Newfoundland and Labrador has slipped into deficit as offshore oil production dips because of maintenance, and payments from the Atlantic Accord dry up.
The $7.5-billion budget tabled Tuesday projects a $258-million deficit this fiscal year and a provincial net debt of $8.5-billion by the end of March 2013.
The fiscal blueprint also forecasts a deficit in 2013-14 of almost $433-million.
Finance Minister Tom Marshall predicts a $44-million surplus the following year as higher offshore oil royalty rates kick in.
The temporary cash crunch means a loss of 45 temporary government jobs as the province negotiates a new contract with public servants, he said. But the government decided against balancing the budget with more drastic measures, he told a news conference.
“We decided we’re not slashing and burning this year. We’re not doing it all once,” he said.
“We’re going to institute a plan, we’re going to determine what our priorities are to diversify the economy for when ... the oil is gone.”
Mr. Marshall said a government-wide review of each department’s core mandate will help focus program goals and increase cash available to diversify the economy.
The province relies on offshore oil royalties for one-third of its revenues and is also heavily dependent on volatile commodity prices through its mining sector.
Mr. Marshall says planned projects such as the $6.2-billion Muskrat Falls hydroelectric development in Labrador would help the province shake its oil addiction.
Mr. Marshall said payments from the Atlantic Accord offshore management program with Ottawa were worth $536-million last year. The end of the program, along with the loss of offshore production due to maintenance, put a $1.1-billion hole in provincial finances, he explained.
He said the province plans to cut per capita net debt of just over $15,000 a person to the national average of about $14,000 over the next decade.
Mr. Marshall said the provincial economy has never been stronger with record levels of investment and the lowest unemployment rate in 36 years at just under 13 per cent.
“Our strong economy and our solid fiscal performance are assets that we will manage responsibly to provide continuing dividends into the future,” Mr. Marshall said in his speech to the legislature.
“We will strike an acceptable balance between fiscal management and strategic investments. Our future will be shaped by the choices we make right here, right now.”
Mr. Marshall said program spending will rise by just 1.7 per cent, the first time in years the province has spent less than the rate of inflation.
Follow us on Twitter: