In the wake of the recent federal election, there has been a lot of talk in Atlantic Canada about the need for balanced budgets and measures to become competitive. All four provinces are facing deficits, and it’ll likely be a few years before most of them are back in the black. As well, Atlantic Canada’s economy has traditionally had sluggish growth, excluding Newfoundland and Labrador’s recent “have” status.

With today’s low interest rates, it’s an ideal time to balance budgets because any surpluses used to pay down debt would allow more debt to be paid off than at times when interest rates are higher, says Marco Navorro-Génie, the president and CEO of the Atlantic Institute for Market Studies. However, he feels a lot of work still needs to be done. “I think there are serious efforts being made, but perhaps not in relation to the magnitude of the problem,” he says. “We’re tinkering at the edges.”

So where do the provinces stand? While it has the largest deficit this year at $1.1 billion, Newfoundland and Labrador is in the best financial position. Thanks to gushing oil and gas revenues over the last dozen or so years, the province has had six surpluses and paid off a large chunk of debt. Its debt peaked at $11.9 billion in 2004–2005. By 2011–2012, it had been chopped to $7.8 billion. Finance Minister Ross Wiseman says it will take five years to balance the books, at which time the debt is expected to reach about $13 billion.

Much like Alberta, Newfoundland and Labrador has the ability to experience huge peaks and valleys because of its dependence on oil and gas. “It’s a big part of our economy,” says Wiseman, noting that petroleum dollars accounted for about 30% of the province’s revenue stream last year. While the province can rack up large deficits, it can also rack up large surpluses.

Regardless, Newfoundland and Labrador hasn’t been content to just accept the swings. In its April budget, it announced that it will raise the HST by two percentage points to 15% on Jan. 1, 2016, and it would add two new tax brackets for its wealthiest residents. As well, the public sector workforce will shrink by 1,400 positions over the next five years, mostly through attrition. Even with income tax hikes, Newfoundland and Labrador is still an attractive place for high-income earners. “We’re still the best in Atlantic Canada,” says Wiseman, pointing to the lowest income taxes in Atlantic Canada and the third-lowest in the country.

Looking to the future, with an expected rebound in oil prices, Newfoundland and Labrador’s fortunes should improve. Production will also increase with the Hebron oil field located about 32 kilometres southeast of the Hibernia project coming into production in 2017. Wiseman is also optimistic about potential oil in the Bay du Nord, as well as seismic work Nalcor has done in the offshore over the last five years. Adding to this confidence is that parcels of land sold in 2014 for offshore exploration fetched the highest prices yet.

The remaining Atlantic provinces don’t have the same boom-and-bust potential. While this means they won’t rack up huge budget deficits, they also won’t have huge surpluses. Prince Edward Island’s deficit continues to shrink. For 2015–2016, it’s expected to be about $20 million, followed by a small surplus the following year. Other economic indicators give reason for optimism. “We have the highest population we’ve ever had in the history of the province,” says Finance Minister Allen Roach. Between July 2007 and July 2014, the population grew by 6.2% to 146,283, the fastest population growth per capita in Atlantic Canada. As well, international exports were up 6.2% for the first half of 2015, which was impressive given that 2014 was a record year.

As part of its efforts to grow the economy, P.E.I. has taken aim at red tape and created sector roundtables to work with industries to identify government regulations and processes that are barriers to success. Using tourism as an example, the province asked industry for its top five concerns and was immediately able to act on three of them.

One of the complaints was that renewal paperwork for such things as service order forms, accommodation licence forms, co-op marketing forms, and visitor-guide listing forms took too long to complete. For many owners, none of the information had changed from year to year. Industry wanted to be able to simply check a box that said nothing had changed. The province agreed, and business owners will now be able to tick a “The same as last year” option on future service order forms.

The government that has no doubt taken the most heat for how it has governed is the Stephen McNeil-led Liberals in Nova Scotia. McNeil has focused on balancing the budget in spite of widespread outcry. His strategy includes big cuts to the province’s film tax credit program, which have largely driven the industry out of the province. “Our government has shown they are willing to make these tough decisions,” said Diana Whalen, Nova Scotia’s finance minister until late July, when a cabinet shuffle put Randy Delorey in charge of the finance portfolio. A program review still underway will likely lead to more outcry as the axe continues to fall.

In its 2015–2016 budget, Nova Scotia forecasted a budget deficit of $97.6 million. This budget showed the Liberals would be taking a different approach to governance than its predecessors. It eliminated the Department of Economic and Rural Development and Tourism; in its place, it created the much smaller Department of Business, which will try to focus on generating growth in key sectors such as ocean technology. The tourism department has been replaced with Tourism Nova Scotia, a private sector-led Crown corporation.

Regulatory review will also be a permanent function of the Department of Business, and it will work to eliminate regulations, reduce overlap, and simplify things, according to Whalen. Over the years, the province put more and more money into economic development, but the economy was consistently near the bottom for economic growth in Canada. “Clearly, it’s not working for us,” says Whalen.

The government would like to cut taxes but won’t do so until the budget is balanced. “We know we’re a high-tax jurisdiction,” says Whalen. Interestingly, past ruling governments didn’t view Nova Scotia as having high taxes but tended to say that people were taxed based on the services they had and also played up the quality of life in the province.

New Brunswick faces the greatest challenges. It has a structural deficit of $400 million, meaning that it spends that much more on average than it takes in each year. “We believe that’s not sustainable,” says Finance Minister Roger Melanson. This government was elected last September, so it hasn’t been able to make sweeping changes yet. Melanson says the province is committed to having a balanced budget by 2018, and then surpluses after that.

To get there, New Brunswick hopes to grow the economy and spend more wisely. It’s implementing a strategic program review, modelled on the one the Jean Chretien Liberals used federally in the early 1990s, to see if programs need to be eliminated, modified, or have more invested in them. “The results of that will be seen in the second budget, which we believe will be more transformational,” says Melanson.

To grow the economy, New Brunswick will continue to lower the tax rate for small and medium-size businesses. It has increased the small business investment tax credit from 30% to 50% and created a youth job program that will help businesses pay for six-month placements for 1,500 people between 18 and 29. The hope is that the program will motivate businesses to hire young people and the jobs will become permanent. “We want to use this program to keep younger New Brunswickers here,” says Melanson.

With the demographic issues facing Atlantic Canada, getting the province’s fiscal houses in order only adds to the challenges. Despite his view that more aggressive things must be done to get rid of the provinces’ deficits, Navorro-Génie is optimistic that things will be done differently. “There’s a sense that the way we have been doing things doesn’t work,” he says. “People are hungry for new ideas and solutions. That’s where we are headed.”