N.L. budget pledges 'change' and shift in status quo to rescue fiscal future
Deficit for 2021-22 projected at $826M, half of prior year’s total
The Newfoundland and Labrador government is promising a "new course" forward and saying "change starts here," as it looks to sop up the red ink sloshing around the fiscally troubled province's treasury.
"This is an important moment in our history," Finance Minister Siobhan Coady said in her budget speech, delivered at the House of Assembly in St. John's on Monday afternoon.
"In this moment we can learn from the past and change the future."
Coady said the "status quo is no longer acceptable."
The numbers on Newfoundland and Labrador's ledger explain why.
The budget deficit for 2020-21 came in at north of $1.6 billion — a dire figure that was actually better than expected.
This year's projected deficit is about half that total, at $826 million.
The government hopes to balance the books in five years.
The question now is what will be done to make that a reality.
"In the last year, strong fiscal management and greater revenue have helped alleviate the continued effects of a volatile oil industry and a pandemic that has caused a global economic crisis," Coady said.
"Despite our improved performance, solutions are needed to address long-standing structural issues such as the high cost of providing services to nearly 600 communities across a large geography, chronic deficits, dependence on volatile oil revenues, as well as a declining and aging population."
Greene report recommendations scattered throughout budget
Many of the ideas from the recent Greene report are sprinkled throughout the budget document as things up for consideration.
"Consultations are underway on the premier's economic recovery team report," Coady told the legislature.
"We will listen to what you have to say for future direction."
That report — chaired by former Royal Mail CEO Moya Greene — recommended major cuts to government spending.
The province will examine a number of options flagged by Greene, without committing to full implementation of them.
There is a plan to "immediately begin the restructuring of Nalcor" and to review the province's oil corporation. Greene suggested getting rid of both.
Assets such as Marble Mountain, offshore oil and gas equity stakes, as well as the Newfoundland and Labrador Liquor Corporation will be reviewed. Greene advised selling them off, in part or in whole.
Two Crown corporations — NL911 and the Newfoundland and Labrador Centre for Health Information — will be rolled into the core government. Greene had advised reducing the number of agencies, boards and commissions.
The province will also take steps to integrate the Newfoundland and Labrador English School District into the Department of Education.
Targeted tax changes
There are some measures in the budget that will affect taxpayers' wallets.
But they are targeted initiatives, not sweeping changes.
The top three per cent or so of earners — anyone making more than $136,000 — will see income tax increases. Those changes are expected to generate $15.3 million for provincial coffers.
Some other changes align with the theme of health promotion touted by the Andrew Furey administration.
A physical activity tax credit of up to $2,000 per family will be introduced.
Tobacco taxes are on the rise again — a three-cent increase per cigarette and an increase of six cents per gram on fine-cut tobacco.
A 20-cent-per-litre sweetened beverage tax will become effective next April, although the exact details of that are still being worked out.
Also, homeowners can also get some help transitioning their homes from oil to electricity, with a rebate of as much as $2,500.
Significant revenue increase this year
Provincial government revenues are expected to sharply climb this year.
Last year, just over $7 billion flowed into the treasury.
This year, that number is projected to jump to $8.5 billion.
There are two key factors in that good-news revenue rise: additional federal government-related cash inflows, and a big bounce in oil royalties.
Rebounding crude prices could see the province bring in $1.1 billion this year, almost double the $597 million from last year.
That change again underscores the importance of oil and gas revenues to Newfoundland and Labrador's fiscal fortunes, at least in the near term.
Spending projected to rise
While revenues are jumping, there is no corresponding cut on the expenditure side of the ledger for the coming year.
In fact, spending is actually projected to rise to $9.3 billion in 2021-22.
Officials attribute that increase to the timing of when revenue from a $320-million federal oil and gas fund hit the books, some other federal-provincial cost-sharing agreements, and wage increases for public-sector workers.
However, the province expects to sharply reduce spending next year.
Initial forecasts for 2022-23 show spending going down by more than $800 million, to around $8.5 billion.
Some of that relates to expiring federally funded programs.
We're not expecting mass layoffs.- Siobhan Coady
But up to half a billion dollars of the planned reduction relates to annual structural spending.
Asked by reporters about the possibility of job losses related to all of this, Coady said, "We're not expecting mass layoffs."
The government also plans to introduce balanced budget legislation.
Actually returning to surplus seems to be a more of an aspirational goal at this point, however, with a target date of 2026-27.