Shrinking deficit raises novel question: What would we do with a surplus?

New Brunswick's budget forecast is continuing to get better as the fiscal year goes on, prompting government and opposition politicians to start debating what should be done with future surpluses.

The province's second-quarter fiscal update now projects a deficit of $135.4 million for 2017-18, far below the original forecast of $191.9 million.

Despite the improved forecast, the Liberals are sticking with their target of balancing the budget in 2020-21 and won't try to eliminate the deficit before next year's election, said Finance Minister Cathy Rogers.

She said the Liberals will follow their plan of using new tax revenue to boost spending, and if they reach a zero-deficit goal earlier than planned, "that would be good news."

"I'm not committing to zero [next year] but it certainly would be nice if we could meet our balanced budget or surplus situation earlier than forecast," she said.

Rogers said unexpected changes in the economy could throw off any effort to reach a balanced budget ahead of 2020-21.

Spending future surplus?

Even so, the improving budget forecast left Rogers confronting a question that hasn't been heard around the provincial legislature for years: what should be done with an eventual surplus.

Rogers said the Liberals would stick with a "balanced approach" if they are re-elected and end up with money left over.

She said paying down some of the accumulated public debt would free up some money now being used on interest payments and allow it to go to programs.

The government forecasts it will spend $691 million on servicing the debt this year, far more than many departments will spend.

Despite the improving budget forecast, the province's net debt is forecast to increase by $298 million this year — $64.1 million less than projected in the February budget — for a total accumulated debt of $14.1 billion by the end of the fiscal year on March 31, 2018.

"There's no one who would disagree with the importance of addressing the debt," Rogers said.

Opposition response

Progressive Conservative finance critic Bruce Fitch wouldn't commit his party to any plan for the surplus if it wins next year's election.

Asked if a PC government would roll back some of the Liberal tax increases the party has complained about, Fitch was non-committal.

"We'd want to see what the numbers really look like," he said.

"Net debt needs to be addressed. I think that's one of the most serious [things] you have to look at."

But Fitch said the PCs would have to weigh that against the benefits of a tax cut and pressure for spending.

Revenue up

This year's improved deficit projection is based on a forecast the government will bring in $22.5 million more than expected, thanks in part to higher-than-expected corporate income tax revenue.

It also now projects it will spend $34.1 million less than expected, mainly due to lower than expected retirement allowance payouts and lower payments on the public debt, due to lower than projected interest rates.

Even so, Rogers attributed the rosier picture to good management rather than good luck.

"We've put a plan in place and I think our record has shown we're meeting or exceeding those targets," she told reporters. "While we might have some unexpected data from time to time, overall we've been doing well with managing."