Nova Scotia's books remain in surplus—with a little help from Ottawa

The provincial government continues to operate in surplus, largely thanks to the federal government.

Finance Minister Karen Casey released her government's December update on the 2018-19 books on Wednesday. The numbers show a projected surplus of $27.3 million, down from the budget estimate of $29.4 million and down from the September projection of $34.5 million.

But the number could have been even lower.

Increase in equalization

While the government has experienced a mixed bag of increases and decreases on both the revenue and expense sides of the ledger, it was the $27 million in increased transfer payments from Ottawa that are perhaps most notable.

Casey said she received a letter from her federal counterpart, Bill Morneau, on Dec. 9 indicating an increase in equalization payments of $23.4 million. The federal health transfer is also up $2.3 million thanks to the province's population hitting an all-time high.

Still, Casey maintained the numbers show the government's financial plan remains on the right track and that there are promising signs for the future, including a declining trend in the province's net-debt-to-GDP ratio, growth in exports, an increasing population and improved youth retention.

"We know that there are — as I said — many moving parts," she told reporters at a news conference in Halifax Wednesday.

"It's our responsibility to make sure we manage those, keep our eye on the surplus and make sure we continue to manage our funds so that we have a surplus. We need that to give us the flexibility for when we have to respond to demands that come from the opposition and from other departments for increased services."

Department spending on the rise

Demands from government departments do indeed continue to rise, and cabinet has before it a list of additional appropriations totalling $64.9 million.

The largest of those asks comes from the Health Department — $34.6 million — related to increased needs in a variety of services. Government officials said the majority related to outpatient care and emergency department services.

Other asks include:

• Internal Services Department needs an extra $13.9 million for IT system upgrades 
• Transportation and Infrastructure Renewal needs $9.9 million more for the Yarmouth ferry, cargo upgrades at the Halifax airport and land purchases for health-care projects 
• Community Services needs $4.4 million for kids in care with complex needs, support for the homeless and to cover higher-than-expected pharmacare costs for those receiving income assistance or disability support.   
• Advanced Education is seeking an extra $2 million for assistance to universities

Department spending is up almost $100 million from the budget.

Casey said the province remains committed to sustaining a balanced budget, however NDP Leader Gary Burrill questioned the value of the government's "hyper-focused obsession with putting money in the bank."

He suggested that at a time when one-fifth of hospital beds are occupied by people waiting for nursing home placements, the government should be more focused on spending money.

"I think this is a mistaken priority and a misguided policy."

Decline in personal income tax

Burrill said he was particularly troubled by a downward spiral in provincial personal income taxes of $110 million from the estimate in the budget. Finance Department officials said it was a function of having to use projections on which to base the budget, projections which ultimately were slightly off.

But Burrill argued it points to a bigger issue given the province has the lowest minimum wage and the highest level of consumer delinquency in Canada.

Tory justice critic Tim Halman said the province's finances appear to be unsustainable, although he was short on suggestions of how to guard against potential economic volatility.

"We have a razor-thin surplus based on a federal transfer. We need to do better. We need a longer vision in terms of the economy in this province."