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The Facts

(taken from the Nova Scotia Economic Advisory Council report November 2009)

Status Quo projection taken from the report ($ millions)

Report yr 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13

Revenues 8,523 8,494 8,411 8,455 8,633 8,891

Expenses 8,133 8,521 9,094 9,237 9,746 10,291

Adjustments 28 46 90 68 31 31

Difference 418 19 (592) (712) (1,081) (1,368)

Net debt 12,114 12,323 13,492 14,558 15,745 17,207

Bottom line: we are already short by about $500 million this year, revenue will increase about $500 million over the next three years but spending will increase $1200 million over the same period. Each year that we are short we have a deficit and we have to borrow the amount so the debt piles up. We pay interest on the debt "currently more than 10 per cent of total provincial government spending" so this will increase, all things being equal to around 14% of spending in three years essentially cutting into monies for programs or tax reduction.

Why is this happening?

"The current cyclical downturn is partly to blame for the emerging fiscal challenges, but it accounts for only a portion of the projected run-up in the deficit. The cyclical component of the deficit will be dwarfed by its structural elements mismatch of the medium-term revenue and expenditure paths." You can see the impact of the recession, revenues went down about $100 milion over the last two years, but look at spending it went up almost $1000 million!

Can We Rely on Growth and So Do Nothing?

No. " ... it will not be possible to rely solely on a return to economic health, the provincial economy growing at its long-term trend rate, to restore fiscal health. Even when the economy is back on an even keel, maintenance of recent trends in expenditures, combined with a return to more normal growth in provincial revenues, will yield persistent deficits well beyond the end of the current mandate." So future growth will not fix the problem, rather it is the 'mismatch' between revenue and expenditure that needs to be addressed.