Provinces with deficits – that is, most of them – are cutting spending and raising taxes, taking a chunk of the room created by the Harper government's tax cuts. All are trying to hold the line on public-sector salaries, the biggest item in their budgets.
Some have rays of hope. Quebec is going to balance its budget, after a hard but necessary struggle. Alberta, Saskatchewan and Newfoundland can hope for a recovery in fossil fuel prices. Ontario says it will balance the books, but that pledge is built more on a wing and a prayer than anything else.
The worst case in Canada, however, is New Brunswick, a province not much written about nationally. Its situation is dire, and it doesn't matter whether Liberals govern, as now, or Progressive Conservatives. Indeed, the recent Liberal budget, small details aside, read just like the ones given by the previous PC government, which tried to take difficult decisions and got beaten for its pains.
Roger Melanson, New Brunswick's Liberal Finance Minister, echoed his Conservative predecessor Blaine Higgs when he said in the recent budget speech: "Over the last several years, New Brunswick has faced many challenges. Weak economic growth, a declining and aging population, persistent job losses and rising government debt have combined to put a great deal of strain on New Brunswickers." Added Mr. Melanson, "We still find ourselves in an unsustainable fiscal situation." Which is what his predecessor argued.
Numbers tell a story: Deficits for the past six years of $739-million, $471-million, $411-million, $564-million, $255-million, and $479-million (including a $150-million contingency fund) for 2015-2016. Each deficit piles up more provincial debt that in turn rises faster than government revenues.
Here's a bit more cheery news. The Harper government has changed federal transfers to a per capita formula. This greatly benefits fast-growing Alberta and slams no-growth, small provinces such as New Brunswick, whose budget already depends on federal equalization payments for 22 per cent of total revenues.
What's a finance minister to do? Raise taxes on the wealthiest citizens. Done. Wake up, finally, to declining student enrolments and let 246 teachers go, the bulk through retirements – a decision predictably denounced by the teachers' union and its NDP echo. Freeze the health budget, again. Freeze tuition fees and grants to universities and colleges, leaving them to fend for themselves against their own internal inflation. Spend more on tax incentives and government grants hoping to lure jobs to a province with chronic double-digit unemployment.
Most important, put off the hardest but most necessary decision: raising the HST. This decision was postponed for completely partisan reasons – federal partisan reasons. The federal Liberals hope to capture eight of the province's 10 seats. The man who ran Premier Brian Gallant's election campaign, Liberal MP Dominic LeBlanc, did not want an HST increase lest it corrode the Liberal brand before the next election. Take book on the 2016 provincial budget raising the HST, safely after the October federal election – another example of the triumph of partisan politics over sensible policy.
As with the HST, politics will determine what New Brunswick does with natural gas deposits that require fracking. For a province flat on its fiscal back, revenues from natural gas would be highly useful, to say the least. But a campaigning Mr. Gallant, finger in the political winds, declared a moratorium on fracking, saying he needed answers to five questions.
So now he's appointed a commission, chaired by Mr. LeBlanc's father-in-law, to report in a year about fracking. It's overwhelmingly likely the commission will say yes to fracking under certain circumstances, which will give Mr. Gallant the cover he needs to allow the industry to take off. Unless he gets cold political feet, which he already has demonstrated is possible.
Then there's the East-West oil pipeline that would run from Alberta's bitumen to the deep water port of Saint John. This project really would help the beleaguered province, but its fate lies elsewhere: in Quebec and Ontario politics, in environmental debates, in regulatory approvals, aboriginal objections and land claims (valid or otherwise) and in the controversies that ensure delay and frustrate proponents of any major natural resource project in Canada. East-West might happen, but not any time soon.
Watching the squirming over deficits in Alberta, Ontario and Quebec is not pretty to behold. It could be worse, as it is in New Brunswick.