N.L. slashes deficit in better-news budget that maintains record spending
‘Balanced approach’ includes cost-of-living measures to aid car and homeowners
Newfoundland and Labrador is reporting a brightening financial picture in a stay-the-course budget that doesn't follow through on previously planned spending reductions.
"A budget is about choice," Finance Minister Siobhan Coady said in her budget speech Thursday afternoon in the House of Assembly in St. John's.
"Your government has chosen to support you, to invest in health, education, the economy."
That choice includes some measures to assist residents struggling with inflation and cost-of-living pressures, along with new tax credits to boost targeted industries.
The provincial deficit for the just-ended 2021-22 fiscal year came in at $400 million, less than half of initial projections.
For 2022-23, the deficit is expected to be lower again, at $351 million.
Those numbers mark a sharp turnaround from the dire early pandemic days, when COVID-fuelled fiscal chaos punched a massive hole in the balance sheet.
The 2020-21 deficit was nearly $1.5 billion.
The province has reiterated that it is now on track to balance the books by 2026.
Help for homeowners, drivers
The budget has a few new relief measures to, according to Coady, "put money back in people's pockets."
She says there are no provincial fee increases or tax increases.
Retail sales tax on home insurance will be eliminated for one year.
The cost of registering passenger vehicles, light trucks and taxis will be cut by 50 per cent, also for one year. Registration for a car will go from $180 to $90.
There are also new tax credits "to encourage business investment and grow our economy," Coady said.
Those include a new green technology tax credit, a manufacturing and processing investment tax credit to aid sectors like the fishery, farming and forestry, and a film and video production tax credit.
No major cuts to spending
The budget theme is "change is in the air."
But that change is less dramatic than what previous announcements had foreshadowed could be in the works.
Less than a year ago, a wide-ranging report commissioned by Premier Andrew Furey recommended major cuts to government spending.
That hasn't happened.
Coady told reporters some of the advice from initiatives like the Greene Report and the Health Accord is "sprinkled through" recent budgets.
In one significant move, the government plans to collapse the province's four health authorities into one.
Spending continues at record levels
Less than a year ago, initial projections showed that the province expected to slash spending in 2022-23.
At the time, officials indicated that up to half a billion dollars of the planned reduction was structural.
Instead, spending is again on the rise.
Last year, the province projected that expenses would drop from more than $9.3 billion in 2021-22 to under $8.5 billion in 2022-23.
Actual spending for last year, 2021-22, fell under $9.1 billion.
But now the province is projecting expenses of more than $9.4 billion in the coming year.
Coady stressed that hundreds of millions in "flow-through money" is included in that total, related to federally funded programs and contributions Ottawa has made to the province.
She told reporters there are also "strategic investments" in health care.
Government revenues are expected to rise north of $9 billion this coming year, $400 million more than in 2021-22.
Officials pointed to increased iron ore prices driving higher corporate income tax revenues, along with more expected revenues from sales tax and income tax, as reasons for that.
We have weathered this storm. We may have been lashed by it but the day has arisen with brighter skies and calmer seas. The fog is lifting.- Siobhan Coady
Oil royalties are expected to drop this coming year, to $866 million from more than $1.1 billion.
If the deficit projection in the budget holds up, 2022-23 would be the best provincial financial performance in a decade. While Newfoundland and Labrador booked a surplus in 2019, it was thanks to the accounting treatment of billions in federal Atlantic Accord payments that span future years and decades.
In her first pandemic-delayed budget 18 months ago, Coady said, "Our financial situation is a blinding storm; we are in the middle of a tempest."
Coady again turned to a nautical theme, as she laid out the plan for 2022-23.
"We have weathered this storm," the minister told the House of Assembly. "We may have been lashed by it but the day has arisen with brighter skies and calmer seas. The fog is lifting."