02/08/2012 09:08 EST | Updated 04/09/2012 05:12 EDT

New Brunswick lowers deficit projection from $546 million to $471 million

FREDERICTON - New Brunswick's deficit is now forecast to drop by almost $75 million for this fiscal year due to reduced government spending, the province's finance minister said Wednesday.

Finance Minister Blaine Higgs is now projecting a deficit of over $471 million for 2011-2012 — down from its previous estimate of $546 million.

In a fiscal update released Wednesday, Higgs said reduced government spending has helped offset softening revenues and a weakened economy.

"We have seen spending reduced in almost every department over the previous quarter," Higgs said.

"We're getting closer to what our budget was, and I'm optimistic that trend will continue."

The biggest spending decrease among departments is a 23 per cent reduction by Business New Brunswick, a provincial economic development agency.

But Liberal finance critic Donald Arseneault said that's one place where deep cuts should not be encouraged.

"We're not seeing any activity, no investments into the economy to create some jobs, so I'm concerned about that," he said Wednesday.

"There should have been some strategic emphasis on job creation and we haven't seen that."

But Higgs said he is encouraged that Business New Brunswick is being more selective in what it funds.

"What I've seen is a lot more scrutiny in what investments make sense, what ones don't make sense," he said.

Eight departments, however, are still over their original budgets.

The biggest difference is a $25-million increase in general government spending. That's due to increased employee benefit and pension plan expenses resulting from a lower than expected return on investments.

The Department of Health has seen a $7.9-million increase in spending, mainly due to higher than anticipated costs within the prescription drug program.

Despite improvements in the last quarter, the deficit projection is still $22.3 million more than the $448.8-million deficit that Higgs anticipated when he released his budget last year.

"We still have a lot of work to do to address the deficit and our mounting debt," Higgs said.

The debt is expected to increase by over $620 million this year, and top $10 billion by the end of March.

Higgs said he's confident the government will balance the budget by 2014, but fears the debt will top $11 billion by that time.

He recently completed a tour of the province to gather suggestions in advance of his new provincial budget, which will be tabled next month.

Last week, the government announced increased user fees that are expected to generate another $6 million for the province in the coming year.

Arseneault said the government needs to have a frank public discussion about ideas such as raising the harmonized sales tax.

Higgs said he first wants to be satisfied that everything has been done to find savings within the government and ensure programs are being run efficiently.