12/18/2013 01:22 EST | Updated 02/17/2014 05:59 EST

Nova Scotia looking at budget deficit as Liberals revise fiscal forecast

HALIFAX - Nova Scotia's deficit forecast will be at least $300 million higher than expected when Finance Minister Diana Whalen tables her first fiscal update Thursday.

Whalen confirmed the bad news Wednesday, saying the added $300 million charge is the result of advice from auditor general Jacques Lapointe, who has told the new Liberal government it should account for the 2012-13 unfunded liability in the public service pension plan in this fiscal year.

"We have, right off the bat, a very large, outstanding liability," Whalen said. "This is not politics. This is just the reality that a lot of negative information has come out in the last two months."

The finance minister's revelation came after the acting leader of the New Democrats accused the Liberals of pulling a political stunt by artificially inflating the deficit to make the previous NDP government look bad as it projected a slim surplus of $18.3 million.

Maureen MacDonald, who served as finance minister until the NDP was defeated in the October election, had predicted prior to the election that the budget would show the surplus.

On Wednesday, she said Whalen's approach to the pension liability was contrary to a legal opinion she received in February when she was still finance minister.

MacDonald said the legal opinion from the firm McInnes Cooper suggested it would be better to amortize the liability over a period of 11 years, putting less strain on the budget.

She said Whalen's decision to follow Lapointe's advice will hurt the province's finances for no good reason.

"It's like expecting that you're going to pay your entire mortgage all in one year," MacDonald said in an interview. "That's not really a reasonable thing to do."

MacDonald said the accounting change is politically motivated.

"It's cover for the cuts that are coming," she said.

Whalen cited a Nov. 29 letter from Lapointe that says his reading of the McInnes Cooper opinion led him to conclude the liability had to be accounted for in this fiscal year.

The minister said it would be imprudent for her not to follow Lapointe's advice.

"If I don't take his advice, there would be repercussions and I would be shown to be irresponsible," Whalen said.

"The auditor general clearly took a different stance. ... There were no options presented to me. Ms. MacDonald wasn't the minister of finance when the instructions from the auditor general came down."

Whalen said the NDP is trying to avoid taking responsibility for a fiscal mess.

"They are not happy about what is going to be shown in the update," Whalen said. "They knew it was coming."

Conservative Leader Jamie Baillie said Nova Scotians are tired of having to endure what he called a complex fiscal shell game every time there's a change in government.

"These are the kind of games that get played with our finances," he said in an interview. "Who's right and who's wrong doesn't matter. What does matter is that our debt continues to go up and our taxes stay too high."