Deficit drops, although oil revenues dip as well
Finance Minister Tom Marshall still concerned about public sector pension plan
The Newfoundland and Labrador government said Monday that its financial position is improving, although reductions in spending are coinciding with a notable decline in oil revenue.
Finance Minister Tom Marshall told reporters that the government now expects to finish the fiscal year at the end of March with a deficit of $450.6 million, down from $563.8 million, which was projected in the March budget.
Marshall said government spending for the year has been reduced by $270.1 million, thanks to delays in infrastructure work and in programs.
"It's little amounts over a huge list of capital projects. There are some delays in roads, some delays in the health sector, some delays in education," said Donna Brewer, the deputy minister of finance.
Oil royalties, corporate and mining taxes down
Oil royalties, though, are also down. The province expects to take in $94.4 million less than first forecast, in part because of longer than expected maintenance at the Terra Nova oilfield southeast of St. John's.
Also affecting the government treasury are corporate and mining taxes that are falling below projections, said Marshall, who took on the reins of the finance department in October when Jerome Kennedy quit politics to return to a law career.
Marshall said Newfoundland and Labrador is outperforming most other provinces in terms of employment and weekly wages, but acknowledged that key economic indicators have worsened since the budget was presented in late March.
Those indicators include housing starts, income and capital investment, as well as the provincial gross domestic product.
However, Marshall said the government will still go ahead with spending reviews of the health and post-secondary sectors.
"We would expect governments and government agencies to be efficient," said Marshall. "But we don't think there is going to be cuts of the same magnitude that you saw at budget time last year."
Marshall added that indicators point to a surplus in 2015.
Public sector pensions still a problem
Marshall acknowledged that the province still has to tackle the long-standing problem in its public sector pension plans.
"They are not sustainable as they are," said Marshall. "They are not going to last."
Marshall said with people retiring earlier and living longer, pension funds are draining faster.
He said the government's total debt is $9.1 billion, with $6.5 billion of that amount tied directly to public sector pensions and retirement benefits.
Our employees should have a good retirement pension plan.- Tom Marshall, N.L. finance minister
However, Marshall said he is not considering the most drastic measure to deal with the matter.
"I'm a believer that our employees should have a good retirement pension plan. I'm not a proponent of the view that we should go to a defined contribution plan. I don't think they work."
Currently, public sector workers have a defined benefit plan which guarantees them a stable retirement at a guaranteed pension level.
A defined benefit plan costs much more than a defined contribution plan, for which critics have been lobbying. A defined contribution plan would generally mean a smaller pension at a higher risk to employees.
However, Marshall said he wants to stick with a defined benefit plan, and he said he will make his stand clear when pension talks with the union resume in January 2014.
With files from David Cochrane