P.E.I. projects biggest-ever deficit as spending increases during pandemic
‘None of us expected the economic storm’
The P.E.I. government is projecting the biggest budget deficit in its history, expecting to go $173 million into the red.
It is boosting spending across almost every department in response to the COVID-19 pandemic.
Finance Minister Darlene Compton tabled the province's operating budget for 2020-21 in the legislature Wednesday. A great deal has changed in the last four months, Compton said in her budget address, when the government was projecting a budget with a small surplus.
"The fiscal picture I present today is very different," she said
"We were prepared for some rainy days. None of us expected the economic storm brought on by the COVID-19 pandemic."
COVID relief spending
Compton didn't spell out how COVID-19 specifically contributed to the deficit forecast. However, government had already put forward an accounting of its COVID-19 relief spending.
According to that document, the province had budgeted $44.7 million in direct support to individuals spread across a variety of departments.
The province had also earmarked $39.4 million in COVID-19 relief funding for businesses, including $4.7 million to pay for shipping and storage of processed potatoes and $9.8 million for a loan program to support the tourism industry.
While private sector forecasts are projecting P.E.I.'s economy will shrink anywhere from three to eight per cent this year, the province is projecting a slight increase in taxation revenues despite the pandemic.
The province is projecting overall revenues will be up this year, thanks in part to an expected boost of $185 million in federal transfers compared to 2019-20.
Without the expected boost from Ottawa the province's projected deficit would be twice as large.
The province expects its three biggest tax sources will remain largely unchanged: income taxes, sales taxes and property taxes.
And the province is projecting an increase in corporate taxes of $9 million, even while committing to further lower the small business tax rate from three to two per cent as of Jan. 1, 2021.
Spending by the province is projected to increase $258 million in the current fiscal year, which started on April 1, up 12 per cent compared to the year before.
The biggest year-over-year increase in spending is in the Department of Transportation, up $58 million over the previous year. Federal transfers for provincial and municipal infrastructure projects make up most of the increase.
Total spending on health care is expected to be up $58 million over the previous year, an increase of eight per cent.
The additional health care spending includes an additional $1.25 million to expand dental coverage for seniors and low-income Islanders; $1.23 million to pay for new psychiatric positions; and $416,000 to increase access to home care during evening hours.