Province Facing Difficult 2007-08 Budget Process

Nova Scotia is facing a more challenging budget situation in 2007-08 compared with previous years, Finance Minister Michael Baker said today, Feb. 7.

Pressures on the revenue and expense sides of the budget mean that government must focus on key priorities like balancing the budget, and there will be minimal room for new programs, Mr. Baker said.

The Finance Minister released a fiscal overview document (www.gov.ns.ca/finance) that outlines the province's fiscal position.

The latest forecast for 2006-07, issued in December, shows provincial expenses of $6.917 billion against total revenues of $6.928 billion. With accounting adjustments factored in, government is forecasting a 2006-07 surplus of $64.7 million, of which $57.4 million is earmarked for the debt. Departments have been working to trim non-essential spending for the last quarter to ensure financial targets are met.

Projections for 2007-08 indicate rising expenses and considerable uncertainty for revenues.

The government of Canada has not announced a permanent solution to the fiscal imbalance problem, and has hinted at changes to the tax system that may affect provinces. Related federal revenue numbers will not be available until the federal budget later this spring. Meanwhile, trends for some provincial revenues are less positive than in previous years.

For 2007-08, the province's expenses are expected to go up again -- particularly in larger budget segments such as health, education, and social services -- because of negotiated salary and wage increments and other costs.

Health-care expenses alone are forecast to increase $220 million, or 8.6 per cent, between 2005-06 and 2006-07.

"We must find ways to keep spending in line with our revenues for 2007-08, and, if necessary, we will delay action on some priorities until they are affordable," said Mr. Baker. "At the same time, we must invest in priorities that will pay long-term social and economic dividends for the province."

Mr. Baker said the government remains committed to balancing the budget and reducing the province's debt. Nova Scotia has introduced balanced budgets in each of the last five years, and the province's net direct debt has gone down at the end of the 2005 and 2006 fiscal years.