March 17, 2009
FREDERICTON (CNB) - The largest one-time tax reduction package ever introduced in New Brunswick is a major part of the province's 2009-10 budget, Leadership for a Stronger Economy, along with measures to maintain and create jobs, a commitment to return to balanced budgets, and strict controls on government expenditures.
Delivered today by Finance Minister Victor Boudreau, the budget also features focused investments in priorities such as health care and education, and $1.2 billion for infrastructure projects.
"With this budget, our government is acting on our commitment to provide leadership for a stronger economy," said Premier Shawn Graham. "The five key elements of this budget will fortify New Brunswick's economy, help maintain and create jobs, and enable our province to stay on the road to self-sufficiency."
The main components of the budget constitute The Plan for a Stronger Economy, and are:
"Through a combination of groundbreaking tax cuts, strategic investments in social programs and infrastructure, and a plan for fiscal responsibility, this budget will put New Brunswick back on the path to economic recovery and growth," Boudreau said.
For 2009-10, the budget allocates investments amounting to $7.838 billion, reflecting growing expenditure pressures, including the impact of weakened market returns on provincial pensions and the increased costs of delivering key social programs. Excluding the extraordinary pension expense, the province is facing a deficit of $440.9 million for 2009-10. Including the extraordinary pension expense, the projected deficit is $740.9 million. This will result in a projected net debt increase of $968.7 million.
"Due to extraordinary economic and financial turbulence worldwide, New Brunswick is grappling with big fiscal challenges, just as most other governments in Canada are right now," Boudreau said. "Budgetary deficits will be temporarily necessary as we provide stimulus to help our province overcome these challenges, but we are already taking steps to ensure that New Brunswick emerges from deficit within four years."
A four-year plan to return to balanced budgets
The budget contains a plan to resume delivering balanced budgets as of 2012-13. This plan reflects revenue projections that take into consideration growth estimates for the provincial economy, and corresponding spending targets that will enable New Brunswick to address its fiscal challenge within four years. To achieve this objective, the province will constrain spending increases to less than two per cent annually over the 2010-11 to 2012-13 period. The 2009-10 budget reflects initial measures to begin curtailing spending, with $182 million in spending and wage restraint.
$1.2 billion for infrastructure and support for businesses
Capital investments totalling $1.2 billion for infrastructure and support for business will help to stimulate, grow and diversify New Brunswick's economy over two years. During this fiscal year and the next, an estimated 6,000 person-years of employment will result from record-breaking capital investments that will be made in transportation and post-secondary education, and from strategic capital investments in the K-12 school system, health-care facilities, and in municipal, tourism and environmental infrastructure. The province will also help New Brunswick businesses with good financial histories and solid business plans to get access to the capital they need to grow, create jobs and strengthen the economy.
The Plan for Lower Taxes in New Brunswick
The Plan for Lower Taxes in New Brunswick will be phased-in between 2009 and 2012, and result in $143.5 million in tax savings for New Brunswick residents and businesses in 2009-10 alone, growing to $380.2 million by 2012-13.
The saving to individuals alone in the first year of the plan is $124 million, while businesses will save about $20 million. In the fourth year, savings to individuals will have increased to $336 million, while businesses will save $44 million.
"This is an unprecedented plan for lower taxes in our province," Boudreau said. "This plan will leave more money in the pockets of New Brunswickers to save, invest and spend as they choose. It will also help New Brunswick companies stay in the province to grow and attract outside investment, and help create meaningful jobs for our children to remain or return to work right here in our province."
The cornerstone of this plan is New Brunswick's move from the existing four-rate, four-bracket personal income tax structure to a two-rate, two-bracket structure. By 2012, the existing four-rate personal income tax structure will be replaced with two rates of nine per cent and 12 per cent.
This plan enhances the Low-Income Tax Reduction, increases the Low-Income Seniors' Benefit, and increases the Tuition Rebate; and introduces a mechanism to improve accountability to taxpayers for provincial and municipal property taxes.
Currently, the Low-Income Tax Reduction is phased out at five per cent of income. For 2009, this will be reduced to four per cent, and subsequently phased out at three per cent, providing $13 million in tax relief annually to low- and middle-income individuals and families. The Low-Income Seniors' Benefit will be enhanced by increasing the benefit amount to $300 from $200 in 2009, and the government will fulfil its Charter for Change commitment by increasing the Low-Income Seniors' Benefit to $400 in 2010. This measure will provide additional tax relief of $3.5 million in 2009-10, rising to $7.4 million for 2010-11.
The maximum lifetime rebate of the Tuition Rebate will be doubled to $20,000 from $10,000, and the maximum annual rebate will be doubled to $4,000 from $2,000. The estimated additional savings to New Brunswick individuals is $2 million in 2009-10. The enhancements to this program will make New Brunswick more attractive to students facing higher tuition costs, including those who work or who will work in health-care professions.
This plan will also provide New Brunswick's business community with tax relief amounting to an estimated $20 million in 2009-10, rising to $44 million by 2012-13. To this end, the general corporate income tax rate will be reduced from 13 per cent in 2008 to eight per cent in 2012.
"This will surpass Ottawa's target for provinces to reduce corporate income tax rates to 10 per cent by 2012, and will make it the lowest rate in the country, based on known provincial rates," Boudreau said.
Effective Jan. 1, 2009, the small business limit will be increased to $500,000 from $400,000. With this increase, New Brunswick will be tied for the highest small business income limit in Canada. It's estimated that this measure will return $1 million to small businesses throughout the province.
Through this plan, enhancements will also be made to the Small Business Investor Tax Credit and the Labour Sponsored Venture Capital Tax Credit.. Together, these enhanced credits will provide additional tax relief of $3 million in 2009-10, and this will double by 2012-13. The initial benefits of these credits go to individuals, but the real benefit is improved access to capital for small and medium-sized businesses.
Further tax relief will come about as a result of the High Energy Use Tax Rebate, which will be extended for an additional year; and a Forestry Industry Investment Tax Credit that will be offered for one year. The former, available to pulp and paper mills to offset rising energy costs, will be extended until March 31, 2010, and provide an estimated $5 million in assistance to eligible producers.
The Forestry Industry Investment Tax Credit will provide for a rebate of 50 per cent of capital investments in qualifying manufacturing and processing equipment, which will offset a maximum of 50 per cent of provincial property taxes paid. It will provide an estimated $5 million in assistance to qualifying forestry companies across the province in 2009-10.
Investing in priorities, including health care and education
The budget includes ongoing support for essential programs and services, as well as some important new initiatives. This support includes record investments in health care and education.
Among the highlights are:
To help lower student debt, the Debt Reduction for Timely Completion Benefit is being implemented in 2009-10. This measure will assist graduates with a high student debt who complete their program of study at a publicly funded post-secondary educational institution, within the program's established timeline. Through this initiative, up to 100 per cent of an eligible student's provincial student loan in excess of $26,000 will be forgiven for a first undergraduate degree, certificate, or diploma earned after April 1, 2009. This initiative will help shift the current New Brunswick average student debt of $34,000 closer to the national average of $24,000.
In addition, the budget allocates:
Responsible management of government expenditures
The budget contains measures to achieve program and administrative savings, and changes to the government's wage policy in 2009-10 that will result in expenditure savings of $182 million. The revised policy will freeze wages for two years, and apply to all unionized and non-unionized employees in Parts I, II, III and IV of the public service.
The key parts of the policy are:
It's expected that the wage restraint policy will save about $55 million in 2009-10, with estimated savings of $150 million by 2012-13.
"These savings will restrain overall spending growth and allow our government to focus resources on priority areas," Boudreau said. "New Brunswickers can be assured that the delivery of key public services will be maintained."
All Crown corporations, including NB Power, NB Liquor Corporation and the New Brunswick Investment Management Corporation, along with nursing homes, will be directed to adopt a similar wage restraint program. Universities and municipalities will be asked to take similarly appropriate steps to manage their wage bills.
In his fiscal update for 2008-09, Boudreau said that the Department of Finance projects a provincial deficit of $265.2 million, leading to a net debt increase of $361.3 million,
primarily on account of the impact of global financial and economic upheaval. Total spending has been revised to an estimated $7.403 billion, of which $157 million is attributable
to the estimated additional public-sector pension expense related to the global downturn in financial markets.
Details of the 2009-10 budget, Leadership for a Stronger Economy, may be found online.
MEDIA CONTACT: Marc Belliveau, communications, Department of Finance, 506-453-4138.