What was expected on Tuesday to be a budget similar to one the previous P.E.I. government submitted in the spring, with a small surplus, has turned out to herald a huge deficit.

Provincial Treasurer Richard Sheridan presents the 2007 Liberal budget
(Province of P.E.I.)

Treasurer Wes Sheridan blamed the dramatic turnaround, from a $2.1-million surplus to a $42-million deficit, on the Tories playing fast and loose with the figures.

When the Progressive Conservatives campaigned on this budget back in the spring, Islanders were told there was a surplus of $2.1 million. Sheridan delivered the deficit news to the legislature in his budget presentation.

It was Sheridan's first budget as provincial treasurer. He told reporters before his speech that the Liberals had made a commitment to reintroduce the Tory budget. But when government went through the figures, he said, they found some major discrepancies.

Sheridan said the Tories overestimated revenues from the P.E.I. tobacco tax by $7 million. The Conservatives had also budgeted $15 million in revenue from the federal climate change program, and Sheridan said that money was supposed to be spread over three years. The $10-million difference came directly off budget predictions.

2007 Liberal Budget Highlights
•$42.2-million deficit. •$12 million in new spending. •$31 million less in revenue.
•$4.4 cents per litre off gas tax. •Cost: $6 million.
Property tax assessments frozen until 2010.
Debt increases to $13 billion.

The previous government also overestimated revenues from golf course fees, said Sheridan, by more than $1 million, and from a can deposit plan by another million.

The deficit didn't stop the new government from keeping most of its election promises. In fact, Sheridan introduced about $20 million in new spending. He told reporters he felt obligated to introduce the new spending initiatives, because his party had campaigned on them and most of them would make a real difference to Islanders.

The new spending includes about $6 million for a 4.4 cent per litre reduction in gas taxes that was implemented shortly after the election. Another $3 million will be spent to recruit new doctors. Government has set aside over $2 million to help the province's troubled hog industry.

Money will also be set aside to help seniors stay in their homes longer and help Islanders with disabilities.

Sheridan told reporters he's working diligently to deal with P.E.I.'s $42-million deficit by next spring's session of the legislature.