- Nova Scotia expects to run a larger $278-million deficit in FY 2023-24
- Revenues projected to fall $150 million (-1%) from FY 2022-23
- Expenses to grow by $100 million (0.7%) as Nova Scotia prioritizes health sector overhaul
- No plan to balance the budget over the four-year fiscal horizon
- Debt-to-GDP to rise to 6% in FY 2023-24
Nova Scotia made clear choices in Budget 2023. It opted to invest more in the (strained) provincial health care system and continue to grow other programs’ funding at the same time. Doing so compels Nova Scotia to run another deficit (of $279 million) in FY 2023-24 that is little changed from the $259 million in FY 2022-23, and take on more debt in the process. This puts the province’s indebtedness on an upward trajectory over the coming years.
Baseline revenues largely in line with year-ago levels
Revenues are slated to decline by $150 million (-1%) in FY 2023-24, though much of it is attributable to changes in accounting practices affecting government business enterprise revenues. The $50 million payment from the federal extension of the Offshore Accord also falls off the books in FY 2023-24. Were it not for consolidation and accounting adjustments, revenues would be largely in-line with year-ago levels.
Budget 2023 has income tax revenues going up 3%, with higher personal incomes more than offsetting lower corporate income tax revenues. This is despite an upside surprise to FY 2021-22 personal income taxes adding $900 million to income tax revenues in FY 2022-23. Rising consumer spending trends (expected to grow by 4% in 2023) alongside a ramp-up in residential investment (thanks to record-high interprovincial migration and immigration), HST proceeds are expected to come in $100 million higher. Federal transfers via equalization payments and the Canada Health Transfer are expected to be over 12% higher. Budget 2023 assumes 2% population growth in 2023, much below the 2.9% witnessed in 2022. Higher interprovincial migration and immigration levels present upside potential to revenues.
Operating expenses soar: monumental health care spending continues
Operating expenses are projected to rise $100 million with the largest increase attributed to health and wellness spending, up 7% from the FY 2022-23 forecast. At $4.8 billion, health and wellness is the single largest line item in Nova Scotia’s expenses, accounting for one-third of total spending. The $300 million bump in health expenditures includes bonuses for nurses agreeing to stay in the publicly funded system (to the tune of $110 million), plus an additional $50 million to address continued surgical backlogs. Aside from health care spending, an additional $100 million (+6% from FY 2022-23) has been dedicated to education and early childhood development. This has been fully offset by a pullback in allotments to advanced education. At $21.6 million, the province’s allocation to create 1,000 new rent supplements only accounts for only 1.5% of total spending but represents a meaningful targeted affordability measure. It will help renters who devote more than 50% of their pre-tax household income to rent.
The province’s debt servicing costs are expected to rise 12.7% in FY 2023-24. Over the medium-term, growth in expenses will outpace revenues on average, with the province’s deficit rising to over $600 million by FY 2025-26. Departmental expenses will be 5% higher by FY 2026-27 and debt servicing costs will rise by one-third.
Capital Plan overhauls hospitals and schools
Nova Scotia’s 2023 Capital Plan totals $1.6 billion. Over $500 million is earmarked for healthcare, including $275 million for the Halifax Infirmary expansion and Cape Breton Regional Municipality redevelopment projects. Aside from healthcare, $240 million will be devoted to building and renovating schools.
Nova Scotia accumulates more debt to finance health sector overhaul
Nova Scotia’s net debt will grow to $19.5 billion (up $1.3 billion) in FY 2023-24 in order to fund the province’s capital plan and the ongoing deficit. The impact of that increase on the province’s indebtedness will be partly offset by above-trend nominal GDP growth (4% in 2023). In FY 2023-24, Nova Scotia’s net debt is forecasted to represent 33.6% of GDP, up from 32.5% a year earlier. The net debt-to-GDP ratio is projected to continue rising to 36.2% by FY 2026-27. This would place Nova Scotia among the most indebted provinces.
|Consolidation and Accounting Adjustments||0.1||0.4||0.2||0.2||0.2|
|Net Debt-to-GDP (%)||32.5%||33.6%||34.8%||35.8%||36.2%|
Carrie Freestone is a member of the macroeconomic analysis group and is responsible for examining key economic trends including consumer spending, labour markets, GDP, and inflation
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