Nova Scotia’s economy wasn’t as hard hit by the pandemic as economists predicted. Instead of a $585 million budgeted shortfall for the fiscal year 2021-2022, the province finished with a $351 million surplus. That’s a dizzying turnaround of $936 million — the largest change or variance from one budget to another in Nova Scotia history.
“Nova Scotia’s positive fiscal position at the end of 2021-22 reflects our province’s strong economic recovery coming out of the COVID-19 pandemic,” said Finance Minister Allan MacMaster. “That said, we know real challenges still exist, such as skilled labour shortages and unprecedented price increases that are driving up costs worldwide. We are addressing those challenges as we continue to make much-needed investments in priority areas such as health care and housing and provide supports to vulnerable Nova Scotians.”
MacMaster said the PCs did not know when they were preparing their first budget, introduced in March 2022, that the economy had rebounded so strongly during the previous year. He said he only learned about the $935 million “swing” a few weeks ago. Even without that knowledge, MacMaster said the PCs chose to introduce a “spending” or deficit budget for this year, 2022-23, with increased allocations for health, housing, and education. The PC budget for 2022-23 is projected to leave the province half a billion dollars in the red by next March.
However, last year’s budget surplus or ”found” money is bound to pressure the government to open the public purse to help people coping with rising prices and higher interest rates.
MacMaster said while he realizes Nova Scotians are struggling with higher prices for everything, the government is bound by legislation to apply last year’s $351 billion surplus to the provincial debt, which now stands at $16.6 billion. On the good news front, the debt-to-GDP ratio actually dropped from 35% to 32.2%.
That didn’t impress opposition critics. Liberal finance spokesperson Fred Tilley told reporters on a Zoom call that the government “knew” since the budget update last December that the province was forecast to finish the year with a surplus of $108 million. Tilley claims $20 million of that flowed from the provincial tax on gasoline.
“The surplus only needs to be applied to the net debt at the end of the fiscal year,” the Northside-Westmount MLA said from his office in Sydney Mines. “They had three months left in the previous fiscal year — January, February, and March — when they could have put money into the hands of Nova Scotians to help them through a tough winter. Heating oil, gas prices, food prices. There was a lot of opportunity to spend some of that surplus.”
Halifax-Sable Island MLA Lisa Lachance is the NDP’s spokesperson on government spending. Lachance said today’s briefing, which closes the books on the previous fiscal year, shows the PCs have room to do more this year to help Nova Scotians struggling with the rising cost of living.
“They are talking about spending on health care,” Lachance said. “We think spending on pharmacare co-pays should be reduced or eliminated … many Nova Scotians are choosing between food or medicine. Kids went back to school without a plan for food or supplies in schools. We feel that the government is pretty out of touch and not listening to what is going on for many Nova Scotians.”
Where did the surplus money come from?
The short answer to that question, according to MacMaster and the Department of Finance officials who briefed journalists on the public accounts, is that Nova Scotia’s economy was not as hard hit by COVID-19 as economists predicted in 2020, and then again in 2021 when public health restrictions began to ease. Revenues from personal and corporate income tax grew, along with HST revenue. The population grew and so did the total number of people working and spending money, with retail sales up 16.3% in 2021.
The revenues for 2021-22 were $1 billion more than budgeted but $600 million of that was “one-time only.” For example, hundreds of millions rolled in from the forfeiture of offshore exploration licenses held by BP Canada and Equinor, as well as the sale of the province’s venture capital stake in a company called MetaMaterials.
Expenditures were up $351 million more than forecast. The cost to clean up Boat Harbour, where decades of sludge from the pulp mill at Abercrombie have been dumped, grew by $42 million. The province paid $14 million more to cover the first union contract for RCMP officers and $12 million to cover its 50% of the Mass Casualty Commission, up until March 2022. Universities got $163 million more to help with deferred maintenance and housing received $88 million more than budgeted.
The province spent less than it expected on capital projects such as schools and hospitals. According to MacMaster, this was because construction companies now have so much work and are so short-staffed, the government has found it difficult to attract bidders for government projects.
For example, $68.4 million of spending that was supposed to build seven new schools, including two in Bedford and Clayton Park, was delayed. Another $42 million allocated for the QEII Hospital redevelopment and the Cape Breton Regional Hospital complex did not get spent in 2021-22 for lack of competitive bids.
This is an ongoing concern for this fiscal year and next, with major projects being delayed because of a labour shortages, which had been forecast for at least a decade.
The public accounts are presented in three volumes: the consolidated financial statements of the province and financial information by department; financial statements of Crown corporations; and departmental details about salaries, payments to suppliers, travel, and other expenses as required by the Public Sector Compensation Disclosure Act.
The so-called “sunshine list” of people making over $100,000 is contained in Volume 3. You can find all the information here.