NATIONAL summarizes Newfoundland and Labrador’s budget released yesterday, and reflects on three provinces struggling to get back to balance.
Since joining the confederation, Newfoundland and Labrador has struggled to solidify lasting economic wealth, but that all changed when the province began to aggressively capitalize on its rich supply of natural energy resources.
Just three years ago in 2014, the price of oil topped more than $100 per barrel. During the rise of the province’s economy, Newfoundland and Labrador added many well-paying jobs, office space, housing, restaurants, and retail. Provincial surpluses for 2009, 2011, and 2012 combined for nearly $4 billion. Things were really looking up.
But today, the price of oil has been cut in half. In 2016, the province’s credit rating was downgraded—a move that potentially impacts the province's ability to borrow money. And before budget day, the provincial debt for 2015–16 was more than $1 billion. The economic downturn has resulted in layoffs, housing declines, and small business closures. The momentum has stopped and finding a new path to success is essential for securing future prosperity.
Newfoundland and Labrador is not alone in this struggle, as its western counterparts in Alberta and Saskatchewan tackle the same issues.
Alberta rolls the dice
In Alberta, Premier Rachel Notley held steadfast to her commitment to not cutting services, front line workers, or public service employees. In effect, the budget plans to stay the course and “slow the growth of government spending” to below inflation and population growth. There are no new tax increases.
The total provincial debt is expected to hit $57.6 billion by 2019. The government will borrow to service the expanding debt until the budget is balanced – well after its current mandate. Further, it appears the province is banking on a turnaround in the economy to put them back in a favourable position while it tries to diversify revenue streams. Finance Minister Joe Ceci doesn’t expect to balance the budget until 2024.
Saskatchewan tightens its belt
In Saskatchewan, Premier Brad Wall has telegraphed for months that he doesn’t like deficits and intends to move swiftly to eliminate Saskatchewan’s. Budget 2017–18 forecasts a $685 million deficit and a deficit of $304 million in 2018–19. Finance Minister Kevin Doherty presented a path to a balanced budget in two years. The budget is all about fiscal restraint: a one per cent hike in PST, with more items taxable; removal of the tax holiday on bulk fuel favoured by farmers; and tax hikes on cigarettes and alcohol. It slashed funding for libraries and post-secondary educational institutions and eliminated rural bus services. The government is also committed to reducing public sector compensation starting with the salaries of the premier, cabinet, and all MLAs. It’s prepared to live within its means to get back on track.
Newfoundland and Labrador resets and refocuses
The Newfoundland and Labrador government now shoulders a similar responsibility of trying to find a way to turn it all around. Over the past year, we’ve seen major cuts to the public sector and leaner spending across the board—similar to Saskatchewan’s plan. Many of these hard decisions have helped soften the blow of the budget many in the province were bracing for. While lean, it turns out this year’s budget is not all bad news.
Click here to read NATIONAL Atlantic’s analysis of this year’s Newfoundland and Labrador provincial budget.