NB touts plan to avoid long-term deficits

[B][SIZE="3"]Premier Shawn Graham is confident that New Brunswick's credit rating will not be negatively affected by his budget's sudden descent into deficit.

Moody's Investors Service issued a report on Tuesday saying the financial health of Canada's provinces will deteriorate over the next 18 months, and that governments must show a plan to balance their budgets or risk seeing their credit ratings worsen.

Graham said that his government's March budget will set in place a long-term plan that will allay the concerns of credit rating agencies.

"I'm confident with our multi-year plan that we will be announcing in our budget that the bond rating agencies will be looking favourably at New Brunswick," Graham said in an interview with CBC News New Brunswick at Six that will air on Thursday.

The Moody's report said provinces should be able to withstand the economic storm that has moved in over the last several months. And the credit rating agency will be watching closely how governments react to the financial pressures.

"Specifically, Moody’s would consider outlook changes and/or rating downgrades should governments fail to implement fiscal policies that support a realignment of revenues and expenses once an economic recovery has taken hold and an elimination, or at least a reduction, in the incremental debt burden taken on as a result of the recession," the report said.

"Moreover, a much worse-than-anticipated recession that would lead to structural impairments of provinces’ balance sheets would likely prompt us to revise our current ratings and outlooks downward."

In its latest report, Moody's rated New Brunswick with a Aa1 rating and characterized it as was stable. That rating is tied with Manitoba and behind only Alberta and British Columbia.

DBRS also indicated the province's debt rating was stable in August.

The credit ratings from agencies such as Moody's and DBRS are important for provinces because they influence the interest rates that governments must pay to borrow money.

The Graham government had been forecasting a small surplus for 2008-09 but in December, Finance Minister Victor Boudreau indicated the province was now forecasting a $285-million deficit. And both Boudreau and Graham have warned that another massive deficit is likely for the upcoming fiscal year.

N.B. facing zero revenue growth
New Brunswick has already ratcheted back its revenue growth projections to zero per cent from one per cent, meanwhile Graham said health and education budgets are still growing.

Those factors, coupled with the beating the province's pension plans are taking in the markets, has contributed to the deficit forecasts.

"Our government is not embracing these deficits," Graham said.

"We are working hard on putting in place a structural plan to bring us back into positive territory. The reason why these deficits are occurring today is because of the downturn in the markets which has had a major impact on our pension plans."

Graham was speaking from Ottawa after lobbying Prime Minister Stephen Harper for infrastructure funds. Earlier this week, Graham visited Alberta on a trade mission to the western province. The premier said he received a warmer welcome during this recent mission than an earlier one he participated in two years ago.

The New Brunswick premier admitted he's in competition with other provinces for federal investment dollars for a range of projects. Graham said he wants Ottawa to complement the $1.2 billion in capital projects planned for the next two years.

"We have done our homework, but we have to be here continuing to make sure that we are not going to be overstepped by other provinces or territories and that we receive our fair share," Graham said.[/SIZE][/B]