N.B. deficit projection jumps to $92.1 million, squeezing Liberal promises

The new Liberal government of Premier Susan Holt is adding some asterisks to its election promises as it faces a higher-than-expected budget deficit left behind by the previous Progressive Conservative government.

Finance Minister Ren Legacy released a second-quarter update for fiscal 2024-25 that projects a deficit of $92.1 million as of Sept. 30.

That is $132 million worse than the $40 million surplus that previous PC finance minister Ernie Steeves forecast in his budget in March.

And it's $64.5 million worse than the deficit Steeves himself projected in his final fiscal update at the end of August.

WATCH | Why a new budget update could upset Liberal plans:

Liberal promises threatened by $92-million deficit projection

14 hours ago

Duration 1:17

The Liberals committed to balanced budgets and nurse retention bonuses and are now hedging on both.

"These results represent a period when the previous government was in place," Legacy said.

To make matters worse, Legacy said, there are indications that the province won't collect a revenue windfall in the third quarter, which is when the federal government remits income tax and sales tax revenue it collects to the province.

In recent years, that revenue has been much higher than expected, leading to a series of record-breaking budget surpluses for the Higgs PC government.

But this year, "it doesn't look like we're going to be in previous years' situations, where revenues are just going to grow and take care of everything," Legacy said.

The shortfall may put the squeeze on some key Liberal election commitments.

The party promised $10,000 bonuses this year for nurses, nurse practitioners and licensed practical nurses as a way to persuade them to stay in their jobs.

That was expected to cost $74.3 million in 2024-25, Holt said while campaigning on Sept. 20, but Legacy wouldn't commit to that figure Friday.

"We have some major commitments that are to be done within the next legislative session," he said. "Some of those will be announced and the appropriate pricing and costing will all come along in the next coming weeks."

Asked about the $74 million figure in the platform, the minister said, "we're still adjusting, we're still working it through, so when the final number comes in, we'll be announcing it."

Green Party health critic Megan Mitton said the Liberals must not sacrifice investments in health care to keep their promise to balanced budgets.

"I think New Brunswickers understand that it might make sense to put major investments right now in health care that are going to pay off longer-term."

Legacy suggested the Liberal promise to run balanced budgets during their mandate doesn't apply to the current 2024-25 fiscal year because it's covered by the PC budget Steeves delivered back in March.

"I am committed to balanced budgets in each year of our mandate, and of course our first budget will be '25-26," he said.

Notably, Legacy's mandate letter, in which Holt lays out what she wants him to do as minister, says he'll be measured on achieving a balanced budget in 2025-26 "what we control," he said but not this year.

Even so, the minister said he's asking officials to assess whether a "course correction" on spending is needed this year and to look for potential savings that can be found in various departments to reduce or eliminate this year's projected deficit.

Friday's update shows revenue forecast to be $118 million higher than expected, but that is more that wiped out by the projection that spending will be $251.8 million over budget.

That includes $193 million in unforeseen spending at the Department of Health, some of it the result of travel nurse contracts.

In a statement, Glen Savoie, the interim PC leader, said the projected deficit was being driven by health-care costs, and his party would be watching what decisions the Liberals make in the remainder of the fiscal year, given their campaign costing.

During the election, the PCs accused the Liberals of a $1 billion mistake in their platform costing.