N.S. budget deficit continues to climb as population growth stalls

The Nova Scotia government is facing a nightmare financial scenario with a deficit still on track to top $1 billion and no expected population growth of note to help boost revenues.

Finance Minister John Lohr released the December update for his government’s 2025-26 budget on Thursday and the numbers continue to look grim.

The deficit is now projected at almost $1.3 billion, up about $65 million from where things stood in September. Meanwhile, the Finance Department has updated population growth projections to 0.5 per cent over the next 10 years based on current federal government immigration policy.

On Wednesday, Statistics Canada reported that Nova Scotia’s population decreased in the last quarter for the first time since 2020, marking an official end to the population boom that coincided with the COVID-19 pandemic and generated massive new revenues for the province.

Trying to manage spending

Lohr told reporters Thursday that his government is working hard to increase economic growth while also being mindful that spending growth must be reined in so the deficit does not continue to expand.

Although he declined to elaborate on how that might be achieved, citing the ongoing work on the next provincial budget, Lohr said his government would continue to spend on things people need.

“We’re very aware there’s an affordability crisis in our province,” he said.

“We will continue to invest in that. We need to just reduce the pace of growth in spending to let revenue catch up.”

That would be a shift for the Progressive Conservatives.

New expenses

Since coming to power in 2021, the government has consistently overspent its budget each year, typically by more than $1 billion. Thursday’s numbers show this fiscal year is no different.

Total additional appropriations, or over-budget spending, so far for 2025-26 is about $1.3 billion.

New expenses since September include about $30 million toward large-scale wildfire costs and almost $172 million for restructuring costs. The latter is a line item government officials never provide any details about until the money is spent, although often it is used for new labour costs such as contract settlements.

The Seniors and Long-Term Care Department also saw its spending go up by about $24 million since September because of increased service demands.

An unsustainable path

NDP finance critic Lisa Lachance said the province is facing a record deficit because the Progressive Conservatives overspend their budget year after year.

“But at the same time, Nova Scotians are still struggling,” Lachance told reporters.

The only notable spending reductions the Tories have made in the last year, Lachance said, was a cut to the heating assistance rebate, which resulted in fewer people being able to access the program.

Interim Liberal Leader Iain Rankin said the government has mismanaged the province’s finances.

“Year after year they’ve tabled deficit budgets and they’ve relied on transfers from Ottawa and that’s slowing down,” he told reporters.

“The path that we’re on is not sustainable.”

Budget won't include tax or fee increases

Lohr repeated an earlier directive he’s issued to departments to consider the impact of a 10 per cent cut to program grants and discretionary spending, although he told reporters there’s no guarantee his government would see that fully through in the next budget.

He also confirmed that the next budget would not include any new tax or fee increases.

In the absence of any other changes, the government appears to continue to be relying on the potential economic promise that would result from major natural resource development projects coming to fruition.

Although some of those, such as offshore wind development, could be years away, Premier Tim Houston and others have argued that there are economic spinoffs to be had even as such projects — if approved — begin to ramp up.

Lohr said his government’s spending since coming to power has been a reflection of efforts to make good on a campaign promise in 2021 to fix health care, along with trying to address other urgent needs in the province related to housing and the creation of a universal school lunch program.

He acknowledged work on that front is not complete.

Documents from the Finance Department on Thursday pointed to ongoing economic uncertainty facing the province, including the impact of Chinese tariffs on seafood exports and the ongoing trade negotiations between Canada and the United States.

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