NOVA SCOTIA finished at the bottom of the pile in an annual assessment of provincial finances. Good Enough for Government Work: Grading Canada’s 2007/08 Provincial Finances, a study just released by the Atlantic Institute for Market Studies, gives Nova Scotia an overall grade of C–, tied with Manitoba for last place in Canada.

Why is that?

It isn’t because of the plan the province presented to the public back in the spring of 2007. That plan, in the form of the annual provincial budget approved by the legislature of Nova Scotia, received an average score for its content. So the plan was sound, if not stellar.

However, the plan is only one of the three components considered in our analysis. The other two include the fiscal health of the province (what exactly is the situation the plan is designed to deal with?) and how well the province sticks with the plan.

No one reading this will be surprised to learn Nova Scotia’s overall mark was dragged down by a poor showing on the fiscal health measure (we have relatively high debt levels and interest payments, and those are very large burdens to bear).

These burdens were largest at the beginning of this decade. At that time, roughly one in six of the dollars that the Nova Scotia government spent went to pay interest on the provincial debt, leaving only five-sixths for programs and services. In 2003, every man, woman and child in the province was on the hook for $13,422 in accumulated debt. Among the 10 provinces, only Quebec and Newfoundland & Labrador were in worse shape on these measures.

In the face of such a daunting fiscal situation, in 2004 the legislature passed a bill requiring all “extraordinary revenue” to go toward chipping away at the province’s mountain of debt. Revenue “not included in the annual budget of the province” was specifically defined as “extraordinary” in the legislation, which remains the law of the land today.

This exercise in fiscal discipline has borne fruit. Since that time, the province’s per capita debt has dropped by roughly $1,000 and interest costs have been reduced to one dollar in 10 (close to a 40 per cent improvement from that one dollar in six five years ago). More good news arrived on April 1 of this year when the province announced over a quarter-billion dollars in revenue beyond what had been forecast in the budget last year. That the province was surprised by much-larger-than-expected revenues is a far better thing than to be surprised by a shortfall.

The good news was overshadowed, though, by the announcement that all of this unexpected money would be spent, rather than applied to reducing the debt. More precisely, that’s $300 million in spending that the government approved at the 11th fiscal hour on March 31 – spending that was not included in the budget approved by the legislature last year.

Unless Nova Scotia has morphed into George Orwell’s Oceania, “windfall” revenues, as they were described by acting finance minister Jamie Muir, should be considered “extraordinary.” As such, unexpected surplus revenues should go into the Public Debt Management Fund. Period.

Every dollar we save by paying down our debt is a dollar available to spend on schools, hospitals and universities – not just this year, but every year.

The argument here is not over the merits of spending more money on infrastructure, universities or anything else. It is about adhering to the spirit of a law intended to ensure tight fiscal discipline for the benefit of all Nova Scotians, both today and tomorrow.

As long as extraordinary revenue today can be ordinary revenue tomorrow, at the whim of the minister of finance, then Nova Scotia will never shake off that C–, or our crippling debt.

Ian Munro is director of research with the Atlantic Institute for Market Studies, an independent, non-partisan public policy think tank based in Halifax. He is author of Good Enough for Government Work, which can be found at the website

www.AIMS.ca.