019 and 1.1 per cent in 2020. This is weaker than the Conference Board’s current economic outlook.

Although New Brunswick presents a balanced budget until the 2020-23 fiscal year, it is unclear how the spending restraint required to maintain balance will be achieved. Combined with pressure stemming from an important demographic shift, New Brunswick faces tough decisions to maintain fiscal balance in future years.