Nova Scotia's Liberal government is forecasting a $481-million deficit for 2013-14, a drastic change from the $16-million budget surplus the previous New Democratic government predicted in August.
The deficit is primarily the result of two factors. The Liberals decided to book pension obligations of $280 million in this year's expenses. They also said revenues were $157.8 million lower than originally forecast while spending is forecast to be $328.5 million higher.
In delivering her first quarterly update, Finance Minister Diana Whalen said revenue from the harmonized sales tax was down by $30.2 million, corporate tax dipped by $8 million and income taxes saw a $71.7 million decrease.
Whalen said she added a pension charge to this year's budget at the recommendation of Auditor General Jacques Lapointe, which results in a one-time $280-million hit to the bottom line.
"We're talking, as you know, hundreds of millions of dollars and the treatment of that. I think it's a significant recommendation from the auditor general," she said.
The New Democratic Party forecast a surplus of $18.3 million in the last fiscal update in August, shortly before former premier Darrell Dexter called October's provincial election.
Acting NDP Leader Maureen MacDonald said the Liberals inflated the budget to make the books look worse than they are. She said pension liabilities should have been spread out — as has been done in the past — instead of a payment to the budget in one year.
'They were too rosy'
"Today's numbers could not have been predicted back in the spring," MacDonald told reporters.
"They've padded every possible thing that they possibly could into this deficit to make it look as bad as possible."
But MacDonald also conceded the province's finances are legitimately in deficit.
"I do accept that the revenue is down. That's clear and that's based on information that comes in," she said.
As expected, Whalen confirmed the government will repeal NDP legislation that would have started cutting the HST next year because it cannot afford the loss in revenue.
Under the law, the HST would have been cut by one percentage point next year and again in 2015, bringing the tax rate down to 13 per cent. Each percentage point cut is worth about $190 million in revenue for the province.
"I think the numbers speak for themselves. It's irresponsible for us to look at a tax cut," Whalen said.
Before the deficit announcement, Premier Stephen McNeil said the updated finances shouldn't be a surprise because the New Democratic Party's budget was too optimistic.
"Every Nova Scotian questioned the revenue numbers that were put forward by the previous government, we all said they were too rosy. The numbers now that have come in and that have been verified confirm that," he said.