New Brunswick's debt is a scary situation
This column was published in the New Brunswick Telegraph-Journal on February 14, 2019.
Life can be tough for kids. The dark is scary and so is whatever might be under the bed. But here’s something that’s truly scary for New Brunswick’s children: the province’s debt.
Consider one fact from the provincial auditor.
If the province paid $100 million on the debt every year, it would take 170 years to pay it off, and that would be on top of annual debt interest payments of $667 million per year.
This is a problem the province needs to take seriously.
The provincial government has indicated that staving off looming credit rating downgrades to stop borrowing costs from rising is a priority. That’s good news for future generations of taxpayers. Major credit rating agency Dominion Bond Rating Service waved a red flag in front of the province last year, adjusting New Brunswick’s outlook from “stable” to “negative.”
Even without a credit downgrade, New Brunswick taxpayers will be paying more to carry the government’s heavy debt load. Interest rates in Canada are rising. Those rate increases will make government borrowing more expensive just like they make home mortgages more expensive – and they’re both bills that hit New Brunswick families.
New Brunswick’s debt situation is already grim.
The province’s debt is $14.4 billion and growing, leaving a per capita burden of more than $18,500 for each New Brunswicker.
The net debt is also increasing, by hundreds of millions, as of the second quarter fiscal update. It’s projected to hit $14.3 billion by March 2019. That means the province’s assets aren’t enough to offset the growing debt.
For eight years, Auditor General Kim MacPherson has warned that the provincial government is living beyond its means.
Each New Brunswicker is carrying a larger and larger share of the provincial debt. According to the auditor general, New Brunswickers are faced with the highest net debt per capita compared to comparable provinces. Even more problematic is the pressure New Brunswick’s aging and declining population puts on younger people in the province, who will be the ones paying off the debt later in the form of higher taxes and reduced services.
Anyone with a credit card knows that the worst part about carrying a huge debt load is the interest payments you’re forced to make on it. In 2018-19, debt interest payments totaled $665 million. That’s money that will never be spent on textbooks or long-term care beds.
To put that number in context, $665 million is about 35 per cent of what the province received from Ottawa this year in equalization. New Brunswick is wasting over one third of its equalization cheque – which is supposed to pay for providing a better level of service for New Brunswickers – paying the big banks interest on its debt.
What an incredible waste of taxpayer money.
If the government stays true to its word and reducing the debt is indeed a priority, then it will need to reduce spending, and fast. We’ve already seen some positive progress, but the upcoming budget will have to deliver concrete action to control spending and pay down debt.
Like living large and lavishly in your golden years then sticking your kids with the bill, leaving future New Brunswick taxpayers with a debt load is incredibly unfair. It’s wrong to leave a scary debt for New Brunswick’s future generations.