New Disclosure Policy Reveals Major Provincial Losses

Finance Minister Neil LeBlanc released a full financial report today that shows Nova Scotia recorded a major deficit last year, not the surplus previously reported.

"Now the accounts show everything added up in one place -- a full accounting," said Mr. LeBlanc. "It is clear that the government's financial health had been on the decline, rather than a recovery.

"With an annual consolidated provincial deficit of $384 million, Nova Scotians now know we have a very serious challenge ahead of us. We must conserve our tax dollars and make sure they are used for the things that are important to us all."

The deficit is due to a number of factors, including losses totalling $116 million at Nova Scotia Resources Ltd. and Sydney Steel Corp. The largest single factor, however, is the most recent overspending at the regional health boards and provincial hospitals. Their deficits in 1998-99 alone were $124 million.

Mr. LeBlanc said the government will deal with this challenge, but the financial picture in 1999-2000 is expected to temporarily deteriorate.

"When we took office 42 days ago, government spending decisions had already been set in motion that will see even greater costs in the regional health system and throughout the rest of government. Nevertheless, we are determined to change course. Not all government spending is required, and economies can be found."

A process of analysing all provincial programs was launched by the government earlier this month. The results will show up in next spring's budget.

"I am also concerned about the continuing losses due to a drop in the Canadian dollar," said the finance minister. "Our new accounting standards show an additional $72-million loss in 1998-99 alone, over and above the extra debt-servicing costs previously reported. We will act to further reduce our exposure to foreign currency."

Plans to eliminate losses at Sysco and Nova Scotia Resources will be worked out over the coming months.

"We must address all these issues quickly," said Mr. LeBlanc. "The new accounting rules have stripped away the rose-coloured glasses. No one should be under any illusion that we can or should ask government to be as pervasive and expensive as it was. We need a smaller government. We need more accountability among those who spend the tax dollars, and those who use the services."

Each of the measures announced today are part of the government mandate. During the recent election campaign, Premier John Hamm promised full financial disclosure, program review, cut the costs of government by reducing non-essential spending, working to reduce the province's exposure to foreign debt and plans to deal with the financial losses at Sydney Steel.

In addition to the deficit in 1998-99, the move to generally accepted accounting principles requires the government to examine the impact in previous years. On a fully consolidated basis, the surpluses previously recorded are now shown as deficits.

"The foreign exchange losses and health overspending for the past number of years were known, but never properly presented," said Mr. LeBlanc. "Looking at it objectively and fairly, the province made some progress until 1997. After that, spending rose and the financial position moved into decline.

"The restated deficit for 1996-97 is approximately $115 million; in 1997-98, it rose to approximately $245 million. The total amount to be reallocated is known, but the work to determine the complete impact in each year will not be complete until the tabling of the budget for 1999-2000, now expected for the middle of October."

NOTE: The Year End Forecast Update, minister's statement and other information on the changes in accounting policy are available at:

www.gov.ns.ca/fina under Financial - Year End Forecasts