Newfoundland and Labrador’s new $7.8-billion budget forecasts a third straight deficit and mounting debt but offers voter-friendly spending across the education, social and health sectors.
The fiscal blueprint tabled Thursday sprinkles new cash across a broad spectrum from all-day kindergarten to more support for students, seniors and low-income families.
It was swiftly dubbed an election budget by Liberal and NDP opposition leaders who say they expect the majority Progressive Conservative government to hit the campaign trail as early as this fall.
Finance Minister Charlene Johnson played down those assumptions.
“It’s a budget that shares the wealth that we are currently seeing in the economy,” she told a news conference before delivering the budget.
“And as the premier said when he was sworn in, we need to share that wealth and do more around social justice.”
It’s Ms. Johnson’s first budget since former finance minister Tom Marshall was sworn in as premier Jan. 24. He replaced Kathy Dunderdale, who resigned amid questions about her leadership, but is not running to remain in the job.
A new Tory leader will be chosen July 5 in St. John’s. Under provincial law, an election must be called within 12 months after the new premier is sworn in.
Ms. Johnson played down questions about whether the budget lays the groundwork for a coming campaign. Opposition critics, for example, have long pushed the Tory government to make good on promised early learning programs.
The new budget commits $35.4-million to enhance such services and offers all-day kindergarten starting in September, 2016.
Over all new spending is up a restrained 2.1 per cent from last year, Ms. Johnson said. It includes salary increases for government workers and $50.6-million over five years to convert provincial student loans into grants.
Ms. Johnson said moves to reduce student debt, freeze tuition for another year and increase low-income supports all reflect concerns raised in pre-budget consultations.
For the third straight year, however, the budget dips into the red and will see the province borrow $1-billion – the first time since 2005 it has had to do so. The budget forecasts a deficit for 2014-15 of $538-million.
Cash reserves that have helped cover recent budget shortfalls have dwindled as the province helps finance the $7.7-billion Muskrat Falls hydro project in Labrador.
Liberal Leader Dwight Ball blasted the government as incompetent money managers.
“A billion dollars in borrowing in a ‘Golden Age,’” he scoffed, referring to a phrase used by Mr. Marshall as finance minister to describe the province’s unprecedented economic growth.
“Really, what this government has done is taken out the kids’ credit card in preparation for, I believe, an election.”
The budget predicts a return to the black in 2015-16 with a surplus of about $28.5-million. It is anchored with a predicted price of oil of $105 (U.S.) a barrel, a key figure in a province that relies on the offshore oil sector for one-third of its revenues. For each dollar the projected price is off, the treasury gains or loses about $30-million (Canadian), Ms. Johnson said.
The budget also includes a hike of almost $808-million in net debt to a total of $9.8-billion in 2014-15. That’s down from a high of almost $12-billion in 2004 but is climbing as unfunded public pension liabilities now account for almost 75 per cent of net debt.
Ms. Johnson said talks are under way with business and union leaders toward a negotiated solution. The answer may include increased pension contributions, reduced benefits or a combination of both, she said.
But what’s clear is that the mounting cost of government retirement plans is now the biggest fiscal challenge, Ms. Johnson said.
“Everybody needs to be a part of this because it’s the most significant financial issue facing our province.”
Sharon Horan, chairwoman of the St. John’s Board of Trade, said the government should lead by example.
“We need them very quickly to come out and modify their own pension plan,” she said in an interview. “They need to show the unions that they’re willing to modify what they’re getting before we ask every pensioner to modify the plan as well.”
Ms. Horan urged the government to act quickly.
“We need to rectify a problem that’s just raging out of control right now.”