New Brunswick is currently experiencing a fiscal crunch. Revenues are below expectations and expenditures are proving difficult to control. Meanwhile the Federal Governmnent has announced a new formula for allocating equalization payments that will tie increases in health care payments to GDP growth, plus those payments will (after 2015) be allocated on a per capita basis. That might effectively reduce payments to NB once inflation, slow population growth, and growing health care costs are factored in. Fortunately, although the provincial debt is approximately $9 billion, interest rates are now low by historical standards and debt servicing has not yet caused a crisis. That is just as well, since slowing economic growth is doing a fine job of reducing government revenue all on its own.
The aim of this post is to present some historical background to NB’s funding sources and examine the role of health care spending as a driver contributing to spending increases over time. More details on how NB spends its revenue, and how that compares with spending in other provinces will be provided in following posts. As we will see (note the last chart below), when we adjust spending by inflation, government spending increases on things other than health care have been kept fairly modest in recent years.by