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Newfoundland and Labrador budget cuts jobs, costs as deficits mount

Newfoundland and Labrador Minister of Natural Resources Jerome Kenned, left, signs a ceremonial version of the formal agreement between Nalcor and Emera for the Lower Churchill hydro development in St. John's, Tuesday, July 31, 2012. Also at the table are Nova Scotia Natural Resources Minister Charlie Parker, Nalcor president and CEO Ed Martin and Emera president Chris Huskilson.


Newfoundland and Labrador will trim government jobs and cut the size of the premier's cabinet in a $7.6-billion budget tabled Tuesday as the province faces a deficit of $563.8-million in the 2013-14 fiscal year.

The deficit is on top of a shortfall of almost $431-million for this fiscal year as net debt grows almost $1-billion to $9.5-billion next year.

The numbers are better than recent warnings that the province was facing cumulative deficits that could total almost $4-billion as world economic troubles cut demand for the province's oil and minerals.

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Instead, the province is forecasting a deficit of $650.5-million in 2014-15, for a total of just over $1.2-billion in the next two fiscal years.

Increased oil production, cost-cutting and a higher-than-expected sales tax refund from Ottawa helped reduce the shortfall.

The province is trimming about 1,200 government jobs through layoffs and cutting vacant positions, and has approved another 200 early retirements.

The budget does not raise personal or corporate income taxes and predicts a return to surplus of just over $230-million by 2015-16.

"It's a tough situation," Finance Minister Jerome Kennedy said of the job cuts. "It's not one that I particularly like, it's not one that any of us like. But it's something that we have to do in order to ensure that we can reduce the deficits and return to surplus in three years."

Opposition critics have accused the majority Progressive Conservative government of poor planning and reckless spending.

"We've made great investments in the past," Kennedy told a news conference. "We've rebuilt the province, for lack of a better term, and the economy is strong. But, unfortunately, we've reached a point where our revenues don't equal our expenditures."

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Kennedy outlined a 10-year sustainability plan to control spending and keep it in check. The first two years focus on eliminating the deficit through public sector cuts, reviews of Memorial University of Newfoundland and College of the North Atlantic, and an effort to rein in the runaway costs of unfunded public pension liabilities.

The third year of the plan projects a surplus in 2015, the same year the next provincial election is set. The fourth to 10th years focus on debt reduction and economic diversification.

The government has sunk about $3-billion into government pension plans but unfunded portions still account for about 70 per cent of net debt, Kennedy said. Premier Kathy Dunderdale has warned the plans could go bankrupt unless public sector unions compromise with the province.

The budget is anchored on what Kennedy called a "conservative" Brent crude oil price of $105 (U.S.) a barrel. That price was reached after consulting several experts and is far lower than the $124 on which last year's budget was based, he said.

Prices hovered closer to $109 for much of the year, taking about $25-million from government coffers for each $1 it fell below the budgeted amount.

The province relies on offshore oil for about one-third of its revenues.

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Some analysts have predicted oil prices could dip far lower but Kennedy said they're "out to lunch." He said global supply and demand, along with the fact that Saudi Arabian producers have said they need at least $100 a barrel, will keep oil prices from dipping too low.

Dunderdale will take on intergovernmental duties as she cuts one cabinet minister and blends Labrador and aboriginal affairs into one post.

A range of new fees and a higher tobacco tax will bring in $19.3-million in the next fiscal year.

Historic sites around the province will increase admission rates and stop offering one free day a week as of April 1. The cost of each cigarette will go up by 1.5 cents as of Wednesday.

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