New Brunswick faces a significant public debt problem and spending restraint is the best available solution. These are the central findings of a new research paper, released this morning, by the Atlantic Institute for Market Studies (AIMS).
The paper’s title is “New Brunswick’s Debt and Deficit Problem: A Historical Look” and the authors are University of New Brunswick Professor of Economics David Murrell and AIMS policy analyst Shaun Fantauzzo. The authors examine a range of fiscal indicators over a 35-year period, concluding that New Brunswick’s revenue capacity has declined and spending restraint is necessary to balance the budget and reduce the province’s debt burden. Specific findings include:
• In this fiscal year, provincial debt will reach $12.2 Billion, or 37.7 percent of GDP
• In FY 2012-2013, the province’s per-capita net debt was $14,623. For a small, low-income province, New Brunswick’s level of debt is significant and problematic
• Growing provincial debt is primarily the result of an important historical trend: declining federal transfer payments relative to GDP. Economic weakness in Quebec and Ontario have led to those provinces consuming a greater share of equalization payments and other federal transfers, resulting in revenue losses in New Brunswick (and other small provinces)
• New Brunswick’s provincial government has not adjusted to the reality of declining revenues and spending now significantly exceeds revenue, resulting in large deficits and growing debt
“There is no hiding from the New Brunswick faces a serious public debt problem,” said lead author David Murrell. “It would be imprudent to expect the trend toward lower transfer payments to change. Instead, the provincial government must address the problem itself through a determined, sustained effort to restrain spending.”
This paper acknowledges that New Brunswick’s government has recently taken a number of steps to reign in spending, but notes that additional fiscal consolidation efforts and continued spending constraint will be necessary to ensure the stability and health of provincial finances.