Budget Highlights 2002-2003 Published by: Department of Finance Province of New Brunswick P.O. Box 6000 Fredericton, New Brunswick E3B 5H1 Canada Internet: www.gnb.ca/0024/index-e.asp March 2002 Cover: Communications New Brunswick (CNB 1199) Translation: Debates Translation, Legislative Assembly Typesetting: Queen's Printer for New Brunswick Printing and Binding: Printing Services, Supply and Services ISBN 1-55236-804-1 Printed in New Brunswick 2002-2003 Budget Choosing Prosperity: A Balanced Approach The initiatives we are setting out in the 2002-2003 Budget reflect choices that will help New Brunswick achieve greater prosperity through investments in innovation, infrastructure and tax relief. At the same time, as part of our balanced approach, we continue to invest in the priorities that matter most to New Brunswickers such as health care and education. As a result of our plan and this approach, New Brunswickers will benefit from: ( a record high investment for health care and seniors of $1.8 billion ( a record high investment for education and children of $1.09 billion ( personal income tax relief of an additional $27 million ( additional corporate income tax reductions of $11 million ( $35 million in investments in two funds for innovation and university infrastructure ( and a budgetary surplus of $21.3 million in 2002-2003 With this budget, we are taking solid, fundamental steps to make our province open to investment and innovation. We are laying down the true building blocks to lasting economic success and a more globally competitive New Brunswick. The Economic Outlook At the onset of last year's budget, it was already evident that the North American economy was in a slowdown. The events of September 11th intensified what was originally expected to be a brief downturn in the world economy. New Brunswick was not immune to this slowdown. While many New Brunswick indicators reported a slower trend in 2001, there are positives worth noting: ( Department of Finance estimates 0.6% real GDP growth for New Brunswick in 2001 ( labour force participation rate reached a record level, rising for the fifth consecutive year ( exports of goods to foreign destinations increased 11.6% to over $8.3 billion, largely on the strength of energy products ( total employment across the province is at a record high level ( private sector consensus is for 1.3% real growth in 2002; Department of Finance estimate is 1.2% Fiscal Update 2001-2002 The 2001-2002 Budget and the November Financial and Economic Update anticipated that the Province would end the current fiscal year with balanced results, despite the considerable economic challenges and uncertainty we faced. Our approach in exercising fiscal discipline and managing smarter is focused on these guiding principles: ( identify and invest in priority areas such as health care, education and jobs, while tightly managing expenditures in other areas ( plan cautiously and prudently to allow for fluctuations in revenue and expenditures ( ensure flexibility to respond to urgent needs and events ( use the Fiscal Stabilization Fund carefully The result is: ( a budgetary surplus of $37 million for 2001-2002, which slightly exceeds the original budget target. Higher revenues, coupled with savings in several departments, have enabled additional expenditures in certain priority areas: ( additional $44 million in the Department of Health and Wellness, including increased expenditures for Medicare, Hospital Services and the Prescription Drug Program ( $35 million in special investments in two funds for innovation and university infrastructure ( a $70 million transfer to the Fiscal Stabilization Fund Fiscal Outlook 2002-2003 This budget is another example that strong fiscal discipline remains a hallmark of this government: ( Province is projecting a surplus of $21.3 million for the 2002-2003 fiscal year ( third consecutive balanced budget delivered by this government ( overall expenditure growth has been, and will continue to be, tightly managed ( revenue projections improved over the course of the past few months ( budgetary revenues for 2002-2003 forecast at $5.288 billion, representing growth of 2.6% from 2001-2002 ( budgetary spending is estimated at $5.267 billion, a growth rate of 3.0% from 2001-2002 ( 88% of additional ordinary account program spending is on health and education This budget reflects the balanced approach this government has taken to invest strategically in clear public priorities, while tightly managing the growth of other expenditures. The choices made in balancing the budget were not taken lightly. By managing smarter, however, the budget has been balanced. Capital Spending This year's capital budget is about investing in strategic infrastructure, one of the four building blocks of the prosperity plan. This budget sets out gross capital expenditures of $257.8 million for 2002-2003, an increase of over 25% from 2001-2002. Capital budget highlights include investments in these key priority areas: ( $34 million for education ( $11.5 million for health ( $10.6 million for "green" infrastructure ( $168.1 million for transportation, an increase of 36% from 2001-2002 Investing in Health Care and Seniors In preparing this budget, we have used a balanced approach that will serve to grow our economy while at the same time helping to meet the social needs of New Brunswickers. Renewing health care for families and seniors has been a top priority of this government since June 1999, and it remains so. We committed to increasing funding for health care each and every year and we have done so. Cumulatively, $1.1 billion more has been invested in health care since 1999. To illustrate what these investments mean to New Brunswickers, this government has provided for: ( an additional 15 medical school seats annually for New Brunswick students ( a $3 million physician recruitment and retention program which, together with increased remuneration for physicians, has helped recruit 249 new doctors, for a net increase of 65 more doctors ( a three-year, $8 million nursing resources recruitment and retention strategy ( 90 new drugs under the Prescription Drug Program ( significant increases in the number of social workers and adoption workers ( twice the number of magnetic resonance imaging (MRI) units in the province In this budget we are investing a record $1.8 billion in health care in 2002-2003. This represents an additional $80.6 million, or 4.7%, over 2001-2002 revised spending levels and equates to a budget-over-budget increase of $120 million for health care. Today's budget allows for investments in key program areas, including: ( $819.1 million for Hospital Services ( a total of $309.8 million for Medicare ( long-term care funding of $278.0 million ( $102.5 million for the Prescription Drug Program ( $10.0 million increase for nursing home operations and employees ( $1.00 per hour increase over the next three years, beginning with a 50 cent increase this year towards homemakers' wages -- an additional $1.6 million for homemakers this budget year ( Low-Income Seniors' Benefit program to continue -- estimated cost of $3.2 million ( $4.5 million for health care renewal initiatives Investing in Education and Children Investing in people is a fundamental building block in the prosperity plan. Our objective is an educated, well-trained, skilled and adaptable labour force supported by a culture of lifelong learning. One of our core commitments is to increase funding for education each and every year. Since taking office, this government has cumulatively increased education spending by $410 million. This has allowed us to make the following key investments in education: ( 200 additional qualified teaching assistants ( a $100 million Healthy Schools capital improvement program ( reduced class sizes for Grades 2 and 3 ( $7.5 million over three years to provide access to high speed Internet bandwidth in all schools ( $6.1 million over three years in additional financial support to enhance access to post-secondary education This year's budget increases education funding once again. The 2002-2003 Budget contains record investments in education totaling $1.09 billion, which represents growth of 4.5%, or $46.8 million, from 2001-2002. Today's budget provides for: ( additional $36.6 million in funding for Kindergarten to Grade 12, including a negotiated wage increase for teachers ( $4.9 million increase in university grants, the third consecutive year in which funding for universities has been increased ( additional $1.4 million to enhance access to post-secondary education ( early childhood development funding will increase by $2.4 million Focusing on New Brunswick Priorities In the wake of September 11th, New Brunswickers saw the need to take additional steps to secure our future and enhance public safety. The 2002-2003 Budget will therefore invest over $2.6 million more in such initiatives. This includes: ( an additional 10 RCMP officers ( enhanced criminal intelligence capabilities ( a Hazardous Materials Emergency Response Program ( operation of a Level 3 Laboratory to deal with bio-terrorism ( security enhancements in provincial facilities Other 2002-2003 spending priorities include: ( an additional $1.5 million in funding in order to hire additional staff to ensure the continued, efficient administration of justice ( $10 million for the continuation of the Total Development Fund ( $3 million for the Community Economic Development Fund ( $2.8 million over three years to enhance arts and heritage; $1.2 million more this year is allotted as the first phase in the implementation of the new cultural policy Greater Opportunity: New Brunswick's Prosperity Plan A prosperous growing economy is at the heart of our objective to bring greater opportunity to New Brunswickers in all regions of the province. That is why this government launched the most comprehensive and far-reaching plan to build New Brunswick's economy that we have ever seen. Greater Opportunity sets out four building blocks as the foundation for lasting economic success and prosperity for New Brunswickers: ( investing in people ( creating a competitive fiscal and business environment ( embracing innovation ( and building strategic infrastructure Each block has four cornerstones, and specific action priorities flow from each cornerstone - more than 60 action priorities in total. This budget moves the prosperity plan into high gear. It invests in innovation - the lifeblood for tomorrow's ideas - to secure New Brunswick's economic future. It invests in our universities to help build the strategic infrastructure they need to become nationally and internationally competitive institutions on the forefront of knowledge and innovation. It lowers taxes to help people and businesses and to help stimulate job creation. Investments in innovation and universities include: ( creation of the New Brunswick Innovation Foundation with an initial fund of $20 million ( a one-time investment of $15 million for a special University Infrastructure Trust Competitive Taxes for Jobs and Growth Competitive taxes are also a cornerstone of the prosperity plan. Lower taxes help create a more competitive business environment that encourages private sector job creation and economic growth. They create the incentive for businesses within New Brunswick to invest and expand. And they help attract new investment from outside New Brunswick. They encourage prosperity and provide greater opportunity. This government is making significant reductions from the taxation levels in place in June 1999. These measures include: ( move from the highest general corporate income tax rate in Canada in 1999 at 17% to the third-lowest in Canada as of January 1, 2003, at 13% ( maintain the lowest small business corporate income tax rate in all of Canada by reducing it from 6% in 1999 to 3% as of January 1, 2003 ( double the small business threshold from $200,000 in 1999 to $400,000 as of January 1, 2003 ( remove more than 40,000 low-income New Brunswickers from the tax rolls by the 2003 taxation year ( reduce personal income taxes by 10.7% in just three years, one year earlier than the promised 10% reduction ( provide New Brunswick taxpayers and businesses some $287 million in cumulative personal and corporate income tax reductions since our first budget BUDGET PLAN 2002-2003 Millions $ BUDGETARY ACCOUNTS Budget Plan Ordinary Account: Revenues 4,847.4 Expenditures 4,949.4 Surplus (Deficit) (102.0) Capital Account: Recoveries 48.0 Expenditures 257.8 Net Capital Expenditures 209.8 Special Purpose Account: Revenues 32.7 Expenditures 31.2 Surplus (Deficit) 1.5 Special Operating Agencies: Revenues 187.3 Expenditures 175.7 Surplus (Deficit) 11.6 Sinking Fund Earnings 240.0 Decrease (Increase) in Net Debt (58.7) Transfer (to) from Fiscal Stabilization Fund 80.0 Surplus (Deficit) 21.3