The rapid growth of New Brunswick's net debt is "very concerning" to Auditor General Kim MacPherson, who is calling for "significant changes to improve the financial health" of the province.
In her 2012-13 annual report today, MacPherson noted that New Brunswick's net debt has grown by 45 per cent since 2009, putting the province in a tie with Saskatchewan for the greatest increase over that time. Since 2007, the debt has grown by 63.3 per cent.
"This pace of net debt growth is not sustainable in the long term and significant changes are required to address this problem," said MacPherson.
The debt grew by $931.8 million in 2012-13, pushing the net debt to more than $11-billion.
Finance Minister Blaine Higgs delivered his second quarter financial update on Thursday afternoon. He now projects the net debt will grow by $587.2 million for the year ended March 31, 2014. That is $7.2 million less than the original debt growth prediction of $594.4 million.
"This continue increase in net debt represents a very disturbing trend," said MacPherson. "An even higher demand will exist on future revenue to pay past expenses."
The report notes in 2013, the province had to put out $660.3 million to pay the interest costs on the debt, which represents 8.5 per cent of its annual revenue.
The report also shows New Brunswick has the second highest net debt per captia in the country. In essence, it would require every New Brunswicker to pay $14,623 to pay off the net debt, which is less than $100 shy of the net debt per capita in Nova Scotia.
MacPherson says the New Brunswick per capita figure has "increased significantly" since 2009 when it stood at $10,197.
Higgs also revised his deficit projection for the current budget year. Based on second quarter information, the deficit projection was revised upwards to $538.2 million, which is an increase of $59.5 million from the earlier projection.
Higgs said the province found $93.2 million in expense savings in the second quarter, but saw its revenue projections fall.
Revenue was projected to be $172-million lower than budgeted mainly due to weaker-than-expected results for NB Power and and reduced tax revenue, said Higgs.
The differences include:
- Return on investment is down $66.3 million, due mainly to lower net income for NB Power because of increase costs for fuel, replacement power, and pensions.
- Personal income tax is down $43 million due to weakened income.
- Provincial property tax revenue falls $11.5 million mainly due to assessments.
- Corporate income tax is $7.8 million lower, due to a negative prior year adjustment.
- Royalties are down $6 million due to a lower price and volume of potash.
Higgs plans to meet with stakeholders in both the north and south of the province to discuss possible solutions to the revenue problems.