New Brunswick's rapidly falling debt triggers debate on whether to save or spend

The New Brunswick government's focus on reducing its debt has been so successful, it's on track to set a national fiscal record later this month. 

But the achievement is not without critics who contend too much money is being banked when it could be used to fund struggling public services, such as housing and health care.

Last month, New Brunswick Finance Minister Ernie Steeves updated the province's current budget year and projected that by the end of March the province's debt will have declined to $11.6 billion. 

That is down $2.3 billion — 16 per cent — in the last three years.   

With one exception, it's the largest reduction in debt, in percentage terms, recorded by a Canadian provincial government in at least 40 years. The exception is a 100 per cent reduction achieved by Alberta in the 1990s when the province eliminated its $13.4 billion debt entirely over seven years.)

"We are able to make progress in assuring the long-term financial health of our province," said Steeves in a statement released with the update.

Economist Richard Saillant, whose 2014 book Over a Cliff? warned that New Brunswick's dismal and deteriorating financial condition at the time risked ending in bankruptcy, said in an interview the turnaround from those days has been "dramatic" and for multiple reasons.

Increased transfers from Ottawa along with exploding tax revenues from population growth and high inflation have generated hundreds of millions of dollars in new provincial revenue. But Saillant said a decision by Premier Blaine Higgs to save much of that money, rather than spend it as other provinces have done, has to be recognized as a central cause of the shrinking debt.

"Higgs did achieve a dramatic fiscal turnaround," said Saillant. 

"It's undeniable. We are in a much better position than we have been in a very long while. If someone has a single-minded focus on fiscal outcomes, this is indeed quite an achievement." 

New Brunswick's debt became a concern more than a decade ago following the 2008 financial crisis that occurred during the then-government of Shawn Graham. Spending increases and stagnant revenues grew the debt for 12 straight years between 2007 and 2019, and eventually it more than doubled in size to $14.0 billion. 

In 2016, the debt reached 41 per cent of the size of New Brunswick's annual economic output. That so-called "debt to GDP ratio" was the worst in Atlantic Canada at the time and the second highest among all provinces after Quebec.

At the end of this month, according to estimates by the Royal Bank of Canada, New Brunswick's debt is expected to recede to 25 per cent of the size of the provincial economy. That would rank as the lowest ratio in the Atlantic provinces and best in Canada, east of Saskatchewan. 

It's among the single largest improvements recorded in any Canadian province's fiscal condition over any period since at least the early 1980s and perhaps ever.