Finance Minister Victor Boudreau's massive projected deficit is putting New Brunswick "at risk" of violating balanced-budget legislation, Auditor General Mike Ferguson says.

The province's Fiscal Responsibility and Balanced Budget Act mandates the government to balance its books over a four-year cycle and reduce its debt as a percentage of gross domestic product.

The Liberal government closed its first year of the balanced-budget cycle in 2007-08 with an $86-million surplus and appeared to be heading toward an $18-million surplus in 2008-09.

Now Boudreau is projecting a $285-million deficit this year, foreshadowing another substantial deficit for 2009-10 and a two-year $1.2-billion capital spending program that will begin next year.

Based on Boudreau's fiscal update released Wednesday, Ferguson said "it will be very difficult" to meet the balanced-budget target that ends in March 2011. Although the legislation sets a firm four-year target, there are no penalties for governments that violate the act.

The province's debt stood at $6.5 billion in 2007 with a debt-to-GDP ratio of 26.1 per cent, and in the March 2008 budget the debt was expected to grow to $7.1 billion.

And with the added weight of these new deficit projections, Ferguson said he thinks the debt-to-GDP ratio requirement is also "significantly at risk."

Ferguson disappointed

The auditor general said Boudreau should have used his fiscal update to comment on the government's ability to meet the balanced-budget targets.

"The disappointing thing about these questions … [is that the government] should have addressed those two things specifically in the update. It is their economic and fiscal update, the legislation is the government's legislation," Ferguson said.

The financial watchdog said another question that needs to be answered is the growth trajectory of the government debt in light of these forecast deficits.

"The way I read [the update], they are going to be up into the high $7 billion of net debt very quickly," Ferguson said. "I don't want to be alarmist, but it wouldn't surprise me if they got to $8 billion very quickly in this time."

A growing net debt, the auditor general pointed out, will mean additional money will be paid to cover those costs.

Boudreau said he intends this spending to be part of an economic stimulus package that will help the province ride out an economic downturn.

"The government is going to obviously say all of this is strategic investment … that stimulates the economy. But just because it is capital spending doesn't mean it does that," Ferguson said.