Overview: Tough measures highlight budget
CBC News Online | April 7, 2005

Saying the province could no longer live with the status quo, the Pat Binns government has outlined a series of cost-cutting measures that affect every government department and a number of provincial services.

Details of the 2005-2006 provincial budget were delivered by Treasurer Mitch Murphy on Thursday night.

The budget includes a number of changes to programs, and spending cuts to all but two government departments.

• Province of Prince Edward Island: Budget 2005
  

"The other path we have before us, leads us to the place called sustainability," Murphy told the P.E.I. legislature.

"Sustainability is the place where we would live within our means, have no deficits, pay down our debt and have the financial flexibility to invest in new opportunities for Islanders," he said.

Even with the tough words, the Binns government plans to spend $22 million more than it will take in over the next year. Murphy said that will add $9.9 million to the province's long-term debt.

Public service

As the treasurer confirmed earlier in the week, 500 jobs would be trimmed. The budget says the jobs will be eliminated by early retirement.

In an effort to avoid the backlash the Liberal government endured in 1996, the treasurer said the government will respect collective agreements, but cautioned that some layoffs may occur.

Details of the government's early retirement program were announced last month. The budget says the cost of paying employees to leave early or keep seasonal workers at home will add $5 million to this year's deficit.

Health care

Four regional health authorities, and the Provincial Health Services Authority will be eliminated. They will be replaced by a single board to administer all health care facilities in the province.

It means a return to community health boards across the province.

Murphy also announced the Department of Health and Social Services will be split into two separate government departments.

This will create a new department of Social Services and Seniors.

However, Murphy said a new minister won't be added to handle the new department.

The changes within the departments will save the government $9 million a year.

Funding to the Best Start program will be restored. The government had earlier said it would break its deal to fund the program, which provides special services to new mothers.

The government also plans to spend more money for Alzheimer's disease medications.

Overall funding for the two departments will increase by $15.8 million.

Taxes and fees

The Binns government plans to make $6.5 million this year by charging the provincial sales tax on gasoline and diesel fuel.

Prices for gasoline and diesel fuel will increase by 2.3 cents per litre as of midnight Friday.

This marks a change in government policy. The Binns government often defended itself against rising fuel prices by saying it did not charge PST on fuel.

A small cut in the corporate tax rate is part of the budget package. It will drop one percentage point to 6.5 percent.

Islanders will be paying more the next time they buy a set of tires. The tire tax will increase to $4 per tire.

The budget allows seniors to collect more income before they have to start paying property taxes. The minimum income threshold is increased to $30,000 from the old level of $22,000.

Finances

Murphy continued to blame the federal government for part of the province's financial woes. He told the legislature that increased federal funding is not keeping up with the cost of delivering programs.

Only two provincial departments had their budgets increased: Health and Social Services, and Education.

Overall the government will spend $22 million more than it will take in.

The treasurer also revised his financial predictions for the year that has just ended. In November 2004 Murphy said deficit would likely be $19 million. His new prediction will increases that by nearly $20 million to $39.5 million.

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