Liberals choose election-year spending over deficit cutting as budget presented

The Liberal government has blown a hole in its balanced-budget target, choosing to run a deficit for an extra year as it ramps up spending ahead of the provincial election in September.

Finance Minister Cathy Rogers releases cannabis revenue projections in 2018-19 as part of budget document

Finance Minister Cathy Rogers spoke to reporters on Tuesday before delivering the latest budget and the final one before the September election. (Stephen MacGillivray/Canadian Press)

The Liberal government has blown a hole in its balanced-budget target, choosing to run a deficit for an extra year as it ramps up spending ahead of the September provincial election.

The Liberals will spend about $237 million more in the coming year, increasing what had been a projected deficit of $117 million for 2018-19 by $73 million, for a much larger shortfall of $189 million.

And their earlier forecast of a $21 million surplus in 2020-21, what would have been the first balanced budget in more than a decade, has been replaced with a $79 million deficit that year.

Instead, the province will only return to a surplus in 2021-22, one year later than planned.

The change comes after three straight years in which the Liberals beat their deficit-reduction targets.

Premier Brian Gallant's government opted to spend more in the 2018-19 budget instead of cutting the deficit. (CBC)

Finance Minister Cathy Rogers said the $73 million increase in the projected deficit represents spending on "new targeted investments," to be divided roughly evenly among what she called "a trio of challenges" — programs aimed at senior care, youth employment and helping businesses compete.

"These challenges will cost money," she said in her budget speech in the legislature. "We came to the conclusion that we cannot afford to ignore these challenges. We have to tackle them now."

'Restored fiscal order'

Rogers bragged in her budget speech that the Liberals had "restored fiscal order" and had "laid out a plan with clear targets, and we beat those targets every year."

With an election looming in September, the Liberals will spend almost $73 million more in the coming year and run a deficit for an extra year. 0:52

But she refused to say whether they were missing a target now by running a higher deficit than planned and delaying a balanced budget by a year.

"I'm hoping we can continue to exceed these targets," she said.

Rogers said the extra year of red ink was the result of "good decisions" based on dialogue with people.

"New Brunswickers are asking for greater investments," she said.

Obviously they've seen polling or something that says people aren't as concerned about balancing the budget.- Opposition critic Bruce Fitch

The boost in spending at the expense of an earlier paydown of the deficit comes as the Liberals under Premier Gallant Gallant try to portray Opposition Progressive Conservative Leader Blaine Higgs as a ruthless cost-cutter.

Heading into their re-election campaign later this year, Gallant has sought to frighten voters into thinking Higgs will zealously slash programs in a rush to get the books balanced.

The new spending gives Liberals even more to defend, including wage increases for special-care home workers, home-support workers and daycare workers, more funding for summer jobs for youth, and more business subsidies in areas such as fisheries and forestry.

Rogers was vague on why the Liberal government didn't foresee the need for the spending last year, when it was forecasting a lower deficit in 2018-19 and a surplus in 2020-21.

Cannabis revenue

The province outlined its cannabis revenue projections on Tuesday. (Evan Mitsui/CBC)

The budget provides new financial information on a couple of high-profile and controversial government initiatives.

The province expects to rake in $7.2 million in revenue from retail cannabis sales, which become legal July 1.

Of that total, $6 million represents the province's share of a new excise tax on cannabis sales, and $1.2 million represents profit from Cannabis NB, the new chain of retail stores that will be run by NB Liquor.

Separate from that, the government will collect $1 million from producers for a Cannabis Education and Awareness Fund. The money will be spent on public campaigns to warn the public, including young people, about the health impacts of smoking cannabis.

The figures are for nine months only because sales begin three months into the 2018-19 fiscal year.

Climate fund details

As previously announced, redefining part of the existing provincial gas tax as a carbon tax will pour $37.4 million into a climate change fund to pay for adaptation and energy-efficiency measures.

But the budget confirms $1.6 million of that revenue will pay not for climate initiatives but for the salaries and operations of civil servants working in the climate change secretariat.

Another $3.8 million in the fund will be held over to be spent in future years, meaning a total of more than 14 per cent of this year's carbon price will not be spent on climate initiatives in 2018-19.

Other parties react

The budget is "obviously" an election budget, PC finance critic Bruce Fitch said.

"They've elected to go with a budget that's going to be their platform going into the next election."

Fitch said several of the new measures fit a Liberal pattern of announcing programs "limited in scope and location," such as new daycare subsidies that will only be available by fall at designated early learning centres in two cities.

Rather than attack the new spending, Fitch said the Liberals have failed to get results with the money they've spent so far — to reduce health-care wait times and improve school test results.

Opposition Progressive Conservative finance critic Bruce Fitch called Tuesday's budget an obvious election budget. (CBC)

And Fitch said it's possible the government is reflecting public opinion.

"Obviously, they've seen polling or something that says people aren't as concerned about balancing the budget," he said.

Green Party Leader David Coon said given how close they were to balancing the budget, the Liberals should have finished the job.

"I had myself convinced that the government was going to announce by election time that the books were balanced, because that's what I would have done," he said. "We have to live within our means.

"Instead it decided to spend not only all the extra revenue it has … but more than that."

NDP Leader Jennifer McKenzie agreed the budget was aimed at voters this fall.

"It's fairly typical in an election year," she said. "They're trying to look good for the public, and trying to make good on some of the promises they haven't kept in terms of daycare and other areas. It's not a surprise for us."

She wouldn't say whether she'd spend more or less money, or run higher or lower deficits, if she were premier.  

"We would just do things differently," she said.

People's Alliance Leader Kris Austin said in a written statement that he wanted the budget to reveal not just cannabis profits but how much the province will spend to set up its retail stores.

Corrections

  • An earlier version of this story said the Liberal government would spend $73 million more this year, compared with last year. In fact, the budget is increasing by $237 million.
    Jan 30, 2018 2:16 PM AT

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