FREDERICTON – The question is: Will Tuesday’s provincial budget offer anything worth cheering about, or will it all be the fiscal equivalent of a Stephen King novel – frights, chills and unspeakable horror? Will the fiscal document offer even one nugget of positive news to revive the spirits of the weary investor, the recently unemployed worker or the overburdened New Brunswick taxpayer? At this point, at least, there appears to be little reason for optimism, because serious doom and gloom started to land last week. First, the government intentionally leaked its projected deficit for the coming fiscal year: $800 million. Then Premier Shawn Graham confirmed that his government will cut “hundreds” of public sector jobs in an effort to wrestle that huge deficit to the ground. On Saturday, the six public sector unions said they are bracing for 700 job cuts. As well, Human Resources Minister Rick Brewer stated the government will implement a two-year wage freeze for all public employees, affecting everyone from civil servants to nurses, teachers and MLAs. Typically governments leak good news before releasing their budgets. Is the worst yet to come? David Murrell, an economist at the University of New Brunswick, says bad news is inevitable when it comes to the 2009-10 budget – the key is in how government plans on minimizing the damage. “There’s a world-wide recession that New Brunswick is part of. So some of that deficit can’t be avoided,” he said, pointing to declining tax revenues, government’s bailout of sagging public pensions, and additional millions spent on so-called economic stimulus projects. “Ideally it’s a temporary thing and we shouldn’t be too negative about it,” he continued of the shortfall. “The question is how to get rid of this.” According to Murrell, the key is to ensure the shortfall does not become a structural, or long-term, deficit. It must be based on the recession, not overspending and poor fiscal management. After forecasting a $19-million surplus for the current fiscal year, the Grits are currently $285 million in the red. But perhaps more worrying is that they expect to run deficits for four straight fiscal years, until 2012-13. That’s not good enough for Murrell. He says the deficit spending can last two years, but then it must end. Within a year the Grits should halve the $800-million figure and slay it entirely by 2011-12. “That’s very difficult to do, mind you. It’s going to require some pain,” he said. But Murrell contends that enduring that pain is better than expanding the province’s $7-billion net debt any more than is absolutely necessary. “It’s a temporary problem. But it could easily turn into a structural deficit,” he said. “They have to have a plan.” Murrell is not the only one hoping Tuesday’s budget will offer a glimpse of the Liberals’ game plan. Last month, the province’s auditor general predicted the net debt could grow from $7 billion to $9 billion by 2011 because of deficit spending. He called on the Grits to draft a plan for managing the growing net debt – and annual interest payments of up to $100 million. For his part, Finance Minister Victor Boudreau says the rising deficit – which represents a large portion of the province’s roughly $7-billion budget – is being caused by a variety of factors. For example: higher fuel costs, disaster relief from last spring’s floods and a $133-million payment needed to bail out provincial pensions. Recently, the Liberals said a third of the $800-million deficit was the result of pension losses. Charles Cirtwill, of the Atlantic Institute for Market Studies, a Halifax-based think-tank, says that fact will “stick in the craw” of investors who have seen their own savings disappear, and now must experience the “joy” of bailing out the retirement savings of others. Meanwhile, Craig Brett, an economist at Mount Allison University, says New Brunswickers should be concerned about the rising size of the province’s deficit. By his calculation, an $800-million shortfall translates into $3,600 per family in the province. “This is not small potatoes here,” he said. “It’s not the kind of thing you want to do every year.”
