Nova Scotia Issues Second Budget Forecast Update

The province of Nova Scotia is forecasting a modest increase in its budget surplus for 2005-06, as rising energy prices boost royalty revenues from offshore natural gas.

Government will increase investment in key priorities, such as new programs to help Nova Scotians manage higher energy costs.

The provincial surplus is expected to go up to $78.4 million, $15.1 million higher than budgeted. The budget includes a legislated $57.1-million surplus to be allocated to the debt.

"We have made adjustments to our budget to recognize the changing global energy situation," Finance Minister Peter Christie said today, Dec. 14. "We are including a prudent plan to help Nova Scotians save energy and to offset the higher costs of fuel for low-income Nova Scotians."

Total revenues are up $112.9 million, largely due to an increase to $119 million for natural gas offshore royalties, $89 million more than budgeted.

The increases are offset by revenue decreases in a number of categories.

Net program spending is expected to go up by $69.9 million, including $28 million for investments in an energy efficiency program and heating rebates for low-income consumers.

Nova Scotia's economy continues to grow, although at a slower pace than projected at budget time. With a drop in exports and a higher volume of imports, the real gross domestic product (GDP) growth is forecast to be 1.6 per cent for 2005, about 0.5 per cent below the rate assumed at budget time.

However, the year-to-date unemployment rate of 8.4 per cent is slightly below the budget forecast, as employment grows at a faster pace than labour supply.

"Our economy is performing well, but not quite at the level we expected at budget time," said Mr. Christie. "We continue to invest in economic development initiatives and other areas to promote economic growth."

Other than new spending on energy programs, the largest added program expenses compared to the budget are in economic development, spending on emergency rooms and intensive care units, and wage settlements in the health-care sector. Several departments are reporting operating savings that offset the increases.

Changes from the budget in major revenue categories include increases in corporate income tax, harmonized sales tax, and offshore forfeitures. These are offset by decreases in revenues from personal income tax, motive fuel taxes, and the large corporation tax.

Due to a recent change in the actuarial assumptions for government pension and retirement obligations, the pension valuation adjustment will increase, costing government $27.7 million more than anticipated at budget time. The projected cost of pension interest is also expected to grow by $24.7 million.

The forecast includes a total of $21.4 million in savings for debt-servicing costs, due to lower interest rates and applying $830 million to the debt from the Offshore Offset Accord.

A copy of the forecast update is available on the website at www.gov.ns.ca/finance .