Concerns about province's fiscal choices don't surprise finance minister

Despite her earlier boast about the Liberals having restored fiscal order to the province, Finance Minister Cathy Rogers says she wasn't surprised when a credit-rating service wasn't impressed.

Rogers said Wednesday that the province knows there are significant challenges to address in New Brunswick's fiscal picture, but that comes at a price.

"We don't believe you can cut your way to prosperity, we just don't," Rogers said in an interview with Information Morning Fredericton. 

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The budget that Rogers presented in late January has the government spending about $237 million more this election year, increasing what had been a projected deficit of $117 million for 2018-19 by $73 million.

After reviewing the budget, the Dominion Bond Rating Service changed New Brunswick's economic trend assessment from "stable" to "negative," although it kept the credit rating of A (high).

'We need to grow our population, we need to help people engage in work directly and we need to help support our seniors.' ​- Cathy Rogers, finance minister

Travis Shaw, vice-president of public finance at Dominion Bond Rating Service, said the decision questions the credibility of the government's current fiscal plan.

The agency found the New Brunswick economy is not performing well, and the future does not look more promising.

"There is limited flexibility with which the province can manage its finances," Shaw said in an interview.

He said the credit rating agency has been concerned about New Brunswick for quite a while, particularly about its economic outlook, which he said is still weak.

"While we did see some out-performance last year … that is not expected to continue going forward," he said.

Shaw said one of New Brunswick's major challenges is a weak demographic, with an aging population "weighing on the overall growth outlook."

Meanwhile, there are also limited prospects of business investment, he said.

"We're not seeing a very meaningful increase in the revenue trajectory. In our eyes, it's fairly limited capacity for the province to further raise taxes."  

The overall debt burden is already relatively high for New Brunswick's current credit rating, he said.

Critics were skeptical

When Rogers presented the budget, opposition parties attributed the increased deficit to the Liberals wanting to spread some money around before the election coming in the fall.

But Rogers said the budget reflected "good decisions" by the government and the concerns of New Brunswickers.

On Wednesday, she said it's important to find efficiencies in spending as well as ways to build the New Brunswick economy down the road.

"We agree that we have huge challenges," Rogers said. "But we are working very hard and strategically in addressing where there will be returns."

Earlier, Rogers said that the $73 million increase in the projected deficit represents spending on "new targeted investments," to be divided roughly evenly among what she called "a trio of challenges" — programs aimed at senior care, youth employment and helping businesses compete.