Nova Scotia Government Introduces Budget With $585-Million Deficit
HALIFAX — Hundreds of millions of dollars in Covid-19 spending, shrinking tax revenues, and spending on healthcare and environmental initiatives will contribute to a $584.9-million deficit in Nova Scotia this year.
The provincial government released its 2021-2022 budget today, addressing how it plans to shepherd the provincial economy back to growth and outlining its spending priorities for the next fiscal year.
This year, the province expects to collect $11.7-billion in revenue, which is a 6.1 percent increase from last year but still below where the province projected it would be before the Covid-19 pandemic hit.
Spending will outpace that revenue, with the province shelling out $12.7 billion over the next 12 months.
A significant portion of that spending will be funneled to capital projects and healthcare.
For the second year in a row, the province will spend more than $1-billion on capital projects, including more than $200-million for the purchase and construction of schools, close to $180-million for the redevelopment of the province’s major hospitals, and $467-million for roads, highways, and bridges.
The province has pledged significant money for healthcare, including more than $1-billion for improvements in long-term care in the province, $365-million for mental health, $24-million on vaccination efforts, and more than $10-million to attract more doctors.
The budget also reflects Premier Iain Rankin’s push to focus more on climate change and green initiatives. The province will spend $80-million on climate-related initiatives this year, including $26-million for initiatives through its green fund.
Meanwhile, Finance Minister Labi Kousoulis insists the province is in a strong fiscal position, even though the government plans to run four straight years of deficits.
“I believe that we have a very clear path to getting back to balance,” he said March 25.
Returning To Pre-Covid-19 Economy
Before Covid-19 hit, Nova Scotia’s economy, population, labour force, and employment were all growing. However, the pandemic triggered an economic decline in the province larger than any in recent history
Last year, Nova Scotia’s Real GDP plummeted by 5.3 percent.
However, the government expects the GDP to whip back to pre-pandemic levels by 2022: real GPD is projected to grow by 4.6 percent in 2021 and 3.4 percent in 2022. That growth will be part of an economic recovery the province says is already beginning.
Delivering the budget today, Kousoulis said employment has increased to 465,200 in the province, which is just 1,800 below pre-pandemic levels. Employment among women is now above pre-pandemic levels.
The province also says that vaccine rollout means most industries will be back to normal output by the second half of 2021 (the recovery in the tourism industry will likely take longer). By 2023 and 2024, the province believes it will return to slower growth as conditions settle more towards normal.
The projections are all based on current trends continuing, but the Kouslious says if things hold firm the province will be back to balanced budgets by 2025.
Extra Spending Not All Covid-Related
Kousoulis says the province will spend about $359-million fighting the pandemic this year, which is a significant chunk of the province’s total $584.9 million deficit.
The province anticipates that spending will fall away as the pandemic receded, meaning there is only about $200-million left to eliminate the deficit.
This year’s deficit is the result of less revenue from both personal and corporate income tax, as well as dips in gas and tobacco taxes.
The province is also spending more across most departments, with spending up by more than 8 percent, or $859-million, across the board.
Along with $350-million related to the pandemic, the province also increased spending for non-Covid-19 items: $234.5-million more went to Health and Wellness, including $58.5-million to NSHA for operating costs, $12-million to implements recommendations for fixing long-term care, and $12.3-million for additional mental health programming.
The province also upped spending to give more money to people receiving financial assistance from the province and poured new money into early childhood education.
Presenting the budget on March 25, Kouslous said Nova Scotians shouldn’t be worried about the province’s books.
“This is not a structural deficit. It is shorter-term and caused by Covid-19, allowing us to anticipate that our economic situation, revenues, and expenditures will return us to the strong economic position we had pre-Covid-19,” he said.