Natural disasters keep happening, but New Brunswick doesn't budget for them
Recouping costs from federal disaster assistance program proves difficult

CBC.ca
May 10, 2018
Robert Jones

Despite paying out $100 million in compensation for six weather disasters in the last four years, the New Brunswick government does not financially plan for the events and will have to divert money or inflate the deficit to deal with multimillion-dollar claims piling up from this year's record flooding on the St. John river.

"We do not budget for future events," said Department of Finance spokeswoman Sarah Bustard in an email to CBC News, explaining that nothing is set aside ahead of time to finance disaster costs like those now being experienced.

There is $9.4 million listed in the province's current budget for disaster assistance, but Bustard said that is to cover remaining costs for incidents that happened before the flood and is already spoken for.

"The annual budget estimates you are referring to relate to the estimated costs for events that have already occurred and remain active for claims," she said.

The department did not respond to a request to interview Finance Minister Cathy Rogers on why her department does not allow for some amount of money in the budget to cover new disaster assistance costs given their frequency and size.

2018 flood compensation

Last week, Premier Brian Gallant announced cabinet approved the activation of New Brunswick's disaster financial assistance program to compensate victims of spring flooding.

It was the second disaster declaration of the year, following flash flooding in parts of the province in January, and seventh declaration the province has made since 2014. 

"It is clear we will surpass the threshold of damages required to apply for disaster financial assistance with the federal government," said Gallant on May 2.

"We therefore called an emergency cabinet meeting to discuss implementing a disaster financial assistance program."

The official cabinet declaration triggers a complex federal-provincial cost sharing program to compensate those hit with uninsured damage, a procedure that has been notoriously expensive in the past.

Tough to recoup

Under the rules of the program, substantial amounts of eligible compensation are the responsibility of the province alone, including the first $2.3 million in claims incurred in each event. In some cases, significant amounts owed to the program by the federal government have proven difficult for New Brunswick to collect.

The province has not given an estimate yet of the likely cost of flood compensation this year, but according to the agreement in place with Ottawa, New Brunswick will be responsible to pay $5.8 million of the first $11.6 million in compensation claims but only 10 per cent of everything above that. 

On paper that means Ottawa will likely be saddled with most of the compensation costs of this year's flood damage, although the province is required to pay all claims upfront and bill Ottawa for its share — a process that has not gone well in the past.

In 2008, the province billed Ottawa $20 million for its share of St. John river flooding compensation that year, an amount that wasn't fully settled until 2016. 

Federal auditors were unconvinced by New Brunswick's record keeping and explanations of expenditures and would not authorise payment for years.

Financial burden

In 2015, seven years after the flood, New Brunswick auditor general Kim MacPherson complained the drawn out dispute over flood compensation was burdening the province with significant costs.

"Delay of receipt of funds results in increased borrowing costs for the Province," she wrote.

A similar hold up occurred with another $20 million owed to the province from December 2010 floods in Charlotte County.

"The amount has not been collected from the Federal government yet because the necessary claims have not been filed," MacPherson noted two years later. 

According to New Brunswick's public accounts and budget documents, the province has made or expects to make $104.4 million in disaster assistance payments covering six events stretching from April 2014 and January 2018 but not including this month's flooding.  

The events included three heavy rains that triggered flash floods in 2014, 2015 and 2018, one regular spring flood in April 2014, the January 2017 ice storm and post-tropical storm Arthur in 2014.