New Brunswick’s auditor general is encouraged by the province’s improved fiscal condition.
But Paul Martin cautioned that important work remains for the government in the years ahead.
A review of the province’s fiscal situation was part of his latest report tabled at the legislature on Tuesday.
Martin noted the province recorded its fifth consecutive surplus in 2022 at $777 million. That was $1 billion higher than budgeted and $368 million more than the surplus reported in 2021.
But, as the auditor general pointed out, much of this year’s surplus was due to increased tax revenues.
Those revenues, he said, are based on estimates and are subject to a “significant amount of uncertainty” at times.
“In our view, as a result of the significance of these estimates, and some uncertainty that may go along with them, the revenue for these taxes this year may not be indicative of future results,” said Martin.
Net debt concerns
With the province’s surplus in 2022, net debt is down $1.1 billion from last year and now stands at $12.4 billion.
The net debt-to-GDP ratio has fallen to its lowest level over the past 10 years at 29.9 per cent. The net debt per New Brunswicker has decreased to $15,700 from a high of $18,200 in 2018.
Despite decreases over the past few years, Martin said the net debt is still $1.4 billion higher than it was in 2013.
“While we know progress is being made, significantly more time is needed to fully address net debt,” he said.
Funded debt at historic highs
The province’s funded debt — the total long-term debenture debt the province has borrowed and has to repay — has remained at a historic high of $18.4 billion over the past few years.
That figure does not include $4.6 billion in NB Power debt and just under $1 billion in New Brunswick Municipal Finance Corporation debt relating to the financing needs of municipalities.
Martin said the province spent $635 million in the last fiscal year just to service that debt, consisting mostly of interest costs. That works out to $1.7 million per day, $72,000 per hour, or $1,208 per minute.
“To put that in perspective, the province spent more in servicing its debt in 2022 than it did in areas such as protection services or economic development,” he said.
Martin said the province is on the hook to repay $4.6 billion of debt over the next four years.
State of province’s financial condition
Overall, Martin said, the province’s financial condition has improved from last year.
His office assessed sustainability as mostly favourable in the short term and as mixed in the long term, mainly as a result of the province’s surplus.
Sustainability looks at whether the province can maintain existing programs and services without increasing net debt.
When it comes to flexibility, the province was assessed as mostly unfavourable in both the short-term and long-term due to declining asset life and an increase in the percentage of own-source revenue compared to GDP.
According to the auditor general, more own-source revenue compared to GDP may limit the province’s future ability to raise taxes if needed to fund operations.
Martin has assessed the province’s vulnerability as mixed in both the short-term and long-term, noting it remains vulnerable to changes in transfers from the federal government.
“We do find improvements in the province’s financial condition to be encouraging,” he said.
“We do caution, however, that over the long-term, it remains important for the province to continue to find ways to manage spending, consider revenue increases, or a combination of both.”
You can find the full report by clicking here.
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