The Newfoundland and Labrador government is projecting a $1 billion improvement to its bottom line this coming year, but the budgetary axe will still fall on roughly 1,200 positions.

"It’s a difficult situation," Finance Minister Jerome Kennedy told reporters Tuesday morning. "We’ve been criticized for growing the public service. No one likes to lay people off."

But Kennedy says the decision was necessary to stabilize the province’s finances.

"It’s a tough situation," Kennedy said. "It’s not one that I particularly like, and not one that any of us like. But it’s something that we have to do in order to ensure that we can reduce deficits and return to surplus."

Just two months ago, Kennedy indicated that the province faced a $1.6 billion deficit in 2013-14 if no action was taken. That number has now dropped to $563.8 million.

'It’s a difficult situation. We’ve been criticized for growing the public service. No one likes to lay people off.' —Finance Minister Jerome Kennedy

The minister says the province is working to rein in expenses as it grapples with a fiscal foundation built on volatile commodities.

"Our province has come from oil," Kennedy said. "What’s allowed us to pay almost 60 per cent of our revenues, or our monies, on social programs has been the oil."

To prove the point, the reason for the brighter picture compared to the dire initial forecasts is largely because of petroleum.

Just over $301 million of the billion-dollar boost over recent projections is attributed to government cuts. Another $696 million came from improved expected revenues for the coming year.

And most of those enhanced cash flows are comprised of royalties or corporate taxes from oil and mining.

And the good — or, at least, better — news is not just for the coming year. The deficit for 2012-13, projected in December to clock in at $725.8 million, is now expected to be $430.9 million.

The government expects to return to surplus within two years.

Oil estimated at $105 a barrel

This year’s budget projection for the price of a barrel of Brent oil is US$105. The province expects production to rebound to 85.2 million barrels, after maintainance shutdowns squeezed off the flow of crude last year.

In 2012, the Newfoundland and Labrador government forecast oil prices at an optimistic price point of US$124. It never reached that level, blowing a hole in the balance sheet.

Kennedy says the province has worked to refine the process of how it benchmarks oil.

"As to why should people trust us, all I can tell you is that we’ve tried to improve the process both in terms of coming up with the price and nailing the production down," Kennedy said.

"I’m as confident as anyone can be at this point in terms of the $105."

Job cuts breakdown

Kennedy says the province needed to work at reducing its workforce this year, to get the deficit under control.

The government says salary and other employee costs account for up to 55 per cent of the total provincial budget.

The core public service will see 485 layoffs, or just over five per cent of the total workforce. Half of those positions are permanent.

Government boards and agencies will axe another 450 jobs. Nearly 200 of those will come from health authorities.

Another 246 positions that are currently vacant will remain unfilled.

In addtion to those staffing reductions, an early retirement incentive program will see another 196 workers retire early. Kennedy expects only half of those to be replaced.

According to the minister, more than half of the job losses in agencies will come from the management ranks.

Managers will be the target of about a quarter of the cuts in the core civil service.

There are another 160 positions targeted in teaching and school administration, although it’s not clear how many job losses will actually result.

School boards reduced to 2

This year’s budget also collapses the number of school boards to two — one English, one French.

Currently, there are five boards in Newfoundland and Labrador.

Kennedy steered questions about those changes to Education Minister Clyde Jackman, whom the government declined to make available for comment.

Next year, government officials will turn their attention to Memorial University and health authorities to create efficiences.

After reducing hundreds of fees in recent years, the province will increase some in 2013.

A 10-per-cent discount to register vehicles online is gone as of April 1, generating $2.6 million for the treasury.

Admission fees are up at provincial historic sites, and ferry users will pay an additional 10 per cent. And the price of rooms in hospitals is up 20 per cent.

Tobacco taxes are also on the way up, effective at midnight, with each cigarette costing 1.5 cents more.