Nova Scotia to allow deficit budget

The Nova Scotia government will amend the province's balanced budget legislation in order to table a deficit budget later this week.

Currently it's illegal to bring in a budget where expenses outstrip revenue. But the province is facing a $590-million deficit for 2009-10.

NDP Premier Darrell Dexter made his position official during his reply to the speech from the throne Monday night in the legislature.

"What is clear right now, is that we are in a situation similar to what the Nova Scotia government found itself in 10 years ago," Dexter said.

"We will have to amend the provincial finance act to help deal with this problem, just as was the case in 1999. This is simply the responsible thing to do."

In 1999, then Tory premier John Hamm changed the legislation to allow for deficit budgeting.

The NDP will table its first budget Thursday.

Dexter said a panel of economic experts will report back to him by the end of next month, and his government will then craft a plan to get the province out of the red. During the spring election campaign, the NDP promised to balance next year's budget.

Risk to balancing budget: experts

But three members of the economic advisory panel have already publicly warned that the government should not try to balance the books for the 2010-11 fiscal year

Lars Osberg, economics professor at Dalhousie University, said last week that the idea is neither feasible nor desirable because the decline in natural gas revenues and the disappearance of one-time payments under federal equalization have created the "perfect storm" for provincial finances.

Osberg said to try to dig out of the deficit in just one year would require tax increases or spending cuts that would "massively disrupt recovery from the recession."

Another member of the panel, Donald Savoie, a political science professor at the University of Moncton and an expert in public administration and public policy, agreed that trying to balance the budget next year would cause irreparable harm to Nova Scotia's economy.

"I think you're dealing with a deck of cards that is pretty difficult. If you were to push me and say, 'Look would you recommend a balanced budget or some kind of surplus over the next 18 months,' my answer is no," Savoie said.

The third panel member, Elizabeth Beale, president and CEO of the Atlantic Provinces Economic Council, said balancing next year's budget could create too much hardship.

She said balancing budgets is not the way to go if it means cutting services to people who need them most at this difficult time.

"For example, where would individuals go who are falling between the cracks on the EI program if they weren't able to reach out to social assistance that the province offers," she said last week. "It might exacerbate poverty and the number of children dropping into poverty. It might affect all the services that government offers."