New Brunswick's financial situation has been deteriorating in the wake of the COVID-19 pandemic but not as severely as a number of private forecasts have been suggesting.
In a special fiscal update released Thursday, New Brunswick's Department of Finance revealed it is now projecting a $299.2-million deficit for the current year, rather than the $92.4-million surplus announced when the budget was presented to the legislature March 10.
That's a $392-million change for the worse, but Finance Minister Ernie Steeves did not rule out the possibility the new estimate might also be overtaken by events like the original projection.
"We are facing a situation unlike anything we have experienced before," said Steeves in a statement released with the update.
"The impacts of the pandemic are only beginning to be understood, and it will take more time to fully comprehend the effects on our economy and our finances."
Although the deficit would be the highest in New Brunswick in six years and represents a serious deterioration from original projections, it is not nearly as dire as private-sector estimates have been suggesting it would be.
In late April the Royal Bank of Canada estimated New Brunswick was headed for a $600-million deficit based on the trajectory of the economy and last week the Bank of Nova Scotia suggested much worse than that.
It estimated New Brunswick's budget shortfall would reach $1.19 billion this year, four times worse than the government's new estimate.
In an interview, Steeves said he's comfortable with his department's analysis.
"I have all the faith in the people I work with. The staff is outstanding and nobody knows New Brunswick like New Brunswickers," he said.
Estimated revenue losses not as dire
Provincial finance officials are especially more bullish than private forecasters about COVID-19's effect on key revenue sources, including both income and sales taxes.
Despite an estimated 49,600 people losing their jobs in New Brunswick since February and most retailers closed tight for two months, the province is projecting only a minor 3.7 per cent reduction in corporate and personal income tax revenue from original budget estimates and a 4.6 per cent reduction in HST revenue.
It's a combined $155-million cut, but nothing like the $1-billion hit other estimates were hinting at.
Canada's parliamentary budget officer was modelling national reductions as high as 20.2 per cent in income taxes and 34.8 per cent in sales tax (GST) from pre-COVID estimates in an analysis published three weeks ago.
Steeves said the federal government, which collects both income and sales taxes for New Brunswick, was involved in New Brunswick's analysis and it shows national and provincial wage replacement measures have helped keep incomes and spending elevated enough to limit significant losses of tax revenue.
"I am confident. If anything, staff is a little on the conservative side in their predictions," said Steeves.
"We're expecting to land at a $300-million deficit."
Steeves cautions against more relief spending
Another factor keeping the deficit down has been the province limiting its own COVID relief spending to $100 million, just one per cent of its total budget. It's the smallest allocation being made by any province, according to the Bank of Nova Scotia, and will be a point of contention among opposition parties when the legislature sits next week.
Steeves said the smaller-than-expected deficit does not change plans to limit COVID relief spending by the province.
"The job is to provide a better New Brunswick for our kids," he said. "I don't want to saddle kids with crushing debt. So that's the plan, to save what we can and try and work through it."
The update shows the single largest drop in revenue to the province, more than personal and corporate income tax reductions combined, is projected to come from casino and video lottery gaming.
Atlantic Lotto was forced to shut all of its video lottery terminals in the province on March 15 and that, along with the shuttering of Casino New Brunswick, is expected to cut revenues by $89.9 million.