12/22/2014 08:52 EST | Updated 02/21/2015 05:59 EST

Nova Scotia's capital spending plan shrinks by eight per cent

HALIFAX - The Nova Scotia government released a slimmed-down capital spending plan Monday, saying it intends to spend $490 million on highways, schools, hospitals and equipment in 2015-16 — the smallest capital budget in seven years.

As usual, almost 70 per cent of that money will be spent on highways, buildings and land. The remainder will be split between grants for regional health authorities, information technology, vehicles and a contingency fund.

The total amount represents an eight per cent reduction compared to last year's plan and is smaller than every other capital plan since 2008-09. The reduction in planned spending has been spread fairly evenly among all departments, government officials said.

Finance Minister Diana Whalen said capital spending rocketed up to about $800 million in 2009-10 when the federal and provincial governments started spending heavily on infrastructure to stimulate the economy as a global recession took hold.

"We are coming back into line," she told a news conference. "We need to bring our spending into line with our resources and what's affordable for Nova Scotia."

However, at $490 million, the capital budget is still above pre-recession levels of $300 million to $400 million.

Government officials said this latest round of spending is expected to add about $90 million to the province's $14 billion accumulated debt, now at a record high.

Whalen said it would be unwise to simply slash capital spending to pre-recession levels.

"That means that we'd be ignoring things that need to be repaired, and we would ultimately end of paying more," she said. "We have to be prudent in maintaining the infrastructure."

Earlier this month, Whalen released a fiscal update that called for lower spending and a predicted $54-million reduction in the province's annual deficit. The 2014-15 budget forecast pegged the deficit at $220.6 million, down from the $274.5 million that was estimated in September.

However, Premier Stephen McNeil has said the improved numbers can't hide the fact that the province's economy is performing poorly as government spending continues to rise for public sector wages, which account for a large share of the province's $9-billion budget.

In August, Whalen introduced a mid-year spending reduction plan in a bid to meet budget goals.

Tim Houston, the finance critic for the Progressive Conservative party, said the government must do a better job of reining in operating expenses.

"They're starting to show some spending restraint," he said.

"At the same time, departmental spending is higher than ever and we're running a deficit of over $200 million. ... If they could get control of departmental spending, there would be more money for capital spending."

The capital plan will be subject to the legislature's approval in the 2015-16 budget. Between $30 million and $40 million of capital funding is expected to come from the federal government.

The province also released a five-year highway improvement plan for repairing and maintaining the province’s 23,000 kilometres of roads and 4,100 bridges. That document doesn't include a cost estimate for the next five years, but it confirms the province will spend $220 million on highways and bridges in 2015-16.

A Transport official said a 20-kilometre section of Highway 103 west of Halifax, between exits 5 and 6, is carrying enough daily traffic to justify twinning the highway at an estimated cost of $3 million per kilometre, though one option could be putting in additional passing lanes.

However, the five-year plan doesn't include any details about twinning, even though the Liberals pledged during the 2013 election campaign to do something about dangerous stretches of the highway.

Whalen said work is underway on an interchange near Ingramport and the plan is to get the federal government to share part of the costs of improving highway safety once a provincial study has been completed in the months ahead.

A similar study on Highway 104 is expected to be completed in February.