N.S. budget update shows increased revenues, but challenges on the horizon

Favourable financial winds have again led to more revenue for Nova Scotia's PC government, resulting in a shrinking deficit and more over-budget spending.

But smaller population growth and the threat of a trade war with the United States could mean those winds might soon shift.

Finance Minister John Lohr released his government's December fiscal update on Friday, his first official public act since being sworn in to the new portfolio last week.

The update shows a forecasted deficit of $247.5 million for 2024-25, an improvement from budget day earlier this year when it was $467.4 million.

Population growth starting to slow

Revenue is up $642 million from budget day, thanks in large part to an increase of $325.8 million in provincial taxes collected.

"Nova Scotia's economy is performing well in many areas and we'll continue to monitor revenue sources and the trends that impact revenue," Lohr told reporters in Halifax.

One of those trends is population growth. Although it's continuing, it's beginning to slow. Figures from this year show population growth at 1.9 per cent, while early estimates for next year suggest it could dip to 0.9 per cent as the federal government reduces immigration numbers and interprovincial migration to Nova Scotia decreases.

Lohr said each budget presents its own challenges and his department would monitor population trends as it works on next year's document. That said, he gave no indication that the trend of over-budget spending is coming to an end. The province's auditor general has repeatedly raised concerns about this practice.

"Nova Scotians expect us to address the needs, as we can, of the province," Lohr said. "So if there are opportunities to invest more or we see needs in new areas, we'll continue to be flexible."

Departments continue to overspend budgets

The Tories spent more than $1 billion a year outside their budget during their first two years in office and Friday's numbers show things headed in a similar direction for 2024-25.

The PCs have spent $701.5 million outside of the budget as of this month. Over-budget spending since September has included $38 million more for the Nova Scotia Film Fund and $25.3 million in a variety of community grants, many of which were announced in the lead-up to the recent provincial election.

Health Department spending is up $53.2 million since September, driven by new contracts for health-care workers and doctors, and a new doctor pension plan. To date, the Health Department has exceeded its budget by $231.6 million.

The budget for seniors and long-term care is up by $19.5 million since September mainly due to the renewal of service agreements. The increased use of refundable tax credits for scientific research, capital investment and digital media and animation has cost $52.5 million more since September.

Although spending in the Education Department is up by $10.6 million since the September budget update, it's offset by an underspend of $14.9 million related to the federal child care agreement. Finance Department officials say that's because some spaces are taking longer to create than expected, although they will still eventually go ahead.

A similar explanation was provided for why the municipal affairs and housing budget decreased by $19.1 million since September. Lohr said that about $103.7 million related to federal programs for municipal sewer, water and infrastructure projects is delayed because the work is taking longer to complete than expected.

The provincial election cost $14.3 million.

Friday's information also shows that the federal government's two-month GST holiday is estimated to cost the province about $82 million. Lohr said officials in his department are talking with their federal counterparts about that money, but he stopped short of saying whether the province has requested that Ottawa compensate it for the lost tax revenue.

NDP Leader Claudia Chender said the Tories continue to show that they "can't or won't budget in a transparent manner" that allows the public to know how its money will be spent ahead of time when the provincial budget is introduced and debated each spring.

But it's become "a fairly predictable rhythm" for the PCs to project a deficit at budget time and then show increased revenues during subsequent updates that shrink the deficit and lead to hundreds of millions of dollars in over-budget spending, she told reporters.

"There is no reason, in my estimation, that we need to engage in this sort of backroom process of cutting cheques throughout the year that aren't accounted for," she said.

Chender said she's concerned about the underspending on child care and from the former municipal affairs and housing department. The responsibility for housing was shifted last week into the newly created Growth and Development Department, which replaces Economic Development.

Guarding against tariff threats

Liberal House leader Iain Rankin said financial indicators suggest the Tories' approach to spending won't remain sustainable. While the public might expect the government to spend what it takes to improve housing and health care, there's no reasonable explanation for why 15 departments overspent their budgets, he said.

"When virtually all departments are overspending, it kind of makes a mockery of the whole [budget debate] process that we do in the legislature each spring," he told reporters.

Rankin said he also wants to see a plan from the government for how it will protect the Nova Scotia economy from the threat and potential impacts of U.S. tariffs. He called for a "Team Nova Scotia" approach, including marketing campaigns and delegations that would meet with U.S. counterparts.

"[Tariffs] could take a huge hit to our economy, given that two-thirds of our exports are going to the U.S."

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