The New Brunswick Liberals' budget, loaded with personal tax hikes and higher debt, is backing off Tory tax cuts that the finance minister says weren't sustainable.

Victor Boudreau says he's projecting a 2007-08 budget surplus of $37 million, but to do that he's planning to raise more than $100 million through tax increases.

Boudreau's budget, which came down Tuesday afternoon, will also increase the province's net debt by $356 million, putting it at more than $7 billion.

Personal income taxes will increase to generate an extra $50 million for the province. For a single person earning $30,000, for example, the tax hike works out to an extra $72. An additional $52 million will come from increases in general corporate and small business taxes.

The most recent personal tax increase in the province was in 1994, when Liberal Frank McKenna was premier.

This year's $6.6-billion budget stands to reverse a long-standing trend towards lower taxes pursued by previous governments in the hopes of making the province more attractive to workers and to industry.

"The decision to raise taxes was not taken lightly," Boudreau said. "It is never easy to increase taxes, but structural change was required to realign revenues and spending."

Big expenses out there

Some big expenses facing the province include $540 million for the privately built section of the Trans-Canada Highway between Woodstock and Grand Falls, and $180 million more for other highways, including the long-sought Nashwaak bypass near Fredericton.

Over $3 million will go to a new 20-bed forensic psychiatric unit at the Restigouche Hospital, where bed shortages led to backups in the courts.

Saint John will get a final installment of $27 million for its harbour cleanup project, and there'll be a feasibility study on a second nuclear reactor at Point Lepreau.

As well, a team will be hired to enforce new laws against children riding off-road vehicles. To pay for it, the Liberals will draw on $25 million worth of cuts to government departments.

"What we've made very clear to the department heads is that we do not want it to affect the front-line services that New Brunswickers receive," Boudreau said.

"So it's basically in the top management, the backroom type of stuff that gets done in every department, and every department is sharing in their share of that $25 million. But there is no target whatsoever in terms of civil service reduction."

There is some relief in the budget, including a three per cent increase in welfare rates, and a doubling of the Low Income Seniors Benefit to $200.

However, to balance the books, Premier Shawn Graham's government is ordering NB Liquor to raise an extra $13 million in profits, possibly through higher prices.

This is the Liberals' first budget since they won the election in September.

With files from the Canadian Press