Presenting the second budget of the Liberal administration on P.E.I., Treasurer Wes Sheridan on Wednesday predicted a $34.9-million deficit for 2008-09.

With the Liberals' first budget last fall, Sheridan predicted a $42.3-million deficit for 2007-08. The latest prediction for that period has been reduced to $36.6 million, but that still brings the anticipated deficits in the first two years of the Liberal administration to more than $70 million.

"Government strongly desires balanced books within as short a time frame as possible," Sheridan told the legislature in his budget address.

"Currently our finances are heading in the right direction, and I am confident that a steady and cautious approach to both revenue and expenditure management will result in fiscal balance in the relative short term."

'I would like to see balanced books within the next two years.'—Wes Sheridan, P.E.I. treasurer

High deficits continue in the province despite a large increase in transfer payments, $40.3 million, from the federal government. The bulk of that, $28 million, comes in the form of equalization.

Expenditures in the budget total $1.3 billion. Overall, expenditures are up $82 million, while revenues are up $86 million.

Health was a major focus of the budget, with money to replace senior-care homes in Charlottetown and Summerside, and bad news for smokers, who will pay $5 more a carton for cigarettes.

The cigarette price increase brings the cost of a carton to $80.75 as of midnight Wednesday, roughly the same as the $79.15 in Nova Scotia, but far more than the $68.37 in New Brunswick. Nationally, the price comes about in the middle of the pack.

Health care called priority No. 1

The biggest increase in spending comes in health, which both this coming year and last year represented about 30 per cent of the budget.

Modernization of health care facilities is a particular focus in health care, with $17.7 million set aside to upgrade hospitals and seniors care facilities. In particular, the government announced a five-year plan to replace seniors manors in the province.

"Many of our public manors are functionally inadequate to meet the needs of their target population," Sheridan said.

Phase 1 of the program would see the replacement of Prince Edward Home in Charlottetown and Summerset Manor in Summerside. Three other manors are also slated for replacement.

Municipal governments received a bonus they were expecting, the elimination of a fee charged by the province for collecting property taxes. Last year, that charge cost municipalities $780,000.

Best Start boosted

In education, some previously announced programs were highlighted, and some older programs received extra funding.

The Best Start program, an education program aimed at young families, got an extra $219,000 to bring its budget to $1 million a year. That program will also be expanded to include children up to age two. During the election campaign, the Liberals promised to expand the program for children up to age three.

Other new investments included:

• Special education expenditure up $540,000.
• English as an additional language funding up $500,000.
• $100,000 for eliminating user fees in schools.
• $100,00 for school breakfast program.
  

Looking to future of agriculture

With beef, hog and potato farmers all struggling, the government is investing in new programs to help farmers find new ways to make a living.

Those funding initiatives include $200,000 for an Agriculture Innovation Fund, for product diversification and value-added technologies, and another $200,000, allocated annually for three years, for an Agriculture Research Fund in support of applied and developmental research.

The government is also planning a Sustainable Diversification Initiative to help farmers find new ways of increasing farm revenues.

Regarding immediate problems faced on the farm, the Hog Transition Program has $1.4 million set aside to help farmers get out of the industry.

The government also budgeted $500,000 for a Buy Local Initiative to increase public awareness of the availability of local produce and other food products.

While the government announced these new programs, it projected a dramatic cut in direct grants to farmers. These were $15 million in 2007-08, but only $2.5 million for the coming year.

Still wrestling with old problems, says treasurer

While this was technically the second budget of this Liberal administration, it was in many ways the first, as Sheridan pointed out in a briefing to the media shortly before his budget speech. The fall budget was, for the most part, a repeat of a Progressive Conservative budget brought down but never passed before that party's defeat at the polls in May.

"This is our budget," said Sheridan, "one that better reflects the direction we would like to take this province."

Sheridan said he would prefer to see a balanced budget, but said 10 years of Tory rule left many problems that needed to be sorted out.

"We are trending in that direction," he said.

"I would like to see balanced books within the next two years."

That would mean a balanced budget just before the next election, scheduled for May of 2011.