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Local Government Minister Bruce Fitch announced plans to cut unconditional grants to municipalities by one per cent on Thursday. ((CBC))

The Progressive Conservative government is reducing unconditional grants to municipalities by one per cent in 2011, Local Government Minister Bruce Fitch announced on Thursday.

Fitch introduced the proposed changes in the legislature on Thursday that will cut the unconditional grant program that distributes funds to municipalities across the province to $67.3 million.

Fitch told the legislature the provincial government hoped to reduce the grant program by as little as possible.

"There are many issues facing our municipalities and rural communities and we felt it necessary to provide stable funding as we move forward with a review of the property tax system and the issue of local governance reform," Fitch said.

The local government minister said the program cut is similar to other budgetary reductions.

The New Brunswick government is facing a $820-million deficit in 2010-11.

Premier David Alward has said the province is facing a "fiscal crisis."

The Tories have already ordered government departments to trim their budgets by one per cent and prepare for a two-per-cent cut in 2011.