Higgs surplus dramatically lower in new update

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The Higgs government is now projecting a $35.3-million surplus in the current fiscal year, dramatically lower than what it was predicting just months ago.

And it’s also now anticipating the net debt to increase for the first time in several years.

The changes to the projected surplus come as health care spending has ballooned, amid other expenses, eating into once skyrocketing revenues that the government contends has now started to slow.

Meanwhile, promised new affordability measures to aid New Brunswickers struggling with the cost of everything still may come, said Finance Minister Ernie Steeves, although he declined to say whether that’s before Christmas or early in the new year.

In August, Steeves said the province was on pace for a $199.6-million surplus for the 2023-2024 fiscal year.

That’s after originally predicting a surplus of about $40 million in March.

The newly released second quarter results still project a large jump in revenues, $156.2 million higher than budget. But Steeves said on Tuesday that it’s no longer the “unprecedented revenue growth like we have over the past year.”

Departmental staff told reporters during a technical briefing that the revenue growth represents a “relatively small amount on a $12-billion budget” that’s now more in line with historical levels.

“What we said all along was going to happen is now happening,” Steeves said. “That is the numbers evening out and not having this huge surplus.”

That said, the extra dollars are being wiped out as several departments go over budget.

Total expenses are projected to be over budget by $161.2 million.

The Department of Health alone is $162 million over budget, with officials stating on Tuesday that higher personnel and operating costs within the regional health authorities, as well as the climbing cost of medicare, are to blame for the overages.

Officials added there are “salary pressures” in staffing managers to train new internationally recruited health workers and student nurses.

The cost of hospital supplies has also jumped.

“We’re always looking for people to make prudent fiscal decisions, but you know what, it’s the biggest department, it has a $3.4-billion budget, they’re a huge spender, but absolutely it’s needed,” Steeves said. “What can you do? It’s health and it’s our top priority right now.”

Post-Secondary Education, Training and Labour is projected to be over budget by $53 million, largely due to “increased demands” for the province’s WorkingNB program, as well as costs related to implementing the province’s new housing strategy.

Natural Resources and Energy Development is projected to be over budget by $21.2 million, after the Higgs government announced last month that it will spend another $30 million on its heat pump program.

The added cost pressures come as harmonized sales tax revenue is also up $77.7 million and personal income tax revenue is up $51 million, largely due to higher income and population growth, but while other revenue figures are down.

Offsetting that slightly is corporate income tax revenue which is down $48.3 million due to what the statement says is “due to a reduction in the national corporate taxable income forecast,” on which payments are based.

Still, Liberal Finance critic René Legacy said the numbers clearly show that revenues continue to grow exponentially, despite the minister’s words.

“When the minister says that there is less growth in the economy, we’re still growing at a much more rapid pace than was anticipated in the budget,” Legacy said.

But the Liberals are surprised with the expense side of the ledger.

Legacy pointed to figures detailing spending this year to date, noting that the government’s nearly $200-million surplus still currently exists, and that spending will now ramp up in the remaining months of the fiscal year.

“What they’re saying is that they’re going to spend a lot more in the last six months than they did in the first six months,” he said.

Legacy mused if it was an “election budget.”

As the colder weather comes, it certainly becomes more and more imperative to help those who are disadvantaged, so I can’t say it will happen before Christmas or in January, but we are looking for new ways to help New Brunswickers.

Ernie Steeves

The figures come after two straight years of dramatically underestimating financial windfalls.

Audited financial figures revealed that the Higgs government’s surplus was actually $1 billion last year, an all-time record never reached before in the province’s history.

It smashed a previous surplus record the Progressive Conservatives set just one year prior when a $769-million surplus was recorded.

Last month, Steeves had promised new “affordability measures” in the wake of that last surplus.

“We are looking in cabinet at a number of different affordability measures and we see the need in New Brunswick,” Steeves said again on Tuesday. “That is not lost on us, don’t worry about that.”

But when asked when that could happen, Steeves appeared to conflict himself in the same sentence.

“As the colder weather comes, it certainly becomes more and more imperative to help those who are disadvantaged, so I can’t say it will happen before Christmas or in January, but we are looking for new ways to help New Brunswickers,” he said.

“We have looked at a number of different options, and we continue to explore those and try to find ones we can afford, while still helping them afford what they need for their life.”

Meanwhile, the net debt is projected to increase to $12.6 billion, something that hasn’t happened under the Higgs government’s watch.

The debt was pegged at $12.4 billion at the end of the last fiscal year, and had been on a steady decline over the last four years from a high of $14.4 billion.

“Service of the public debt is projected to be down $78.6 million from budget due to higher short-term interest earnings, projected savings in the long-term borrowing program, and the adoption of a new accounting standard for financial instruments,” according to the government’s fiscal update.

Todd Selby, director of fiscal policy, revenue and economic and statistical analysis within the Department of Finance, said that the province tabled a $1-billion capital budget this year that increases borrowing.

“Those investments exceed the amount of amortization we pay and the net effect of that is an increase to net debt because of that additional borrowing that’s required,” Selby said.