Finance

2002-2003 Budget (02/03/26)

NB 281

March 26, 2002

FREDERICTON (CNB) - The New Brunswick government today delivered its third consecutive balanced budget, containing increased funding for health care, education, innovation and university infrastructure as well as lower taxes for people and businesses.

Finance Minister Peter Mesheau and Natural Resources and Energy Minister Jeannot Volpé."The initiatives we are setting out today reflect choices that will help New Brunswick achieve greater prosperity through investments in innovation, infrastructure and tax relief," Finance Minister Peter Mesheau said when he tabled the 2002-2003 budget in the provincial legislature.

Finance Minister Peter Mesheau and Natural Resources and Energy Minister Jeannot Volpé. (150 dpi image) Audio - Quicktime (1) (2) (3) Video - Quicktime Movie (1) Microsoft ASF (1) - (more audio/video)

"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, New Brunswickers will benefit from:

  • a third consecutive budgetary surplus, projected at $21.3 million in 2002-2003;
  • a record $1.8 billion investment in health care and seniors, with new investments of $80.6 million;
  • a record $1.09 billion investment in education and children, with new investments of $46.8 million;
  • personal income tax reductions of $27 million;
  • corporate income tax reductions of $11 million;
  • $35 million investment in two funds for innovation and university infrastructure.

"Strong fiscal discipline is, and will remain, a hallmark of this government," the minister said.

Highlights of budget

The minister noted in his budget speech:

  • budgetary surplus of $37 million is projected for 2001-2002; the surplus has been achieved without drawing down the Fiscal Stabilization Fund; in fact, an additional $70 million will be transferred into the fund at year-end to allow for greater financial flexibility in future;


  • budgetary surplus of $21.3 million is projected for 2002-2003; it marks the third consecutive balanced budget for this government; the Fiscal Stabilization Fund will be drawn down by $80 million;


  • budgetary revenues for 2002-2003 are estimated at $5.288 billion, representing growth of 2.6 per cent from 2001-2002; budgetary expenditures are estimated at $5.267 billion, a growth rate of 3.0 per cent from 2001-2002;


  • as announced earlier by the premier, an Innovation Fund worth $20 million will be set up to increase innovation capacity; this seed money will help close the research and development gap between New Brunswick and the rest of Canada;
  • University Infrastructure Trust worth $15 million will be set up to provide for infrastructure improvements in universities, this will help ensure excellence in their research and teaching capacity;
  • real GDP growth of 1.2 per cent is projected for 2002; real growth for 2001 is now estimated at 0.6 per cent;
  • the gross capital budget for 2002-2003 is $257.8 million; spending reflects the government's commitment to investing in strategic infrastructure, one of the building blocks in Greater Opportunity: New Brunswick's Prosperity Plan.

Finance Minister Peter MesheauInvesting in health care and seniors

The government remains committed to health care as its top priority. Funding for health care in 2002-2003 will be a record-high $1.8 billion. This represents an additional $80.6 million, or 4.7 per cent, over 2001-2002 revised spending levels.

Measures will include $819.1 million for hospital services; $309.8 million for Medicare; $278 million for long-term care, and $102.5 million for the Prescription Drug Program.

Finance Minister Peter Mesheau (150 dpi image) Audio - Quicktime (1) (2) (3) Video - Quicktime Movie (1) Microsoft ASF (1) - (more audio/video)

Additional funding includes $10 million for nursing home operations and wages of employees; $4.5 million for health-care renewal initiatives, and $1 per hour wage hike towards wages paid to home care support workers, over three years, starting with 50 cents per hour this year.

The Minister of Health and Wellness will present additional details about expenditures during presentation of his estimates in the legislature.

Investing in education and children

The government is committed to investing more in education because investing in people is a fundamental block in the government's 10-year prosperity plan, Mesheau said.

Funding for education totals $1.09 billion, which represents 4.5 per cent growth from 2001-2002. The total includes an additional $36.6 million in expenditures for Kindergarten to Grade 12, $4.9 million in grants to universities and $2.4 million for early childhood development programs.

The minister said $6.1 million will be spent, over three years, to enhance access to post-secondary education. Another initiative spread over three years will provide access to high speed Internet bandwidth in all schools. This will cost $7.5 million.

The Minister of Education and the Minister of Family and Community Services will outline further details about expenditures during consideration of their estimates in the legislature.

Personal income tax changes

Mesheau said the government is committed to reducing the tax burden on New Brunswickers.

"Including measures in today's budget, New Brunswick taxpayers and businesses will save $287 million in cumulative personal and business income tax reductions since our first budget," the finance minister noted.

As a result of measures taken by this government since 1999, more than 40,000 tax filers will no longer pay provincial income tax.

Effective for the 2002 taxation year:

  • single tax filers with incomes up to $11,000 and families earning up to $18,000 will no longer pay provincial income tax;
  • this will remove more than 10,000 additional tax filers from the provincial income tax rolls for the 2002 taxation year.

Effective for the 2003 taxation year:

  • single tax filers with incomes up to $12,500 and families earning up to approximately $20,000 will no longer pay provincial income tax;


  • this will remove a further 15,000 tax filers from the provincial income tax rolls for the 2003 taxation year.

Savings:

  • the low-income tax reduction is expected to save taxpayers $6 million in 2002-2003;


  • estimated savings from indexation (announced in the previous budget) are $21 million in 2002-2003;


  • the cumulative personal income tax savings over the 2000-2001 through 2002-2003 fiscal years are estimated at $231 million.

"This equates to a savings of 10.7 per cent which exceeds the government's commitment of a 10 per cent reduction in personal income taxes," the minister said.

"The bottom line is that this government is allowing New Brunswickers to keep more of their hard-earned dollars," he added.

Corporate income tax changes

Mesheau said competitive taxes are vital to a prosperous economy. The government has progressively lowered corporate income tax measures to help make New Brunswick a magnet for new business investment.

Effective July 1, 2002, there will be:

  • a reduction in the small business corporate income tax rate from 4 per cent to 3.5 per cent;
  • an increase in the small business income threshold from $300,000 to $350,000;
  • a reduction in the general corporate income tax rate from 16 per cent to 14.5 per cent.

Effective Jan. 1, 2003, there will be:

  • a reduction in the small business corporate income tax rate from 3.5 per cent to 3.0 per cent;
  • an increase in the small business income threshold from $350,000 to $400,000;
  • a reduction in the general corporate income tax rate from 14.5 per cent to 13 per cent.

The small business corporate income tax rate is already the lowest in the country. By Jan. 1, 2003, New Brunswick will have the third lowest general corporate income tax rate in the country.

Mesheau said that, combined, the new measures will generate additional corporate income tax reductions of $11 million in 2002-2003.

"Once fully implemented, these new measures will be worth approximately $39 million annually in tax reductions for New Brunswick's small, medium and large businesses," he added.

Conclusion

In concluding his speech, the minister reiterated that the budget represents a major step forward, and a critical first step, in implementing the government's 10-year prosperity plan.

"Measures announced today represent an important step in making New Brunswick an investment magnet," he said. "They will create jobs and economic growth and lead us towards greater prosperity."

02/03/26

EDITOR'S NOTE - Media contacts are Ann Deveau (506-444-4498) or Véronique Mercier-Dickens (506-453-4138), communications, Finance. They can also be reached by telephone 506-453-2451; fax 506-457-4989; e-mail wwwfin@gnb.ca

The complete budget speech, a highlights booklet, the main estimates and the annual report on the economy will be posted on the Department of Finance Web site at http://www.gnb.ca/0024/index-e.asp (The 2002-2003 capital budget, which was released in December 2001, is already posted on this site.)

The following fact sheets describe various elements of the 2002-2003 budget:

Fact Sheet - Fiscal
Fact Sheet - Economy
Fact Sheet - Investments
Fact Sheet - Personal Income Taxes
Fact Sheet - Corporate Income Taxes

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Budget 2002-2003
Fact Sheet - Fiscal

2001-2002 Fiscal Year:

  • budgetary surplus of $37 million projected (exceeding original budget target of $34.8 million)
  • budgetary expenditures of $5.115 billion and budgetary revenues of $5.152 billion
  • no drawdown on the Fiscal Stabilization Fund in 2001-2002, making New Brunswick among the few provinces projecting a balanced budget for 2001-2002 without using its "rainy day fund"
  • $70 million will be added to the Fiscal Stabilization Fund
  • Equalization payments, tobacco tax revenues and corporate income tax revenues were higher than predicted
  • economic growth in 2001 was weaker than forecast, contributing to lower than expected HST revenues; return on investment is down

2002-2003 Budget:

  • a third consecutive surplus budget of $21.3 million in 2002-2003
  • budgetary expenditures of $5.267 billion and budgetary revenues of $5.288 billion
  • a record $1.8 billion investment in health care, including $80.6 million in new investments
  • a record $1.09 billion investment in education, including $46.8 million in new investments
  • personal income tax reductions totalling $27 million in fiscal 2002-2003
  • corporate income tax reductions totalling $11 million
  • $35 million investment in two funds for innovation and for university infrastructure
  • drawing down the Fiscal Stabilization Fund by $80 million
  • counting interest earned on the fund, a balance of nearly $97 million will remain in the Fiscal Stabilization Fund at the end of the fiscal year to provide financial flexibility in the future
  • gross capital spending of $257.8 million

2002-2003 Budget
Fact Sheet - Economy

  • The North American economies slowed in 2001 with the US experiencing a recession. Canada reported real Gross Domestic Product (GDP) growth of 1.5 per cent, down from 4.6 per cent last year. While the manufacturing sector struggled, monetary and fiscal policy helped to avoid a technical recession in Canada as consumer spending remained strong.
  • In New Brunswick, economic growth also slowed to an estimated 0.6 per cent due to the completion of major construction projects and the status of the US economy.
  • Increases in New Brunswick manufacturing shipments, exports, housing starts, farm cash receipts and sawmill production surpassed national rates. Higher commodity prices for petroleum products influenced manufacturing shipments and exports.
  • Housing starts reached their highest level since 1993.
  • Retail trade growth slowed in the province although sales per capita remained above the national average.
  • The inflation rate dropped and was well below Canada's rate.
  • Capital investment decreased but still registered as the third highest level on record.
  • New Brunswick employment remained at last year's record level of 334,400. Gains in full-time employment were offset by losses in part-time jobs. Stable employment, combined with strong labour force growth, resulted in the unemployment rate increasing to 11.2 per cent. The participation rate rose for the fifth year in a row to 62.2 per cent.
  • Wages and salaries growth of 4.2 per cent was lower than in 2000 but matched the national increase for the second year in a row.
  • The service industries fared better than the goods producing industries in 2001.
  • For 2002, economic growth in North America is expected to strengthen in the second half of the year and real GDP in New Brunswick is projected to increase by 1.2 per cent.
  • Capital investment is anticipated to be relatively strong.
  • The provincial unemployment rate could show a slight increase due to stronger labour force growth than employment growth.
  • Consumer inflation is expected to be comparable to the national average.

    2002-2003 Budget
    Investments

    Health Care and Seniors

$1.8 billion in health care funding, which is $80.6 million (4.7 per cent higher) than 2001-2002:

    • $819.1 million for Hospital Services
    • $309.8 million for Medicare
    • $278 million for long-term care
    • $102.5 million for the Prescription Drug Program
    • $10 million extra for nursing home operations and wages of employees
    • $4.5 million for health-care renewal initiatives
    • $250 annual increase in certified disabled supplement (third consecutive increase)

    • $100 annual benefit for qualifying low-income seniors

    • $1 per hour towards wage increases for homemakers, phased in over three years, beginning with raise of 50 cents per hour this year

Education and Children

$1.09 billion in education funding, which is $46.8 million (4.5 per cent higher) than 2001-2002:

    • $36.6 million more for Kindergarten to Grade 12, which includes a negotiated wage increase for teachers
    • $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
    • $4.9 million more for university grants
    • $2.4 million extra for early childhood development programs

University Infrastructure Trust

    • one-time investment of $15 million
    • purpose is to provide infrastructure improvements to ensure excellence in research and teaching capacity
    • four eligible universities
    • examples of projects may include science labs, computer labs, language labs, libraries

N.B. Innovation Foundation

    • initial funding of $20 million
    • representatives from government, business and university in partnership
    • purpose is to stimulate new research and development and innovation investments in New Brunswick

Other

  • $10 million to continue the Total Development Fund to help resource-based economy
  • $3 million for the Community Economic Development Fund
  • $2.6 million for public safety, including security improvements in provincial buildings, 10 RCMP officers, emergency response program for hazardous materials
  • $1.5 million to hire additional staff in the Department of Justice
  • $1.2 million for NB cultural policy
  • $700,000 to help protect the public drinking water system

2002-2003 Budget
Fact Sheet - Personal Income Taxes

Effective for the 2002 taxation year:

  • single tax filers with incomes up to $11,000 and families earning up to $18,000 will no longer pay provincial income tax
  • this will remove more than 10,000 additional tax filers from the provincial income tax rolls for the 2002 taxation year

Effective for the 2003 taxation year:

  • single tax filers with incomes up to $12,500 and families earning up to approximately $20,000 will no longer pay provincial income tax
  • this will remove a further 15,000 tax filers from the provincial income tax rolls for the 2003 taxation year

Income Tax Savings:

  • the low-income tax reduction is expected to save taxpayers $6 million in 2002-2003
  • the cumulative personal income tax savings over the 2000-2001 through 2002-2003 fiscal years are estimated at $231 million
  • the government committed to reduce personal income taxes by 10 per cent and has done so in three years (reduction is 10.7 per cent)
  • all New Brunswick taxpayers will benefit in 2003 from the indexation of personal income tax brackets and personal credit amounts; savings from indexation in 2002-2003 are $21 million

Examples of savings:

  • 1999: one-earner family with an income of $35,000 would have paid $2,373 in provincial personal income tax
  • 2003: same family will pay about $1,921 in provincial personal income tax, a reduction of $452, or 19 per cent
  • more than 40,000 tax filers will be removed from the provincial tax rolls
  • once fully implemented, these tax reductions will mean an annual tax savings of $502 for a single individual with earned income of $12,500
  • once fully implemented, these tax reductions will mean an annual tax savings of $613 for a one-earner family with income of $20,000
2002-2003 Budget
Fact Sheet - Corporate Income Taxes

Effective July 1, 2002:

  • a reduction in the small business corporate income tax rate from 4 per cent to 3.5 per cent
  • an increase in the small business active income threshold from $300,000 to $350,000
  • a reduction in the general corporate income tax rate from 16 per cent to 14.5 per cent

Effective Jan. 1, 2003:

  • a reduction in the small business corporate income tax rate from 3.5 per cent to 3.0 per cent
  • an increase in the small business active income threshold from $350,000 to $400,000
  • a reduction in the general corporate income tax rate from 14.5 per cent to 13 per cent

Important facts:

  • New Brunswick's small business corporate income tax rate is the lowest in the country
  • small business corporate income tax rate was 6 per cent in 1999 and will have been cut by half, to 3 per cent, by Jan. 1, 2003
  • small business threshold was $200,000 in 1999 and will have doubled, to $400,000, by Jan. 1, 2003
  • New Brunswick had the highest general corporate income tax rate in 1999 but, by Jan. 1, 2003, will have the third lowest general corporate income tax rate in the country

Corporate tax savings:

  • savings to business in corporate income tax reductions will be $11 million in 2002-2003
  • once fully implemented, tax reductions will be worth approximately $39 million annually for New Brunswick's small, medium and large business community
  • cumulative savings in corporate taxes estimated at $56 million over the 2000-2001 through 2002-2003 period

Example of savings:

  • for a business with $400,000 of active business income, these measures will result in a reduction of about $34,000 in corporate income taxes paid in 2003 (savings of 74 per cent compared to 1999)

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