Growing tax windfall drives New Brunswick budget surplus to record $862.2M

A major income tax windfall is continuing to drive New Brunswick's budget surplus to ever higher levels.

The provincial government is now projecting that the surplus will reach $862.2 million this year a record andmore than 24 times the original budget projection last March.

"Our economy has recovered much faster [from COVID-19] than expected and population growth has set new records," Finance Minister Ernie Steeves said in his third-quarter fiscal update.

"These factors have contributed significantly to the improved results for our tax revenues."

Steeves also announced the creation of what he called a "New Brunswick Advantage Savings Fund" that will see the province label $300 million of the surplus as a distinct "fund" that can't be spent.

Instead, it will generate interest of about $13 million a year, Steeves estimates, which can then be used for programs such as housing, health and education.

But from comments by officials during a media briefing, it's not clear a separate fund or account is actually being established.

The money will sit in "a variety of our [existing] bank accounts," said the province's financial comptroller Amy Murdock, as government revenue normally does.

"What we're doing is we're saying $300 million of the cash that we have at this time will be invested to generate income for the purposes of this fund."

Steeves said it's the first time the government "has set aside money for the future, yes, to stabilize the future."

In fact the Progressive Conservative government of Premier Bernard Lord established a "fiscal stabilization fund" in 2001 popularly known as its "rainy day fund" where it said it was stowing $200 million from two consecutive budget surpluses.

Two years later, when the government was on track for a budget deficit, it said it was withdrawing the money and counting it as revenue to keep the budget balanced.

Then-auditor general Daryl Wilson labelled the fund an accounting fiction.

"Taking money from one pocket and putting it into another pocket in the same garment does not increase or decrease the amount of money available," he wrote in a 2002 audit.

He said in reviewing the government's financial statements that he was treating the fund "as if it did not exist" and said the government's 2001 surplus figure was "inaccurate."

Finance officials said Wednesday the new fund is different.

It does not raise the same accounting issues as the Lord fund because the $300 million is reflected in this year's surplus, and if a future government spends that money, it will show up at the time as an expense, not as revenue.

Still, opposition parties said the fund was the latest effort by the Higgs government to avoid spending a revenue windfall where it's badly needed, including in health care, addiction services and affordable housing.

Liberal finance critic Ren Legacy said the so-called fund amounted to "liquidity management," the province moving a large amount of cash on hand around and relabelling it to avoid pressure to spend it.

"The surpluses are starting to be, unfortunately, a little bit embarrassing for the minister," he said.

Green leader David Coon called it "a sleight of hand. We can't afford to be tying up desperately needed funds."

According to the update, revenues are now projected to be more than $1 billion higher than what Steeves set out in his 2022-23 budget last March.

That includes $468.2 million more in corporate income tax than originally expected and $423 million more in personal income taxes than what Steeves projected.

What the government is spending on health care this year has barely changed, however, since the last budget update in November.

The record surplus will reduce the province's accumulated debt by $749.5 million, bringing it down to $11.6 billion.

The province recorded a surplus of $777.3 million last year, in 2021-22.