N.B. deficit balloons to almost $400M

The New Brunswick government's budget deficit this year has exploded to almost $400 million.

The province's third-quarter fiscal update is projecting the shortfall as a result of soaring health-care costs, including $108 million as a result of travel nurse contracts signed by the previous Progressive Conservative government.

Barring a financial miracle, the $398.9 million deficit figure puts a balanced budget out of reach for this year , — though the Liberals said after taking power that their campaign promise to avoid deficits didn't apply in fiscal 2024-25, which began with the PCs still in power.

But the Liberals also acknowledge that two of their own expensive campaign promises — $60 million in nurse retention bonuses and a sales tax rebate on electricity bills costing $32 million — are adding to the projection.

Finance Minister René Legacy told reporters it will be "difficult if not impossible" to balance the budget before the March 31 end of the fiscal year. 

He also warned that he's unlikely to be able to balance the budget next year either.

The Liberals promised a second package of nurse bonuses for next year, worth half of this year's amount.

But the price tag for the tax rebate on power bills, which this year only covers part of the year, will jump next year to $92.6 million.

Legacy said the government will stick with those commitments as well as a promise to open the first of 30 collaborative care clinics in 2025.

"You pick and choose which promises and which things you can do. Keeping a balanced budget right now would mean not delivering on a lot of promises that were done in our platform," Legacy said.

"We can work toward a balanced budget, but right now New Brunswickers' needs are at an all-time high." 

But he said "difficult decisions" would be needed in other areas to maintain some level of fiscal responsibility. 

The update says higher demand for social assistance and child welfare programs will cost $106.4 million more than originally expected.

The government is also blaming a federal government sales tax holiday that eliminated the HST on a range of consumer items for two months — a program that also prevented the province from collecting its share of the tax during the same period.

Premier Susan Holt has asked Ottawa for $70 million in compensation, but so far it has not paid up.

On top of that, sales tax revenue in general is less than expected for a total of $136.3 million less than expected coming in.

There are other revenue shortfalls projected.

Federal transfer payments — so unexpectedly high over the last four years that they produced record surpluses for the Higgs PC government — are now forecast at $13.7 million lower than expected in 2024-25.

"We've been going through four or five years of large surpluses, and people had in mind that we could start spending those surpluses," Legacy said, because of an assumption of a third-quarter tax revenue windfall.

"We need to change those expectations. There is no large surplus to be spent."  

PC Opposition Leader Glen Savoie wouldn't say which of the Liberal promises he'd eliminate to get the deficit down but blamed the party for ignoring predictions revenues would level off this year.

"They made the promises and now they have to manage it," Savoie said.

"It's not whether or not I'm against what they decided. They won the election, that is their right to make those decisions. But they made them knowing the declining revenue situation we were coming into." 

Losses at N.B. Power are also reducing revenue to the province by another $48.8 million.

Officials said it was too early to account for the impact of potential U.S. tariffs on New Brunswick exports in the third-quarter fiscal update because the uncertainty over those measures changes almost daily.

Holt said earlier this month the threat of the tariffs was already having an impact on the province's economy.

Green Leader David Coon said the Liberals have to be prepared to run a deficit next year to deal with the potential impacts of those tariffs, if they are imposed. 

He said Legacy's comments about difficult decisions worried him because "it's important to maintain the current levels of public services and to invest in improvements in health care."