Province Books $378.5 Million for Sydney Steel Corp.

A one-time, extraordinary expense of $378.5 million, which is the estimated cost of the province's environmental and pension liabilities related to Sydney Steel Corp., will drive the provincial deficit to $767 million for 1999-2000.

"These obligations would have fallen on taxpayers regardless of Sysco's future," said Finance Minister Neil LeBlanc. "Whether it was sold, closed or continued to operate, the province is responsible for environmental remediation and pension shortfalls."

He said the province's decision to book the expense in the third quarter of this year is in keeping with generally accepted accounting principles, and helps Nova Scotians understand the magnitude of the province's true financial picture.

"We gave Nova Scotians an honest, open accounting -- the true picture of the province's finances. And while the numbers aren't very pretty, at least we all know where we stand," he said.

Accounting rules require the government to record the estimated amount as an extraordinary item in the year the cost is known. Any future expenditures will be recorded as cash flow in forthcoming financial statements.

"This report underlines the need for Nova Scotia to put its financial house in order," said Mr. LeBlanc. "I cannot overstate the difficult choices we are dealing with as we prepare the 2000-01 budget, but we are committed to doing what is necessary to balance the books and give Nova Scotians quality services, at a cost they can afford."

The third-quarter update released today shows the estimated cost of steelworker pension liabilities and environmental cleanup costs at the plant. The Sysco costs do not represent an immediate cash payment.

The financial update forecasts higher-than-anticipated revenues from personal income tax and equalization payments in the amount of $158 million.

"These additional revenues are really a drop in the bucket when you're facing a $400-million deficit, not including Sysco," said Mr. LeBlanc, adding Nova Scotia will pay an extra $100 million next year because of higher interest payments on the debt.

"Making government smaller and less expensive is our only long-term option. Even without the Sysco provision, we would be faced with a deficit of almost $400 million. Clearly, we have a major task ahead of us."

The Department of Community Services has included the recently announced heating oil rebate in this update and has had higher program costs in child maintenance and income assistance.

The Department of Justice is reporting increased costs associated with the institutional abuse investigation and compensation programs. And Nova Scotia Economic Development and the Department of Education increases include items previously reported in the December forecast update.

NOTE TO EDITORS: The year-end update is available on the department's website at www.gov.ns.ca/finance (click on Year End Forecast).