The province is forecasting a slim budget surplus for 2006-2007, as higher expenses for government pensions and labour settlements in the health care sector put pressure on the budget. The province’s second budget forecast update this year shows $3.3 million remaining in the unallocated surplus — the amount available to cover spending and revenue pressures for the rest of the year. The total surplus of $64.7 million — $8.88 million down from the $73.5 million budgeted — includes $57.4 million legislated for debt reduction, and a $4-million debt-reduction contingency. “The province continues to perform well overall,” said Finance Minister Michael Baker. “However, with a razor thin surplus, we will be taking a very prudent approach to managing our budget risks in the last quarter of the year. We must keep our expenses in line.” Total revenues are forecast to rise slightly, to $6.928 billion, including net income from government business enterprises of $340.3 million. Total expenses will go up $11.8 million to $6.917 billion, as higher program and pension expenses are offset by savings in debt servicing costs. Net program spending is forecast to increase by $21.3 million over the original budget, primarily because of an additional $23.7 million to cover the recent contract settlement with acute-care health-care workers. Costs related to government pension plans are also expected to rise, with a negative variance in the pension valuation adjustment of $35.8 million. The higher expenses are offset by a $45.3-million decrease in net debt servicing costs, to $830.9 million. The Department of Finance has revised its calculation for sinking fund interest earnings, and taken advantage of favourable market conditions for the refinancing of government debt. Net revenues, excluding government business enterprises, were down $900,000, with a number of significant changes in revenue categories. Nova Scotia’s own-source revenues are forecast to drop $12.5 million, with federal revenues $11.6 million higher than budget. Provincial and federal income tax revenues are forecast to be higher, offset by lower revenues for petroleum royalties and tobacco taxes. Mr. Baker said higher pension expenses are a significant risk for the last quarter, when new benefit and premium estimates are expected. Nova Scotia may also be hurt by income tax changes potentially coming forward in the federal spring budget. Details have not yet been announced. Nova Scotia’s real Gross Domestic Product for 2006 is forecast to be 2 per cent, down from 2.5 per cent in the budget. This is because of slowing economic growth in Canada and the United States. Mr. Baker said government departments will be asked to defer, or eliminate, non-essential spending to ensure that the province ends the year with the surplus required by the Provincial Finance Act.
As the economy grows, the government has a greater capacity to service debt without sacrificing program delivery. -30- NOTE: For further 2009-10 budget information, see the Department of Finance website at www.gov.ns.ca/finance . Stimulate the economy Government will undertake its largest infrastructure investment, Building for Growth. In the next three fiscal years, the province will increase capital spending to leverage federal dollars and stimulate economic growth. These infrastructure investments will cause debt to rise. The province of Nova Scotia will change its approach to debt management to respond to the current fiscal and economic circumstances. A new Debt Management Plan will be introduced as part of the 2009–10 budget. In the midst of a worldwide economic downturn, Nova Scotia’s revenue sources are declining, and additional funds are needed for core programs such as health, education, and social services. Under the new debt plan government will: The Provincial Finance Act will be amended to support the Debt Management Plan of 2009 and modify provisions of the 2005 Debt Reduction Plan that were enshrined in legislation. Government will set new debt reduction targets for the years ahead. The goal is to keep debt at a level that is affordable for the size of the economy and resume debt reduction once the economy improves. Debt Reduction Background Nova Scotia has implemented a number of financial measures in the last eight years, first to slow the growth of its debt and then to produce large enough surpluses each year to reduce it. In 2005, the government adopted the Debt Reduction Plan, placing debt management along with balanced budgets as a central priority of fiscal management. Some provisions of the plan were given force by amendments to the Provincial Finance Act. The act was amended to ensure that a payment of $830 million from the government of Canada for the offshore offset would be earmarked to go to debt reduction. The 2005 Debt Reduction Plan also included a policy commitment to have the debt decline beginning in 2007–08, which was met. Government later made a policy commitment to put funds received from the Crown share payment on the debt. Government has managed the debt portfolio prudently. Gross debt-servicing costs have declined, and after remaining U.S. dollar funds were hedged in 2007, the foreign currency exposure went to zero from 72 per cent in 1995. Debt Management Plan, Four Components The Province of Nova Scotia will introduce a Debt Management Plan in 2009 to replace the Debt Reduction Plan of 2005. It has four components: Maintain fiscal discipline Balanced budget legislation will continue. Government must take a very strategic and disciplined approach to keeping expenses down, while maintaining or increasing revenues to balance the budget in years ahead. As part of this discipline, government is choosing not to run an operating deficit to finance stimulus measures. A higher base of operating expenses continues into future years, is very hard to reverse, and makes debt reduction targets more of a challenge. Set debt-management targets The 2009 Debt Management Plan sets new debt management targets that are focused on keeping the level of debt sustainable and affordable for the Nova Scotia economy. Amend legislation The Provincial Finance Act will be amended to facilitate the introduction of the 2009 Debt Management Plan. borrow money in the next three years to pay for much-needed infrastructure and stimulate the economy use some specific funds previously earmarked for debt reduction to fund programs and services The Offshore Offset Revenue Expenditure Act changes Nova Scotia’s unique definition of deficit, which prevents offshore offset payments from being used as revenue to calculate whether the provincial budget meets the balanced budget requirements. The changes mean that offshore revenues may be used as revenue as they would normally be under standard accounting practice, and as they are in all other provinces.
NEW YORK — Stocks that moved substantially or traded heavily on Thursday:Qualcomm Inc., down $1.96 to $71.20.The chipmaker gave investors a disappointing profit forecast as it faces the fallout from the U.S.-China trade war and weak demand.Prudential Financial Inc., down $10.22 to $91.09.The financial services company reported weak second quarter profit and its individual life insurance unit swung to a loss.Yum Brands Inc., up $4.42 to $116.94.The Taco Bell and Pizza Hut owner beat Wall Street’s second quarter profit and revenue forecasts.General Motors Co., down 19 cents to $40.15.The auto maker blew past Wall Street’s second quarter profit forecasts on strong sales of pickups and SUVs.Abiomed Inc., down $73.69 to $204.87.The maker of heart devices slashed its revenue forecast for the year as it expects a slow second quarter.Kellogg Co., up $5.41 to $63.63.The maker of Frosted Flakes and Pop Tarts beat Wall Street’s second quarter profit forecasts.Fitbit Inc., down 89 cents to $3.31.The wearable device maker cut its revenue outlook for the year as it faces weaker sales for some of its smartwatches.Western Digital Corp., up $1.62 to $55.51.The maker of hard drives reported solid fiscal fourth quarter profit and said it expects the market for flash drives to improve.The Associated Press