Financial Review Interim Report Released

NOTE: A social media version of this release, including photographs, audio and video clips is available at http://gov.ns.ca/news/smr/20090817financial-review.asp .

The findings of Phase 1 of the Province's Independent Financial Review by Deloitte were released today, Aug. 17, showing the financial situation is worse than was presented by the previous government.

The report focuses on the province's current and future financial position with emphasis on the economic assumptions underlying the May 2009 budget, the impact of the former government's Building for Growth infrastructure plan, and an analysis of revenue and expenditure forecasts.

"The previous government was on an unsustainable path. That is going to change," said Graham Steele, Minister of Finance. "If the province continues down this path, Nova Scotia's deficit will soar to over $1.3 billion within three years, and the debt will climb to over $16 billion.

"That is mainly because of flat or declining revenue, matched against a pattern of spending that has been rising faster than either inflation or revenue."

Mr. Steele said government's operating principle is that it will balance the budget next fiscal year.

The independent review highlights several areas of concern for the province:

• Nova Scotia was facing a projected annual deficit of $1.3 billion by 2012-13
• If the deficit continued, provincial debt would reach $16.7 billion by 2012-13
• Nova Scotia's revenue growth is expected to remain flat as a result of external factors, including the economic recession, offshore petroleum royalties and the reduction in equalization payments
• Growth in expenses is expected to outpace revenue growth in the coming fiscal years

Nova Scotia is facing many of the same challenges as other governments in Canada, but also has the additional challenge of expiring short-term revenue sources upon which the province has become dependent. This, combined with sharp declines in offshore revenues and equalization payments, will make the next several years extremely difficult from a financial management perspective.

"The report tells Nova Scotians where the province stands today," said Mr. Steele. "This government will have a considered response to the challenges. Tomorrow, we are going to take the first of many steps down a new path."

Copies of the report are available at www.gov.ns.ca/finance/site-finance/media/finance/final_report.pdf .