Six Things To Look For In New Brunswick’s Budget
FREDERICTON—Tomorrow is budget day in New Brunswick, and no one expects it to be pretty.
The provincial government has been telegraphing big tax hikes and spending cuts for months now as it reaches the culmination of its “strategic program review.” That review is intended to find up to $600 million in savings and new revenues to address New Brunswick’s structural deficit.
The government says it has already identified more than $1oo million in operating savings in government. But there’s still a long way to go to balance the books.
The province has been running an ad campaign with a theme of “hard choices.” It has also deliberately floated the possible changes to ready the public for what’s to come. None of the tax hikes or budget cuts are expected to be popular, but the provincial government is hoping that New Brunswickers recognize the gravity of the province’s fiscal situation.
That’s a big hope.
Still, the province is trying to make this about “balance” between cuts and tax increases, with premier Gallant saying every dollar in new tax revenue will be matched by a dollar in reduced program spending. The strategic program review document floated a wide range of proposals, some generating modest savings or revenues, while others are expected to hit family budgets and business bottom lines hard in order to fill the government coffers.
Here are six things to look for in tomorrow’s budget:
Highway Tolls
Maybe it’s no surprise that this budget is coming down on Groundhog Day, because, like in the Bill Murray movie of the same name, history may be repeating itself with highway tolls coming back to New Brunswick. The government says that tolls could generate up to $60 million in new revenue, depending on where they are placed. According to the government, a round-trip by car from Edmundston to Moncton would cost $24 for an individual car, but $96 for a transport truck. To get from Saint John to Moncton would cost a car $9 and a truck $36. Other toll options include locations at key border points, and even tolls around suburbs of the province’s largest cities. New tolls will be contentious, and trucking companies in particular will not be happy.
Increasing the HST
Did we mention Groundhog Day? The Harmonized Sales Tax (HST) may be going back to 15%. The federal government lowered its HST rate in 2008 resulting in a combined tax rate of 13 per cent in New Brunswick. Increasing the HST looks likely. The provincial government has gone as far as float how an HST tax credit system will ease the pain of an increased consumption tax for low income New Brunswickers. A hike of the HST back up to 15 per cent would be expected to generate about $300 million in new revenue, although the tax credits proposed would erase $100 million of that. While it is a big-ticket tax hike, it still only gets the provincial government part of the way to addressing the structural deficit.
Increase Corporate Income Tax
New Brunswick’s corporate tax rate increased to the current 12 per cent in 2013-2014. At that rate, corporate tax will generate an estimated $258 million in 2015-2016, or about 3.1 per cent of total provincial revenues. The government’s strategic program review options document puts forward a further increase up to 14 per cent. That would raise up to an additional $25 million. It would also make New Brunswick’s corporate tax rate one of the highest in the country, lower than only PEI and Nova Scotia.
Civil Service Cuts
More than 9,000 people work for the provincial government, and that doesn’t count those employed by the province’s health authorities or schoolboards. The province says it could cut 1,000 civil service jobs by layoffs, attrition and consolidation as well as by outsourcing back-office functions to the private sector. These cuts, and other changes within the civil service, could save up to $45 million.
Cutting Teachers and University Funding
While the provincial government has identified education as one of its priorities, it also sees opportunities for savings. That could include increasing class sizes by four students to reduce the number of teachers needed. That would save somewhere between $50 million and $70 million. Government could also slowly cut the number of teachers through attrition and retirement, avoiding outright layoffs, saving up to $12 million. The provincial government also floated the idea of cutting the number of educational assistants to match the drop in student enrolment, saving up to $6 million. It might also cut or freeze operational grants to universities, saving as much as $45 million.
Cutting Healthcare Spending
The government said it might close as many as 10 hospitals or convert them into community health centres. They are also floating the idea of avoiding duplication in the system by establishing “centres of excellence” for a particular healthcare service in only one hospital. These changes to the healthcare system could save between $50 million and $80 million.
At last week’s “State of the Province,” Premier Gallant said that the province will only need to make three or four of these big changes. He also said that he won’t eliminate the deficit by slashing into healthcare and education. Given that, it seems highly likely that New Brunswick’s business community will have to bear a big part of the pain that will come with balancing the government’s books.
If that seems like deja vu, remember, tomorrow is Groundhog Day.