Finance Minister Michael Baker, having brought in the Conservative government's sixth-consecutive balanced budget, avoided tax increases and included modest spending increases, but kept costs down by delaying several campaign pledges and raising user fees.
Baker said Ottawa's plan to address the so-called fiscal imbalance, introduced Monday in a federal budget that was heavy on spending, presented tough choices for a province that says it has to be more prudent.
In the end, Baker chose more money immediately while putting at risk the potential for more cash from the offshore energy industry in the long term.
"We must take the important increase in federal funding this year," he said in a speech to the legislature. "Otherwise we would be forced to dramatically raise taxes or cut programs."
Premier Rodney MacDonald said the dilemma was evidence that Ottawa has failed to fix the disparity between have-not provinces struggling to pay for services and a federal government awash in surpluses.
"Ottawa is asking us to give up our legal rights to our offshore revenues in order to fully benefit from our constitutional right to equalization," he said. "That so-called choice represents no reasonable choice at all."
The decision means the province effectively gives up its 2005 offshore accord, which excluded natural resource revenues from equalization calculations.
Finance Department officials estimated that switching to the new option will give the province an additional $776 million over five years by 2011-2012.
They also stressed that the province was unlikely to lose significant income from the offshore industry within the next five years because no developments are expected to come on stream for at least another six years. But the officials were reluctant to look beyond that time frame.
The new formula gives the province an extra $79 million in equalization payments for its 2007-2008 budget, which includes $7.3 billion in expenditures and a projected surplus of $118.4 million.
Total expenditures were $382 million higher than last year, with increases to several areas, including $24 million to freeze tuition, the creation of 832 long-term care beds and $50 million over ten years to build and upgrade recreational facilities.
Health-care spending is rising by more than five per cent to just over $3 billion. But the increase is the lowest in a decade, when costs have jumped by about eight per cent each year.
Several promises from last summer's election have been delayed, most notably a Pharmacare program for low-income working families. The province is investing just $5 million to develop a system that was originally estimated to cost about $25 million.
Provincial legislation compels the government to put the surplus toward the debt, which is expected to remain steady at $12.4 billion over the course of the next year.
"It's time to start paying the bill on behalf of all Nova Scotians," said Baker. "The budget is disciplined and it is strategic. We have contained costs."
While MacDonald's minority government would fall if the budget is rejected by the opposition parties, the New Democrats and Liberals have made it clear they are not eager for a spring campaign.
Liberal Leader Michel Samson said he was "pleasantly surprised" by the budget, signalling his party would be willing to support it.
"I think we've put forward a constructive agenda allowing the government to hear some of the concerns expressed to us," said Samson, whose party has supported the minority government since last summer's election.
"Obviously, that message has been heard in this budget."
NDP Leader Darrell Dexter was more critical, holding up the budget as proof that the Conservatives are breaking promises to Nova Scotians, but he wouldn't say how his party would vote.
"Much of what the Conservative government talked about over the course of the last campaign we now know wasn't achievable," said Dexter.
"They called it a realistic plan that they could afford. It is clear that that should have had a rider on it that said, 'Some conditions apply.' "
The Conservatives currently hold 23 seats in the 52-seat house of assembly, the NDP 20 and the Liberals nine.
Both opposition leaders were sympathetic with the province's predicament in choosing an equalization option.
"They (the federal Conservatives) rode support for the Atlantic accord into office, and they may well ride it right back out again," said Dexter.
Meanwhile, Baker's stoic tone on fiscal restraint stands in sharp contrast to the big spending pledges MacDonald made less than a year ago.
During last summer's election campaign, which resulted in a reduced minority for the Tories, MacDonald promised to spend more than $600 million on new programs and services, raising capital spending by a whopping 16 per cent.
But in apparent about-face, the premier recently changed tack and started to warn Nova Scotians that his latest budget would be a tough one and some campaign promises would be delayed.
Aside from the delayed Pharmacare program, Baker also confirmed he would delay a property tax break for seniors, a review of school bus rules, full implementation of a tax credit for volunteer firefighters and a mental-health tax credit.
Nova Scotia's stay-the-course budget stands out among most of the other fiscal plans delivered so far this year across Canada.
With the exception of New Brunswick, which stunned critics by raising personal and business taxes, five other province and Ottawa cut taxes and pumped big money into various programs and services.
In Nova Scotia, the government is seeking more money for itself by raising most user fees by 6.8 per cent effective April 1, hiking the costs of cigarettes by $2 a carton and almost tripling aviation fuel taxes to 2.5 cents a litre.
