Budget lays foundation for investments in priorities

FREDERICTON (GNB) – The 2016-17 provincial budget tabled today in the legislative assembly outlines plans to put the province’s finances on the right track, protect education and health care and invest in job creation.

“This budget marks the close of the Strategic Program Review process and will set a foundation that our province can build upon so we can invest in New Brunswick’s priorities and create jobs,” said Finance Minister Roger Melanson. “After an exhaustive, inclusive and transparent consultation process with New Brunswickers about the choices we faced, we chose to protect education and health care and reduce the size of government because that’s what we heard from New Brunswickers.”

The first steps of Strategic Program Review focused on merging departments and eliminating waste in government. The final results of the Strategic Program Review were released in conjunction with the budget. Decisions have been made which will improve the province’s financial situation by $589 million. In total, dozens of different expenditure reduction and revenue measures were adopted.

The Strategic Program Review will yield $296 million in expenditure reductions and $293 million in new revenue measures once they are fully realized.

“Our objective was to take a balanced approach with roughly equal amounts coming from reducing spending and new revenue measures and we feel we have accomplished that,” said Health Minister Victor Boudreau, minister responsible for the Strategic Program Review. “In the end, we chose to move forward with dozens of measures which include cutting the size of government, increasing the Harmonized Sales Tax (HST) and the Corporate Income Tax. Of the six key choices that were identified during the Strategic Program Review, we chose not to proceed with introducing highway tolls or making deep cuts to health care and education.”

In 2016-17, the provincial government is projecting a deficit of $347.0 million.

Revenues of $8.719 billion are projected, a 5.1 per cent increase over 2015-16 revised estimates. Excluding revenue measures in today’s budget and prior-year adjustments, revenue growth is estimated to be 2.3 per cent. Expenses are expected to grow 3.5 per cent, an increase of $303.8 million.

The expenditure increase includes about $85 million related to several one-time and exceptional expenses including:

• the Saint John Safe Clean Drinking Water project;
• the Home First Strategy;
• retirement allowance curtailment expense;
• 2016 municipal elections; and
• renewal of technology service agreements.

The budget includes a Multi-Year Plan to improve the province’s bottom line and return to balanced budgets by 2020-21.

“The decisions we are announcing today on expenditures and revenues will lead us to a balanced budget and meet our commitment to get our finances in order,” Melanson said. “This is very important because we currently spend more on servicing our debt than we do on post-secondary education.”

Backgrounder

Strategic Program Review engagement process

• More than 160 stakeholder representatives and about 500 high school students participated in the engagement process; nearly 30 groups hosted complementary sessions; and more than 9,000 ideas were submitted online, by email or by mail.
• Nearly 3,000 New Brunswickers participated in two consultation tours across the province with a total of 24 stops.

Savings measures

The Strategic Program Review will yield $296 million in expenditure reductions including $115 million in 2015-16 and $181 million announced in 2016-17. Expenditure reductions initiatives include:

• Rightsizing management and an organizational realignment of the civil service will save $46.4 million. Specific items include:
  • The provincial government will be reorganized with further elimination of duplication and realization of efficiencies. The number of senior managers in the government will be reduced by 30 per cent by March 31 and the number of middle managers will be reduced by 30 per cent over the next five years, largely through attrition.
  • The Department of Transportation and Infrastructure will be reorganized resulting in reductions in senior and middle-management and a focus on the core services of the department: winter maintenance, summer maintenance and contract management. Non-core functions will shift to the private sector impacting nearly 200 casual workers during construction season.
  • Building on the significant progress made last year through the creation of the new Service New Brunswick, human resources services for the public service will also be centralized.
• Amalgamating the government’s 40 contact centres into four regional business centres to achieve $3.5 million annually in savings, investing in technology and improving services to New Brunswickers.
• Working to eliminate the retirement allowance with bargaining groups. As collective agreements are settled, an annual savings of $29 million is expected.
• Consolidating non-medical laboratory services which are currently operating under three different governance models, six different mandates with six separate management teams for a savings of $600,000 annually.
• Transferring Department of Public Safety customer service functions at eight locations to Service New Brunswick, for a savings of $514,000 per year.
• Following Transport Canada regulations requiring the removal of the Gagetown ferry from service. Not replacing the ferry due to it having the lowest ridership of any ferry in the system and its proximity (15 kilometres) to the TransCanada Highway bridge will result in a capital cost savings of about $5 million.
• Finding potential cost savings and service efficiencies through the restructuring of all provincial court services. This organizational review will help ensure best practices and standards are used and followed across the province and will focus on four key points: consolidating resources, reviewing the court security protocol, expanding specialized programs and an organizational renewal.
• Undertaking the analysis necessary to quantify the economic value of Larry’s Gulch and to identify qualified private sector operators, leading to a private sector proponent operating Larry’s Gulch in 2017-18.
• Closing the visitor information centres in Cape Jourimain and Campobello due to the low usage of these centres. Visitor information will continue to be provided at the Cape Jourimain Nature Centre and at Campobello’s Herring Cove Provincial Park.
• Maintaining transfers to municipal governments at current levels.
• Reducing the number as well as the money associated with agencies, boards and commissions by about 15 per cent.
• Establishing an Alternative Service Delivery unit within the Department of Finance to ensure a strategic, evidence-based approach to reviewing services that could be delivered by government versus an alternative service delivery model.
• As identified through the Strategic Program Review process, we will:
  • Eliminate the Municipal Fine Revenue Sharing Program.
  • Renegotiate license management fees for forestry operators.
  • Rightsize the industry assistance budget.
  • Modify regulations under the Electrical Installation and Inspection Act.
  • Allow New Brunswickers to opt out of vehicle registration reminders.
  • Centralize designated land registry offices from 13 offices to one.
  • Make it cheaper and easier for motor vehicle dealers to use online motor vehicle services.

Revenue measures

In order to avoid making deep cuts to education and health care, the following revenue items will be initiated. Revenue measures from Strategic Program Review will yield $293 million once they are fully realized.

• Increasing the general corporate income tax rate from 12 to 14 per cent. The new corporate income tax rate will match that of Newfoundland and Labrador, but will remain below Nova Scotia and Prince Edward Island. Businesses currently paying only the small business income tax rate will be unaffected by this increase.
• Increasing the provincial portion of the Harmonized Sales Tax (HST) by two percentage points resulting in the same HST rate as Nova Scotia and a rate that is comparable to Quebec’s combined rate of 14.975 per cent. This will be effective July 1, 2016. This will generate about $300 million annually and will return the combined federal-provincial rate to the level it was between 1997 and 2006. Daily necessities such as basic groceries are exempt from the HST. It should be noted, when the GST was first introduced in 1991 at seven per cent, the provincial sales tax was 11 per cent.
• To lessen the impact of an HST increase and make it more progressive, a refundable provincial HST credit of $300 for individuals, $300 for spouse or equivalent, and $100 per child under the age of 19, will be provided. Single parent families will receive a $300 credit for their first child.
  • The full HST credit will be provided to New Brunswickers with a family income of less than $35,000 per year. The credit will be reduced by two cents for every dollar of income above $35,000. This will mean that individuals with incomes of less than $50,000, or a family of two adults and two children with incomes of less than $75,000, could receive some benefit from the HST credit.
  • This credit is designed to protect low-to-middle income households and will return about $100 million to New Brunswickers.
• Increasing the real property transfer tax from 0.5 to one per cent effective April 1, 2016. This tax is a one-time payment on the purchase of a property when the deed is registered. Even with this increase, New Brunswick’s real property transfer tax will remain among the lowest in the country.
• Increasing the tobacco tax to discourage smoking and help pay for the additional costs smoking imposes on our health-care system. New Brunswick has the lowest tobacco tax in Atlantic Canada and the third-lowest in the country. Only Quebec and Ontario are lower. The tax rate will be increased by 6.52 cents per cigarette or gram of loose or fine cut tobacco over the next two years to bring it to the same rate as Nova Scotia. An initial increase of 3.26 cents per will be effective midnight tonight and will bring the tax rate to 22.26 cents per cigarette or gram of loose or fine cut tobacco. A second increase of 3.26 cents will be effective next year on Feb. 1, 2017.
• Finding additional revenues by increasing fines and establishing a dedicated enforcement unit to actively identify and investigate individuals involved in illegal activities; to primarily disrupt and dismantle smuggling networks; and to recover the tax losses linked to the trade of contraband tobacco. It is estimated that a reduction of one percentage point in the illicit tobacco trade would increase taxes collected by the government by $1 million annually.
• Similar to other jurisdictions, new revenue streams will open up by allowing companies and/or individuals to purchase the rights to name government-owned assets such as buildings, parks and bridges. Part of this initiative could also include allowing advertising on or around certain assets such as ferries, roadways and government common areas.
• Exploring the sale of various surplus properties.

Protecting education and healthcare

New Brunswickers have been clear that they will not accept deep cuts in education and health care. Furthermore, cuts of this magnitude do not align with the values of the provincial government, but this does not mean that there will not be changes in these areas. Below are some examples:

• Maintaining or improving the ratio of teachers-to-pupils, while continuing the longstanding policy of decreasing the overall number of teachers through attrition based on declining enrollment numbers. Overall, 150 new teachers will be hired to replace 200 retirements.
• Optimizing student transportation over the next two years through technological and operational changes. Standard practices and processes will be implemented across the province in all school districts in both the education systems for a savings of $2.6 million which can be re-invested into fleet renewal and student achievement.
• Maintaining the current funding for universities to reflect that enrollment has decreased by 11.8 percent between 2007-08 to 2014-15, while funding has grown by 11.5 per cent over the same period. However, the Education and New Economy Fund will make strategic investments in projects that will help ensure the best education system for New Brunswickers and contribute to the growth of our economy.
• Consolidating the Department of Health’s Picture Archiving and Communication System (PACS). Consolidate PACS in two-phases for a savings of $470,000 by 2018-19.
• Working with the New Brunswick Medical Society and Medavie EMS to explore the development of an enhanced community-based primary health care service.
• While the Council on Aging conducts its work, the Department of Social Development will proceed with a number of administrative efficiency measures;
  • The Disability Support Program, which currently offers flexible support for persons with disabilities, will provide clients with the option to self-manage their own disability support funding.
  • Following consultations and an extensive review with the assistance of health professionals and stakeholders, the Department of Social Development will be introducing dollar maximums and frequency limits to its Health Services program.
  • Building on similar practices within the Department of Health, the Department of Social Development will work with the New Brunswick Pharmacists’ Association to develop a pricing model that provides consistent and predictable pricing for health supplies.
  • In addition, the department is looking at mechanisms to purchase oxygen supplies at lower rates than it currently pays.
• The Department of Social Development will also be introducing measures that will enhance procurement controls and standardize service types across all regions and program areas. This also includes establishing a contract management framework for grants that will align funding to department priorities and enhance accountability among service delivery partners.

NT3