5 ways Blaine Higgs is cutting the deficit

Finance Minister Blaine Higgs is reducing the province's deficit to $183 million through a combination of measures.
Finance Minister Blaine Higgs, right, outlined his second budget to reporters at a news conference on Tuesday. (Daniel McHardie/CBC)

Finance Minister Blaine Higgs whittled the provincial government’s deficit to $183 million in the Alward government’s second budget.

The finance minister toured the province earlier in 2012, asking citizens how they thought the New Brunswick government should curtail its spending.

Premier David Alward’s government has, again, opted not to raise the Harmonized Sales Tax or impose highway tolls as a way to boost the amount of revenue flowing into the provincial coffers.

The provincial budget did not reveal any wholesale cuts to specific government services or agencies. Instead, Higgs’ path to cutting the deficit to $183 million from the estimated $471 million can be found in a series of smaller revenue increases and spending cuts.

No. 1: Civil service cuts

The province’s bureaucracy had been considered a key target heading into the budget. The ranks of the civil service have grown to 46,788 from 44,345 in 2002. Although the precise effect on the civil service remains unclear, Higgs is promising a leaner bureaucracy.

The Alward government estimates that 1,500 civil servants will retire annually for the next three years. "We will replace only those positions that are critical to the delivery of core government services," Higgs said in his speech.

Higgs told reporters the provincial government expects to rehire two of every three people who leave.

The finance minister is banking on a savings of $86 million because of those reductions. Bureaucrats will also be seeing some of their benefits reduced. The two-year wage freeze policy will be applied to any civil servants who have avoided the wage restraint policy until now. And the provincial government is changing the sick leave policy for employees.

No. 2: Small tax increases

The finance minister, again, sidestepped the need to hike the HST. And unlike last year, Higgs did not feel the need to impose higher taxes on tobacco and gasoline.

So this year, the provincial government is spreading out a series of targeted tax increases.

The provincial government will generate an additional $7 million by increasing the Real Property Transfer Tax. People buying homes will now pay 0.5 per cent up from 0.25 per cent when they purchase new property starting on June 1, 2012.

The Financial Corporation Capital Tax will be bumped up to four per cent from three per cent on April 1. This will raise roughly $5 million annually.

No. 3: Revenue from royalties increasing

The issue of royalty revenue has been a contentious issue in recent months as the provincial government has dealt with the issue of shale gas exploration.

Higgs said the province is working on a new royalty system that will allow the provincial government to "receive its fair share of profits from the development of our natural resources."

The projections for royalties on natural gas are holding steady at $1 million.

But the main increase will come from royalties on potash. The province estimates it will reap $48 million in potash royalties, up forom $18 million last year.

In total, the province will generate $121.6 million in royalty revenue compared to $87.6 million last year.

No. 4: Spending cuts

In his inaugural budget, Higgs eliminated three government agencies, including the Advisory Council on the Status of Women.

This year, Higgs did not lop off any agencies. Instead, the Alward government’s much-talked about government renewal initiative isolated a series of broad, undefined cuts.

  • $123 million by "managing human resources more efficiently"
  • $24 million in restructuring
  • $16 million in savings from government administration
  • $8 million in other government savings

Higgs is also boasting about a cut of $55 million in program delivery savings. This includes the savings by cutting the number of school districts to seven from 14, as previously announced, reducing unconditional grants to municipalities by two per cent and the decision to halt the $600,000 in funding for the province’s harness racing industry.

No. 5: NB Power

The Alward government is also relying on NB Power to help its battle against the deficit.

NB Power is projected to earn $78 million in 2012-13. That’s almost as much in one year and the projected savings from three years of civil service reductions.