Nova Scotia Liberals say first budget to reflect province's tough fiscal reality

HALIFAX - Nova Scotia's premier says his government's inaugural budget to be presented Thursday will reflect the tough financial situation the province faces.

The Liberals have already said the budget, their first since coming to power in October, will project a deficit largely due to steadily declining revenue.

"We are in tough financial times," Premier Stephen McNeil said Wednesday. "The document tomorrow will be an indication of that."

McNeil promised little and offered no detail, although he said certain "strategic investments" will be made in education and to address wait times in health care. Both were key promises during the election campaign with the Liberals promising to spend a further $65 million on education.

But Finance Minister Diana Whalen has been warning since her first fiscal update in December that the province's financial position is "dire."

That update projected a $481.7-million deficit for 2013-14 and Whalen said the books would remain in the red for 2014-15.

"I've made it very clear it's a deficit budget, it's a difficult situation and we have our work cut out for us," said Whalen.

Whalen was also short on detail, but said the government would be laying out the beginnings of a plan of fiscal prudence that would lead to a surplus.

But she warned that the government was still trying to find its fiscal feet after six months in power and suggested bolder measures would likely have to wait until next year.

Whalen said the new fiscal plan would not pre-empt the government's newly launched tax and regulatory review.

"A great deal will rest for next year, a year from now, on the answers that we get back from that review. I wouldn't expect that we would be changing any of our fiscal policies in a drastic way because we want to wait and see and take direction from the tax and regulatory review."

Last month, Whalen warned cost pressures would add to the fiscal challenges in formulating the budget. She said a Liberal promise to trim $28 million from government coffers would be offset by program costs and recent wage settlements that are entering their second and third years.

Opposition Leader Jamie Baillie expressed disappointment that the Liberals would be tabling a deficit budget. On Monday, his Progressive Conservatives proposed a bill requiring the province to balance the budget by law.

"We'll continue to have the highest taxes in the country," Baillie said. "And the debt will go up."

Acting NDP Leader Maureen MacDonald said her party will be watching to see whether the government carries through with its promise to improve education and health care.

"This government has said those are their priorities and they will have to put their money where their mouth is," said MacDonald.