Finance

Budget 2006-07 delivers on Five in Five Initiative (06/03/28)

NB 328

March 28, 2006

FREDERICTON (CNB) - Record amounts of money for education, health and seniors, lower taxes for New Brunswickers, a balanced budget, and help to cope with high energy costs are highlights of the 2006-07 provincial budget, brought down today by Finance Minister Jeannot Volpé.

"This budget delivers on Premier Bernard Lord's Five in Five Initiative," Volpé said. "This budget is about making New Brunswick more competitive economically and more progressive socially, which in turn will accelerate prosperity in our province and create greater opportunity for all."

(Multimedia)

The Smart Province

The first goal of the Five in Five Initiative is to make New Brunswick known as the Smart Province. The intent is to have the highest increase in workers with post-secondary education in Canada.

As a result, the 2006-07 Budget provides for total record investments in kindergarten-to-Grade-12 education of $893 million, a $37.5 million or 4.4 per cent increase over 2005-06 spending. It will provide 240 new teaching positions.

"This year's budget builds on investments in the Quality Learning Agenda to improve educational outcomes and raise standards while ensuring each young New Brunswicker receives the best education possible," Volpé said. "It also contains a number of initiatives to support and implement the findings of the MacKay report on inclusive education. With this budget, direct spending per student has increased nearly 50 per cent since 1999."

Maximum class size will be reduced by a minimum of four students for all grades over the next four years. There will be an immediate reduction of one student per maximum class size in all grades in September 2006. $5 million will be provided to address classroom composition issues following consultations with stakeholders.

Volpé also announced the expansion of the Dedicated Notebook Research Project, by investing a further $9.4 million in 2005-06. This pilot project, initiated in 2004 to supply notebook computers to teachers and students in nine Grade 7 and nine Grade 8 classes, will be expanded to more Grade 7 and Grade 8 students as well as some Grade 9 students. As well, all 7,500 New Brunswick teachers will have the opportunity to obtain a notebook.

Wages for supply teachers will increase in 2006-07 from $97 per day to $113 per day for non-certified teachers, and from $105 to $140 per day for certified teachers. Funding to universities will be increased to meet the government commitment of a 13 per cent increase by 2007-08. This will mean that by 2007-08, annual funding to universities will have increased by over 34 per cent, or $54.7 million, since 1999.

In addition, the province will invest $800,000 to establish a commission to better plan for the future of post-secondary education in New Brunswick.

On the training side, $3.5 million will be invested in capital spending to renew the infrastructure of the provincial community college system. The budget also contains a further $1 million in adult literacy programs, and additional funds will be made available for enhanced apprenticeship training and other adult learning and skills initiatives.

The budget also invests $1 million in the provincial library system to build quality and equitable services and to provide tutoring programs to foster literacy among students.

One-time federal funding for early learning and child care in 2005-06 and 2006-07 totals $31 million for New Brunswick. Spending on new provincial early learning and child care initiatives totalled approximately $10 million in 2005-06 and will increase to $13 million in 2006-07.

Government is investing $3 million in 2006-07 to provide additional increases to the wages of child-care workers, building on investments announced last year.

Although this federal funding will not be renewed in 2007-08, government will continue to maintain this new, increased level of spending on early-learning and child-care initiatives.

The government is also establishing an Early Learning and Child Care Trust with the remaining $8 million from the one-time federal funding. Child-care operators, community groups and other relevant organizations can use the fund for renovations to existing facilities for the establishment of a pre-kindergarten program and curriculum development, equipment and material for pre-kindergarten, training for day-care workers, and incentives for providing new child-care spaces for rural areas, infant care, seasonal and shift work as required to meet community needs.

The Investment Province

"As finance minister I have received a clear mandate from the Premier: to make New Brunswick the Investment Province," Volpé said. "The objective is to have the lowest tax burden east of Alberta, and the biggest decrease in the unemployment rate in Canada. The personal and corporate income tax reductions introduced by the government since 1999 have contributed significantly to investment, job creation, economic growth and prosperity, and with today's budget we are committed to go even further."

The 2006-07 budget provides an additional $16 million in personal income tax savings in 2006. As part of the commitment to lower personal income taxes by five per cent, provincial income tax credit amounts and tax brackets will continue to be indexed to protect against inflation.

In addition, effective for the 2007 taxation year, the province will enhance the Low-Income Tax Reduction so that all single tax filers with incomes up to $13,750, and families with incomes up to $22,000, will pay no provincial personal income tax. This will provide an additional $4.8 million in tax relief in 2007.

"New Brunswickers currently enjoy the lowest provincial personal income taxes east of Ontario," Volpé said. "Because of initiatives introduced by government, more than 50,000 New Brunswickers will not have to pay any provincial personal income tax when they file their returns for 2007 compared to the 1999 tax system."

For businesses, effective July 1, 2006 the small business tax rate will fall to 1.5 per cent, and to one per cent in 2007, making it the lowest rate in the country. In addition, the tax threshold will increase to $475,000 on July 1, 2006, and to $500,000 on July 1, 2007. This is the highest small business threshold in the country.

The general corporate income tax, which was 17 per cent in 1999, will be lowered from 13 per cent to 12 per cent effective Jan. 1, 2007. This will provide New Brunswick businesses with an estimated $11 million in savings in 2007.

"The government knows the forestry sector is going through difficult times," Volpé said. "We believe that the $250-million, five-year Forestry Assistance Support Package announced last December will help the forestry industry respond to current challenges in world market conditions."

Part of this initiative is the commitment to eliminate the large corporation capital tax by the end of 2008. The 2006-07 budget sets out the planned phase-out. This will result in savings of $7.5 million to New Brunswick businesses in 2006-07 alone, and an estimated $45 million annually once eliminated.

In addition, effective for investments made after March 31, 2006, and before Dec. 31, 2007, qualifying forestry industries will receive a rebate of 50 per cent of the investments in manufacturing and processing equipment, up to a maximum of 50 per cent of the provincial property tax paid for that year.

The credit is in effect for the 2006 and 2007 taxation years. Over the two-year period, this will provide an estimated $18 million in assistance to the forestry industry.

Close to 200 forestry companies may qualify for this tax credit if they make an eligible capital investment. Qualifying forestry industries include: pulp and paper mills; sawmills; shingle and shake mills; wood preservation; millwork; and wood-product manufacturing.

The New Brunswick Department of Finance will process applications and issue rebate cheques. Further details on the rebate application process will be released in the near future.

The Wellness Province

The third objective of the Five in Five Initiative is to make New Brunswick known as the Wellness Province, with the biggest increase in physical-fitness participation of any province in Canada.

Total investment for health care and senior care in 2006-07 will be $2.46 billion, the highest amount ever. This budget will fund 27 new physician positions throughout the province, further improving New Brunswickers' access to family practitioners and specialists.

Other initiatives include:

"Wellness has been a recurring theme during the last two pre-budget consultations," Volpé said. "People told us that wellness is an important area for investment, and that preventing illness does not just save the health-care system money, but helps people live quality and fulfilling lives. Today's budget responds to what they have told us by announcing the establishment of a five-year, $25 million Wellness Infrastructure Fund."

This new initiative will replace - and build upon - the three-year, $10-million Community Partnership Fund that was announced last year. Through this fund, the province will provide funding support toward the capital cost of new or expanded sport and recreation facilities, playing fields, walking trails and other priorities.

For long-term care and nursing homes, the 2006-07 Budget provides $335.3 million in record funding.

Effective Jan. 1, 2007, the government will cover nursing home care costs, which represents an investment of $5.2 million in 2006-07. With this new measure, the maximum amount that all residents will pay will be based on $79 per day, which includes room and board costs.

"New Brunswickers put a high value on seniors and their care," Volpé said. "During our pre-budget tour, they told us it is important that seniors be allowed the dignity and respect they deserve, and that they have access to the wealth they have worked for and saved over their lives. This budget continues the commitment toward seniors."

As well, effective April 1, 2006, proceeds from the sale of the client's principal residence will be exempt for clients using residential services in nursing homes, special care homes and community residences.

For special care homes, the Level 1 rate that operators receive will increase by $2 per day on July 1, 2006, and $4 per day on Jan. 1, 2007, for a total increase in 2006-07 of $6 per day.  The Level 2 rate also will increase by $2 per day on July 1, 2006, from $68 to $70.

Additionally, the elimination of the grandfather clause for special-care-home residents has been moved up to 2006-07 rather than 2007-08 as previously announced.

The 2006-07 budget also includes a 3.9 per cent increase for home support agencies, the majority of which will go to wages and benefits. This measure represents an investment of $2.1 million.

Today's budget also makes investments for culture totalling $9.2 million, including a new investment of $1 million to implement the Book Policy and the second phase of the Cultural Policy. This is the first year of a $3-million increase over three years.

The Clean Province

The 2006-07 budget reflects government's commitment to make New Brunswick the Clean Province, with the greatest reduction in air and water pollution in Canada.

Today's budget provides strategic investments to protect and clean up the environment. That is why funding for the Environmental Trust Fund will be pegged at $5.6 million this year.

Several other initiatives include:

The Inclusive Province

This fifth goal of the Five in Five Initiative is centred on New Brunswick having the largest reduction in the poverty rate in Canada.

"While the number of people on social assistance has declined by 27.2 per cent since June 1999, it remains that the government must still provide financial support for those who need it the most," Volpé said. "This budget announces increased funding of two per cent for social assistance rates."

In an effort to assist New Brunswickers in dealing with the impact of increasing energy costs, Premier Bernard Lord announced yesterday an Energy Action Plan, which represents investments of more than $100 million. The 2006-07 budget reflects this commitment.

"Energy prices are a global issue, and significantly affect New Brunswickers," Volpé said. "While government has no control over this situation, we have heard New Brunswickers' concerns loud and clear, and with today's budget, we will act."

In this manner, to protect consumers, the government will instruct NB Power Distribution and Customer Service that rate increases shall not exceed eight per cent this coming year for any category of ratepayers.

"This will result in savings to New Brunswickers of an estimated $46 million in 2006-07, relative to if the proposed rate hikes of 11.4 per cent were approved," Volpé said. "We have also directed the NB Power group of companies to seek further efficiencies in their operation in order to protect consumers from future rate increases."

In addition, effective July 1, 2006, residential customers from all brackets will benefit from a rebate of the eight per cent provincial portion of the harmonized sales tax (HST) on home energy costs. This will apply to all types of home energy, including heating oil, electricity, natural gas, propane, wood and kerosene.

This rebate is expected to save New Brunswickers $45 million in 2006-07, with an estimated full-year saving of $55 million.

For a household which pays $3,000 per year for energy (electricity and heating) the rebate amounts to $240.

The New Brunswick Department of Finance will process applications and issue refunds to qualified applicants. Further details on the rebate application process will be released in the near future.

"Even with this new program, New Brunswickers must keep in mind that efficiency remains the most cost-effective and permanent solution to reducing energy costs," Volpé said.

"The creation of the Energy Efficiency and Conservation Agency of New Brunswick this past fall was an important stepping-stone to providing consumers, homeowners and businesses with the information and financial and technical assistance to help them reduce their energy consumption. This budget contains $11.9 million for this initiative, including $8 million for agency programs and operations, $3.4 million for loans and advances for residential energy conservation projects, and $0.5 million in HST rebates on home improvement work."

In addition, the budget of the Department of Family and Community Services contains $4.8 million for a joint initiative with the Energy Efficiency and Conservation Agency of New Brunswick and federal government to provide grants to low-income households to help improve the energy efficiency of their homes.

Funding for community volunteer agencies will increase by two per cent. Gas and heating fuel totalling $1.7 million and an investment of $1.9 million for the Family Support Orders Service are also included in this budget.

Fiscal outlook

Volpé announced that the 2006-07 budget estimates a surplus of $116.8 million for 2005-06 and forecasts a surplus of $22.2 million for 2006-07. He also said that the New Brunswick economy is growing and diversifying.

Real GDP growth in New Brunswick in 2006 will be around 2.5 per cent.

Investment will again be an important driver of growth, with several major projects currently underway in the province:

A record level of employment is expected in 2006, and the unemployment rate should fall again this year to a new, 30-year low.

"While our economy continues to grow, we must not overlook the fact that not all sectors of the economy or regions of the province are growing and benefiting at the same pace," Volpé said.

"We know that pulp and paper mill closures in smaller communities, and jobs lost in other sectors, have had a tremendous impact on workers and their families. The government will continue to work in conjunction with the private sector, communities and workers to find made-in-New Brunswick solutions to these problems."

With this budget the province's net debt-to-GDP ratio will be reduced for the seventh consecutive year, to reach its lowest level since the early 1990s, and debt service costs as a percentage of total expenditures are at their lowest level in over two decades.

06/03/28

EDITOR'S NOTE: The complete budget speech, the main estimates and the annual report on the economy are available on the Department of Finance website at http://www.gnb.ca (Keyword: Finance). MEDIA CONTACT: Vicky Deschênes, Finance, 506-453-2451.

06/03/28