New Brunswick is projecting a deficit for the upcoming year, with government officials pointing to costly travel nurse contracts as the main driver. 

That projected $27.6 million deficit for fiscal 2024-25 comes after the province recorded four major budget surpluses and had projected a surplus for the year of $40.9 million.

But an update Thursday showed the first quarter surplus was $150.4 million, below government's budgeted $269.8 million surplus for the quarter.

Finance Minister Ernie Steeves said health expenses are largely behind the projection. 

The Department of Health is expected to land $164-million over budget — $97 million of which the province is attributing to those contracts.

Vitalité Health Network's travel nurse contracts represent the bulk of that number.

The province has been aware of the cost implications of those contracts since early 2023, deputy minister Eric Beaulieu told a legislative committee this summer. 

Deputy health minister, Eric Beaulieu, told a legislative committee the cost of travel nurse contracts were made clear to the department in March 2023. (Legislative Assembly of New Brunswick)

"The impact that travel nurses contracts are having on our bottom line is really no surprise," Steeves told reporters on Thursday. 

But he appeared to backtrack when asked why the budget wasn't altered if the cost wasn't a surprise. 

"You're always surprised at the amount of money and surprised by how it happened I guess," he said. 

"And then looking at how we can ... come up with a solution and solve the problem. That's ultimately where we are now, and where we're moving forward to is, how do we solve this problem? This $97-million problem?"

   Dr. France Desrosiers, president and CEO of Vitalité, says the health network plans to phase out the use of travel staff by 2026. (Bader Ben Amara/Radio-Canada)

France Desrosiers, the president and CEO of Vitalité, did not respond to questions Thursday about the regional health authority's projected cost for travel nurses in the coming year.

"Our financial results and projections are shared with the Department of Health on a monthly basis, following the usual process," she said by email.

"As we stated before the Standing Committee on Public Accounts, agency staff have helped maintain essential services, ensure a safe threshold of nursing care hours per patient per day, and most importantly, save lives," Desrosiers said.

She noted Vitalité's plan is to phase out the use of travel staff by 2026. 

Steeves said other personnel expenses, such as overtime and training new staff, along with supply costs, account for the rest of the overage estimate.

He said the projected deficit is 0.2 per cent of the budget and that quarterly data and federal estimates to come could change the outlook for the year.

Green Leader David Coon says he doesn't trust the province's latest fiscal projections. (Pat Richard/CBC)

Opposition parties were skeptical of the figures. 

"We've done this song and dance for the last four years now," said Liberal finance critic René Legacy.

"One quarter we're projecting very low surpluses and then we end up with just humungous surpluses because the revenues are under-projected."

Green Party Leader David Coon expressed similar doubts. 

"The premier and his finance minister have been off by a country mile on surpluses and projections in the last number of years, and so I don't trust the projections," Coon said. 

Steeves said the last time the province recorded a deficit was in 2017, while the last deficit forecast was made in the third quarter of fiscal 2020-21. 

Despite the prediction, Steeves said the Progressive Conservatives plan to forge ahead with an election promise to reduce the HST to 13 per cent — a move that would cost the province $450 million in revenue.

"We're still continuing to grow as a population, we're still continuing to grow with employment, and that leads to more income tax. So the revenue will go up naturally," he said.