Finance

2005-2006 Budget / Building a stronger New Brunswick for all (05/03/30)

NB 349

March 30, 2005

FREDERICTON (CNB) - A balanced budget that invests record amounts in health and senior care, as well as in education and children, was tabled today at the legislative assembly by Finance Minister Jeannot Volpé.

The 2005-2006 budget also contains further tax relief for New Brunswickers and small businesses.

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"New Brunswickers told us during our pre-budget consultations that health, education and jobs are their priorities," Volpé said.

"We will invest a record amount of $2.3 billion in health and senior care, and almost $1.2 billion in education. As we make these key investments, we anticipate a surplus of $98.9 million and a reduction in net debt of $4.0 million."

The fiscal update for 2004-2005 projects a surplus of $112.3 million and a reduction in net debt of $53.1 million.

No tax increases and no new taxes

The 2005-2006 budget contains total expenditures of $6.105 billion, an increase of 3.7 per cent from the revised 2004-2005 level. The new budget contains no tax increases or new taxes.

Provincial income tax credit amounts and tax brackets have been indexed to guard against inflation effective Jan. 1, 2005. Indexation will be extended to include the Low-Income Tax Reduction.

Indexation of personal amounts, brackets and the Low-Income Tax Reduction for 2005 will provide New Brunswick individuals and families additional savings of about $11 million for this taxation year.

As a result of these measures, individuals with incomes of up to $12,713 and families with incomes of up to $20,324 will pay no New Brunswick income tax for 2005. An additional 3,000 New Brunswickers will no longer pay any provincial personal income tax.

"New Brunswickers currently enjoy the lowest provincial personal income taxes east of Ontario," Volpé said. "More than 43,000 additional New Brunswickers will not have to pay any provincial personal income tax for 2005, compared to the 1999 tax system. In 2005-2006 alone, New Brunswickers will realize savings of $137 million as a result of measures we have undertaken."

The 2005-2006 budget contains a three-year initiative that will bring the small business corporate income tax rate to one per cent by 2007 - by far the lowest in Canada.

Effective July 1, 2005, the provincial small business corporate income tax rate will be reduced from 2.5 per cent to 2.0 per cent. Effective the same day, the income threshold eligible for the small business corporate income tax rate will increase from $425,000 to $450,000. This will result in additional annual savings of $4 million for New Brunswick businesses, providing them with more resources to invest and create jobs in the province.

Effective July 1, 2006, the province will further reduce the tax rate to 1.5 per cent and raise the income threshold to $475,000. And effective July 1, 2007, the government will implement the final phase of its commitment by reducing the small business corporate income tax rate to one per cent and raising the income threshold to $500,000.

"This budget confirms our determination to support small business when it comes to staying competitive and creating jobs," Volpé said.

As a result of this tax relief plan, New Brunswick small businesses will save an estimated $12 million more annually once these measures are fully mature, he said.

"We will introduce legislation this session to amend the Assessment Act to help encourage private sector businesses to develop and utilize heritage properties," Volpé said.

This will provide a property tax incentive for owners of designated heritage properties who undertake an approved restoration.

Health and Senior Care a Priority

Total investment in health and senior care will rise to $2.3 billion, an increase of 7.6 per cent over what was spent in 2004-2005. Ordinary account funding for the Department of Health and Wellness will increase $102.8 million over last year's revised expenditures - an increase of 6.1 per cent. The funding includes:

- $20.5 million more for medicare

- $55.5 million more for hospital services;

- $8.2 million more for ambulance services;

- $11.8 million more for the Prescription Drug Program; and

- $4.4 million for new funding for nursing programs (including the 95 new nursing seats at UNB and the Université de Moncton).

The 2005-2006 budget also provides $2 million to promote healthy living for children and youth in the areas of physical activity, nutrition and healthy eating; tobacco cessation; and mental health and resiliency.

"I am very happy about this new initiative because it falls in line with what I have heard during our pre-budget consultations," Volpé said. "People all around the province told us that encouraging healthy lifestyles is an integral part of the health-care system. We firmly believe that investments made in promoting wellness are investments in the long-term health of New Brunswickers, especially in our children."

Families and Seniors

The Department of Family and Community Services budget will receive an additional $19 million this year for a total budget of $737.7 million. The funding includes:

- a six per cent increase in social assistance rates over the next three years, beginning with a two per cent increase this year - the largest increase since 1991; - a 9.1 per cent increase for nursing homes;
- a 10 per cent increase over the next three years for home support agencies; and
- $11.8 million in our Early Childhood Development Agenda.

Quality Education System is Essential

Total education spending will rise to $1.2 billion in this budget, a 3.3 per cent increase over 2004-2005.

Education funding for kindergarten to Grade 12 will increase $23.0 million over last year's revised expenditures, to a total of $752.8 million - the highest level ever. The funding includes:

- 85 more teaching positions (410 teaching positions added to the school system since 2003, on a commitment of 500);

- $2.5 million for the Quality Classroom Resources Fund (second year of a $10-million, four-year commitment);

- $1.1 million for the second year of the pilot laptop research program; and

-$0.7 million for the Quality Technology Infrastructure Enhancement Fund.

Universities will see their funding increased by 4.6 per cent in 2005-2006; three per cent in 2006-2007; and 3.4 per cent in 2007-2008.

As announced in the State of the Province Address, $20 million more will be invested in the University Infrastructure Trust Fund.

The government will also integrate its provincial student financial assistance program with the federal program. This will mean that students will have to manage only one loan instead of two.

Community and Regional Economic Development

The 2005-2006 budget dedicates funding once again for regional and community economic development funds. It includes:

- $5 million for the Miramichi Regional Economic Development Fund;

- $5 million for the Restigouche-Chaleur Regional Economic Development Fund;

- $12 million more over the next three years for the Acadian Peninsula Economic Development Fund (a total of $40 million over eight years); and

- $5 million more for the Total Development Fund.

The budget also includes $18 million for the creation of a new three-year program, the Community Development Initiative. It will consist of three specific components:

- $10-million Community Partnership Fund;

- $6-million Family and Youth Capital Assistance Program; and

- $2-million Community Events Program.

An additional $10 million is being provided for the creation of a three-year, Community Economic Infrastructure Program with an initial $2-million investment in 2005-2006.

The 2005-2006 budget also allocates $1 million to the government's immigration program, a 54 per cent increase over last year. The program will be enhanced to co-ordinate the focus across government on bringing more immigrants to New Brunswick.

"Additional demands for health care and other services, and fewer young people available to fill jobs in the economy, will create challenges for New Brunswick - and other provinces -- over the next several decades," Volpé said. "We believe increasing the levels of immigration of educated and talented people is one method to partly address the problem."

The government also expects to further reduce waste, duplication and overlap in public services in 2005-2006. The goal is to redirect savings to priority areas such as health care and education.

"By managing smarter and maintaining our fiscal responsibility, we continue to live within our means, while investing in the priorities of New Brunswickers," Volpé said.

EDITOR'S NOTE: Four fact sheets on the budget are attached. The complete budget speech, a highlights booklet, the main estimates and the annual report on the economy are available on the Department of Finance website at http://www.gnb.ca/0024/index-e.asp.

MEDIA CONTACT: Vicky Deschênes, Finance, 506-453-2451.

Budget 2005-2006

Fact Sheet - Economy

2004

  • Canadian and U.S. economies continued to regain strength in 2004 and enjoyed robust growth following the slowdowns of 2003.
  • Real GDP growth in Canada was 2.8 per cent in 2004.
  • Real GDP growth in the United States was 4.4 per cent in 2004.
  • The soaring appreciation of the Canadian dollar and high oil prices had an adverse impact on economic growth in New Brunswick.
  • The provincial Department of Finance estimates New Brunswick's economy expanded by 2.5 per cent in 2004 despite external factors that affected the province.
  • Job growth in New Brunswick reached a record annual high of 350,400 people employed in 2004.
  • New Brunswick's unemployment rate dropped to an annual average of 9.8 per cent in 2004, while the provincial participation rate reached a new high of 63.9 per cent.
  • Private and public capital investment in New Brunswick increased 7.4 per cent to a record $4.3 billion in 2004.
  • Despite the rising Canadian dollar, New Brunswick's foreign exports of commodities rose 10.8 per cent to more than $9.4 billion, compared with an 8.6 per cent national increase.
  • New Brunswick's manufacturing shipments increased 11.1 per cent, compared with the national increase of 8.4 per cent.
  • Average weekly earnings in New Brunswick increased 3.0 per cent, almost double the 1.6 per cent national increase.
  • Consumer inflation, as measured by the Consumer Price Index, increased by only 1.5 per cent in New Brunswick - far below the growth level of the previous two years and below the national rate for the first time since 2001.
  • The latest monthly data show 28,000 jobs have been created in New Brunswick since 1999.

2005

  • Private sector forecasters expect New Brunswick's real GDP growth will be in the range of 1.7 per cent and 2.5 per cent in 2005.
  • The provincial Department of Finance estimates New Brunswick's real GDP growth will average 2.1 per cent in 2005 on account of decreased domestic and external demand for some commodities from most natural resource sectors and the ongoing strength of the Canadian dollar.
  • Construction activity, continued twinning of the Trans-Canada Highway and significant provincial government investments in infrastructure will contribute to more economic growth.
  • Employment levels are expected to increase at a steady pace in New Brunswick.
  • Consumer inflation is expected to increase at about the same rate as last year in New Brunswick.

Fact Sheet - Fiscal Outlook

2005-2006 (outlook for upcoming fiscal year)

  • Balanced budget with a projected surplus of $98.9 million.
  • Reduction in net debt of $4.0 million, for a total of $166.3 million since the government's first budget.
  • Projected revenues of $6.109 billion, up 2.9 per cent from 2004-2005.
  • Projected expenditures of $6.105 billion, up 3.7 per cent from 2004-2005.
  • Record $2.3-billion investment in health and senior care.
  • Record $1.2-billion investment in education and children.
  • Net-debt-to-GDP ratio is expected to decrease for sixth consecutive year to 28.0 per cent, the lowest level since 1991-1992.
  • Debt service costs as a percentage of total expenditures are expected to be at 9.8 per cent, the lowest level in more than 20 years.
  • The provincial economy is expected to continue to report a solid performance in 2005 (2.1 per cent real GDP growth projected).

2004-2005 (update on fiscal year ending)

  • Government will meet its objective of a balanced budget for 2004-2005, with an anticipated surplus of $112.3 million and a reduction in net debt of $53.1 million.
  • Overall revenues are projected to be $210.1 million higher than budget.
  • New Brunswick to receive additional $194 million in 2004-2005 as a result of successful negotiations with the federal government on the Equalization Program and health transfers.
  • Expenditures are up $159.4 million, primarily due to increased priority investments in the Provincial Health Plan and wage settlements in the health-care sector.
  • $20 million added to the University Infrastructure Trust Fund.
  • $5 million added to the New Brunswick Innovation Trust Fund.
  • Negative revenue adjustment by the federal government of $78 million in HST revenues for 2003 impacting provincial revenues for 2004-2005.

Fact Sheet - Spending

Health and Senior Care

  • $2.3 billion in health and senior care spending for 2005-2006, $163.1 million, or 7.6 per cent, higher than in 2004-2005.
  • $102.8 million for Department of Health and Wellness, or 6.1 per cent more than 2004-2005.
  • Capital investments for Health and Wellness will increase 74.4 per cent from last year's revised figure to $95.7 million.
  • $55.5 million for hospital services.
  • $20.5 million for medicare.
  • $11.8 million for the Prescription Drug Program.
  • $8.2 million to enhance ambulance services.
  • $4.4 million for nursing programs, including 95 new nursing seats at UNB and Université de Moncton.

Education and Children

  • $1.2 billion in education spending for 2005-2006, $38.5 million, or 3.3 per cent, higher than in 2004-2005.
  • $23.0 million more for kindergarten to Grade 12, for a total of $752.8 million.
  • $15.3 million more for Quality Learning Agenda initiatives.
  • $2.5 million for the Quality Classroom Resources Fund.
  • $1.1 million for the second year of the pilot laptop research program.
  • $700,000 for the Quality Technology Infrastructure Enhancement Fund.
  • 4.6 per cent funding increase for universities, meeting commitment to increase funding by 10 per cent over three years. Funding will increase by a further three per cent in 2006-2007 and 3.4 per cent in 2007-2008.
  • Education capital investments for 2005-2006 provide for $48 million for new schools and repair and rehabilitation of existing schools.

Families and Seniors

  • $19 million more for Department of Family and Community Services for a total budget of $737.7 million.
  • Six per cent increase in social assistance rates over three years, beginning with a two per cent increase this year, or $2.8 million in 2005-2006 for a total of $8.6 million by 2007-2008.
  • One-time transitional benefit of up to $300 to help those leaving social assistance for employment.
  • 9.1 per cent increase in nursing home funding.
  • 10 per cent increase for home support agencies over the next three years.
  • $11.8 million for the Early Childhood Development Agenda.
  • $100 annual increase per child space for early intervention and integrated day-care services.

Other

  • Gross capital spending to rise 10.9 per cent over 2004-2005 to a total of $423.8 million.
  • Capital budget for the Department of Transportation to be $242.1 million, including $63.4 million for Trans-Canada Highway twinning, $41 million for rural roads, $21.3 million for routes 11 and 17, and $12.7 million to improve border crossings at St. Stephen and Woodstock.
  • Creation of a three-year, $18 million Community Development Initiative, consisting of three components:
    • $10-million Community Partnership Fund;
    • $6-million Family and Youth Capital Assistance Program; and
    • $2-million Community Events Program.
  • Creation of a three-year, $10 million Community Economic Infrastructure Program.
  • $5 million for the Miramichi Regional Economic Development Fund.
  • $5 million for the Restigouche-Chaleur Regional Economic Development Fund.
  • $12 million more over the next three years for the Acadian Peninsula Economic Development Fund, for a total of $40 million over eight years.

  • $5 million for the Total Development Fund.
  • $600,000 for tourism infrastructure and participation in the Tourism Atlantic Marketing Initiative.
  • $11.1 million under the Infrastructure Program and the newly created Municipal Rural Infrastructure Fund.
  • $1 million for the provincial immigration program, a 54 per cent increase over 2004-2005.
  • $8.1 million dedicated under the Cultural Strategy.
  • $23.7 million over two fiscal years (2004-2005 and 2005-2006) to assist agriculture producers with income shortfalls due to the BSE crisis, depressed potato market prices and potato disease problems.

Fact Sheet - Competitive Taxation

No tax increases and no new taxes

Personal Income Taxes

  • Provincial income tax credit amounts and tax brackets have been indexed to guard against inflation effective Jan. 1, 2005.
  • Indexation will be extended to include the Low-Income Tax Reduction.
  • Indexation of personal amounts, brackets, and the Low-Income Tax Reduction for 2005 will provide New Brunswick individuals and families additional savings of about $11 million for this taxation year.
  • An additional 3,000 New Brunswickers will no longer pay any provincial income tax.
  • As a result of measures taken by the government since taking office, more than 43,000 additional New Brunswickers will no longer pay provincial income tax
  • As a result of measures taken by the government since taking office, New Brunswickers will benefit from cumulative provincial income tax savings of $608 million.
  • In 2005-2006 alone, New Brunswickers will realize savings of $137 million.

Corporate Income Taxes

  • Cumulative income tax savings for businesses are estimated at $272 million since this government took office in 1999.
  • Savings are estimated at $76 million in 2005-2006.
  • Effective July 1, 2005, the provincial small business corporate income tax rate will be reduced from 2.5 per cent to 2.0 per cent -- reducing the lowest rate in the country even further.
  • Effective July 1, 2005, the small business income threshold will be increased from $425,000 to $450,000.
  • Effective July 1, 2006, the provincial small business corporate income tax rate will be further reduced to 1.5 per cent and the income threshold will be raised to $475,000.
  • Effective July 1, 2007, the small business corporate income tax rate will be reduced to one per cent and the income threshold will be raised to $500,000.

Other

Qualifying non-profit housing organizations will be able to apply, within a few weeks, to receive a provincial property tax exemption on their low-income residential rental property.

Amendments to the Assessment Act will provide a property tax incentive for owners of qualifying designated heritage properties who undertake an approved restoration to help encourage private sector businesses to develop and utilize heritage properties.

05/03/30