Financial challenge addressed leading to balanced 2007-2008 budget (07/03/13)
March 13, 2007
FREDERICTON (CNB) -- The provincial government is taking the next steps toward greater self-sufficiency with the release of the 2007-2008 budget, focusing on the priorities of health care, education, senior care and energy conservation. Finance Minister Victor Boudreau delivered the budget speech today at the Legislative Assembly.
"Today's budget marks the first budget of our four-year mandate, and we want to show New Brunswickers that we will be a government of action," Boudreau said.
"A government of action is a government that looks to the future and does what is right for all New Brunswickers. Our first step toward this goal was to bring revenues and spending into balance, and that is what our 2007-2008 budget is: a transactional budget which lays the groundwork for future transformational change."
Addressing the financial challenge
Finance Minister Boudreau announced that the 2007-2008 budget is balanced with a surplus of $37.1 million.
"We committed to having a balanced budget and to do what was necessary to address a potential deficit of more than $300 million for 2007-2008," Boudreau said.
"We are proud to say that we did it, even if difficult, but necessary, decisions were required. The government is committed to sound financial management and will take the necessary action to ensure that revenues and spending remain balanced in the future."
The government was able to address the financial challenge for 2007-2008 through a combination of factors:
1) Eliminating the HST rebate on home energy fuel costs;
"As for 2006-2007, we are now anticipating a projected surplus of $34.6 million," Boudreau said.
The 2007-2008 budget includes significant investments in health care, education, senior care and energy conservation, which are consistent with priorities identified by New Brunswickers through a pre-budget online consultation process and within the government's Charter for Change electoral platform.
The 2007-2008 budget includes:
- An increase of $127 million for the Department of Health, which is an increase of 6.6 per cent compared to last year. This includes additional funding of $58.8 million for Hospital Services, $14.8 million for the Prescription Drug Program, and $31.4 million for Medicare;
- An increase of $47 million for the Department of Education, which is an increase of 5.7 per cent compared to last year; this includes an additional 283 teaching positions and an additional $5 million for initiatives contained in the MacKay report on inclusive education;
- An increase of $67.4 million for the Department of Family and Community Services, which is an increase of 8.4 per cent. This includes $38.7 million to improve access, quality of care and affordability for seniors requiring nursing home, special care home and home care services;
- Additional funding of $15.3 million will be provided to the New Brunswick Energy Efficiency and Conservation Agency for comprehensive home energy conservation initiatives, along with new programs for the commercial and industrial sectors;
- In an effort to grow New Brunswick's population and economy, additional funding of $1.8 million over 2006-2007 revised spending is provided for the newly created Population Growth Secretariat, for a total budget of $3 million in 2007-2008; and
- A three per cent increase in social assistance rates effective October 2007.
In its Dec. 20, 2006 report, Grant Thornton noted that constrained increases in tax and other revenues is a major factor in the financial pressures facing the province.
"We all enjoy lower taxes, but when the level of taxation is insufficient to ensure the continued provision of essential public services that New Brunswickers deserve and expect, it needs to be addressed," Boudreau said. "That is the situation we face. Tax reductions made over the past number of years are not sustainable. We need to bring revenues and spending into line with one another. This is why we are increasing taxes in today's budget."
Effective Jan. 1, 2007, the province's personal income tax rates will be increased in order to generate an additional $50 million in revenue annually. The new rates will be 10.12 per cent on the first income bracket, 15.48 per cent on the second, 16.80 per cent on the third and 17.95 per cent on the fourth bracket.
For a one-earner family of two with taxable income of $40,000, this represents an increase of $42 in New Brunswick personal income taxes for 2007 compared to 2006.
Even with this measure, New Brunswick still has the lowest personal income tax burden in Atlantic Canada. Personal income tax brackets and personal amounts have been indexed for the 2007 taxation year, protecting taxpayers against the effects of inflation.
The 2007-2008 budget will continue to protect those least able to pay. The Low-Income Tax Reduction had been enhanced as scheduled so that all single tax filers with incomes up to $13,750 and families with incomes up to $23,050 will pay no provincial personal income tax in the 2007 taxation year. As stated in the Charter for Change, the government will also increase the Low-Income Seniors' Benefit from $100 to $200 on April 1, 2007.
On the business side, the provincial general corporate income tax (CIT) rate will increase to 13 per cent effective Jan. 1, 2007, restoring the rate that was in effect for the 2006 taxation year. This will generate an estimated $17 million in additional revenue in 2007-2008. New Brunswick's general CIT rate is the fourth lowest in Canada.
The provincial small business corporate income tax rate will increase to five per cent effective Jan. 1, 2007, and the income threshold will be decreased to $400,000. The small business corporate income tax rate is the third lowest in Canada and the income threshold matches all other provinces except Alberta.
"To provide an incentive for people and business that will have a positive effect on investment in New Brunswick, the government will enhance the Small Business Investor Tax Credit program," Boudreau said. "The size of the allowable investment for the 30 per cent tax credit will be increased from $50,000 to $80,000, the type of share will be broadened and businesses with net tangible assets of up to $40 million will now be eligible."
"The decision to raise taxes was not taken lightly," Boudreau said. "It is never easy or popular to increase taxes, but structural change was required to realign revenues and spending. We must be able to pay for the services we provide."
2007-2008 Capital Budget
The capital budget contains spending of $311.9 million. The 2007-2008 capital budget will focus spending on projects that are currently under construction, and will provide funding to maintain the province's existing infrastructure.
- $173.6 million for highway and rural road infrastructure investments;
- $30.6 million for spending on new and existing schools;
- $7.9 million for capital improvements and repairs and renovations to the New Brunswick Community College network;
- $3.4 million in renovations at the Restigouche Hospital to create a secure 20-bed forensic psychiatric unit and a two-bed secure seclusion area;
- $2 million for a new veterinary laboratory incinerator and the construction of a new post-mortem/incinerator room; and
-$1.2 million for a new Provincial Fish Health Laboratory in St. George.
"We are very proud of today's budget which lays the groundwork for future transformational change to grow the New Brunswick economy," Boudreau said. "It realigns revenues and spending and provides for a balanced budget. It ensures the continued provision of essential public services and most importantly, it reflects our courage to lead and make choices that will result in a better New Brunswick in the future."
EDITOR'S NOTE: More information on the budget, including fact sheets and other information, can be found online at the Budget Page. MEDIA CONTACT: Vicky Deschênes, communications, Finance, 506-453-2451.