The P.E.I. government is expecting a deficit of $78.6 million in 2011-12, says Finance Minister Wes Sheridan, and covering employee benefits accounts for a big piece of that higher cost.
Last spring Sheridan predicted a deficit of $42 million. The biggest portion of the $36 million increase comes from covering shortfalls in government pension funds and other costs of employee benefits.
"Government pension plans rely heavily on global equity markets to address and meet its obligations to public servants," said Sheridan.
"Our public pension plans, like all others, have been significantly impacted by declines in equity markets."
As a result, the government had to put $16 million more than budgeted into employee benefits in 2011-12. The situation is not expected to improve in the coming year. A further $10 million has been added to that budget line for 2012-13.
Sheridan said the government would be entering consultations with public sector unions regarding pensions and benefits.
Social services spending up
Social Services spending
2011-12 budget: $92M
2011-12 forecast: $98.8M
2012-13 budget: $93.1M
The Community Services Department overran its budget by $6.8 million.
Sheridan attributed the increase to an increased support for children in care and for people with complex care requirements.
While costs were up significantly in 2011-12 over what was expected, expenses in the coming year are budgeted to be something closer to the original estimate for last year.
Expenses at beef plant
The Department of Agriculture also saw a big increase in spending over what was budgeted last year, costing the government $44 million instead of the projected $38.6 million.
A portion of that failure to hit budget can be attributed to Atlantic Beef Products in Borden-Carleton. The government funded $3.2 million in losses at the plant in 2011-12. Since it opened in 2005, the province has invested more than $40 million.
"While it was hoped that this plant could get to break-even status, there is little likelihood that this will be achieved in the foreseeable future," said Sheridan.
In an effort to minimize losses, Sheridan said the government would cap support for the plant at $1.5 million per year.
HST to help balance budget
Despite those pressures, the government has put together a plan to balance the budget in 2014-15.
Expenditures will continue to rise over that period of time, but revenues are expected to increase sharply with the introduction of the HST, which the government announced would be introduced on April 1, 2013.
Revenue is projected to grow at a rate of more than four per cent a year from 2013 to 2015.
Outside of health, there will be no increases in expenditures at government departments until the budget is balanced, said Sheridan.
Increases in health spending will be capped at 3.5 per cent.
Education saw an increase for the coming year, but will have to hold the line in subsequent years. Other departments saw their budgets cut, but those numbers will hold steady in coming years.
Budget plan: 2011-2015