By David Shipley
As appeared on page A1

New Brunswick’s mediocre grade on a scorecard of provincial finances may sink even lower next year thanks to the Liberal government’s newly announced tax and spend budget.

“On the good news front, New Brunswick posted the best grade in Atlantic Canada with a C-plus,” said Ian Munro, a researcher with the Halifax-based Atlantic Institute for Market Studies.

“(But) I’m fearful that their grade next year will be dropping,” added Munro, co-author of Could Do Better III: Grading Atlantic Canada’s 2006-2007 finances.

The report, released on Thursday, praises the former Progressive Conservative government of Bernard Lord and its last budget.

Munro said New Brunswick’s grade in the report, which looked at last year’s budget as well as other factors such as debt and expenditure levels, fiscal health and fiscal accuracy, kept the province in a leadership position in the region.

Newfoundland and Labrador and P.E.I. scored C’s in the test, while Nova Scotia scored a D-minus, according to the report.

“Part of the reason for (New Brunswick’s) reasonably good mark came from the 2006-2007 budget,” said Munro. “New Brunswick got fairly good B marks for the budget.”

Highlights of the Tory budget that earned top marks included a cut to corporate tax rates as well as an increase in the tax threshold for small businesses.

But the new Liberal government’s budget for 2007-2008, unveiled last week, contained a number of measures that could see that score plummet.

Among the measures, the rescinding of the Tory corporate tax cut and threshold increase.

“That won’t help their grades next year,” said Munro.

The budget saw the province hike personal and corporate taxes for the first time in 13 years.

The hikes were blamed on a projected $300 million deficit that Liberal finance minister Victor Boudreau said was left by the Tories.

The $6.6-billion budget calls for continued increases in health and education spending as well as $311.9 million on capital projects and a one-time $543.8 million payment for the Woodstock to Grand Falls Trans-Canada Highway.

Although the government predicts there will be a $37.1 million surplus, the net debt will be skyrocketing with nearly $356 million attributed primarily to the Trans-Canada Highway payment.

Increases to provincial expenditures in 2007-2008 won’t help New Brunswick’s score next year, said Munro.

“We wish we’d seen more restraint.”

Still, there are some saving graces for New Brunswick, he added.

“It’s a surplus so that will help.”

New Brunswick’s grade next year may also be buoyed if other provinces do poorly financial or have bad budgets, said Munro.

“So if the other provinces put in really bad budgets this year, then New Brunswick could still come out ahead – in relative terms,” he said.

“(But) “We’d much rather them ensure good grades through good budgeting, rather than through the failure of their cousins.”