Province Législature Session Type de discours Date du discours Locuteur Fonction du locuteur Parti politique Nouveau-Brunswick 50e 1e Discours sur le Budget 6 mai 1983 M. John B. M. Baxter, Jr. Ministre des Finances PC Mr. Speaker, I would like to congratulate you on your reappointment as Speaker. Your fairness and sound judgment in presiding over this Assembly are well known. My deepest thanks go to my constituents in Kings West, and I entreat all to bear with me as we go through this difficult period. I feel strongly that the steps we are taking now are essential to a better future. All members will understand when I say that this is not an easy time for budgets, Finance Ministers and governments. Economic conditions have ruined the budget plans of all governments over the past year and the prospects for the year ahead are clouded with uncertainty. The 1982-83 budget was based on the expectation of a mild recession ending in the latter half of 1982 and a change in the federal government's policy of shifting its deficit onto the backs of the provinces by reducing transfers. On the basis of these expectations, the budget was designed to support economic activity and accelerate the return to a higher rate of economic growth. We were confident that the deficit that we had budgeted for in 1982-83 would dwindle with a return to economic prosperity and a reversal of federal policy on transfers. Today, Mr. Speaker, it is clear that we were wrong in our predictions for 1982-83. We did not experience a mild recession but a very severe one, and the federal government, instead of reversing its policy, announced plans to cut transfers even more. The advantage of hindsight does not alter our view that the 1982-83 budget was right for the times. It provided jobs and helped people cape in a year when other governments and industry were cutting back. However, the adjustments to our revenues and our expenditure programs that we had hoped would not be necessary in order to reduce the deficit are now unavoidable. They are unavoidable because the economy of Canada is not showing the vitality it should and because I have no confidence that the current federal government can be persuaded to change its policy on transfers. This change in our circumstances does not signal a weakening of this government's commitment to improving services to the people of New Brunswick our commitment remains, but first we must deal with the deterioration in provincial finances that has been thrust upon us. If we chose to ignore the deficit, it would make our situation worse because the financial community would not lend us money on reasonable terms and the interest charges on borrowing to finance these deficits would deprive other programs of necessary funds. We can deal with this situation and continue to meet the needs of the people of this province, but government cannot do the job alone. The help and cooperation of the members of this Legislature and the support of the people are essential. By working together, we can overcome the short-term difficulties and at the same time prepare for the resurgence in economic activity that lies ahead. When the 1982-83 budget was struck it was expected that after adjustments for inflation, Gross Domestic Product would increase by about 1%. Employment was expected to increase somewhat slower than the labour force, resulting in an increase in the unemployment rate to 12.8%. These predictions for the New Brunswick economy were made in the context of forecasts for Canada, which foresaw the national economy expanding at a similar rate and the economies of Europe and United States gaining strength during the latter half of 1982. All economic forecasts were off the mark. Virtually all of the Western industrial World was plunged into a severe recession, with Canada being the most seriously affected of the seven OECD countries. Economic activity in this country declined by 5% last year after allowing for inflation as compared to the 2.2% increase predicted by the federal Minister of Finance. The New Brunswick economy suffered a similar decline instead of the expected increase of 1%. The unemployment rate reached 14.2%. The recession of 1982 delivered a severe blow to the Canadian economy. Across the country the unemployed reached record numbers and governments, both federally and provincially, grappled with soaring deficits brought on by the harshness of the economic slump. The final results will not be available until the end of June, but I expect that the situation outlined in my recent third quarter report will closely approximate the final results on the 1982-83 budget. By the end of the third quarter, the deficit on Ordinary Account had worsened by $96.1 million, reflecting an expected net drop in revenues of $66.9 million and an increase in spending of $29.2 million. The deterioration in revenue is largely because of two taxes: 1) a $53.2 million reduction in the estimate of corporate income tax which is based on federal estimates of corporate taxable income, and 2) a $14.4 million decline in estimated revenue from the sales tax. The estimates of other revenues are not substantially different from the budget. The $29.2 million increase in estimated expenditures is mainly because of the effects of the recession on the Social Services Department and because of higher health care costs. Net capital expenditures for 1982-83 are estimated at $251 million, down by $6.5 mi Il ion from budget because of lower expenditures under the General Development Agreement. Net loans and advances are up by $14.8 million due to the difficulties encountered by some of our basic industries. When sinking fund instalments and serial redemptions of $42.2 mi11ion are combined with all other budgetary and non-budgetary expenditures, the total financial requirements for the year are estimated to be $599 million. Very recent information indicates that the 1982-83 budget plan will be improved favourably by increased equalization revenues. The revenue shortfall noted in the third quarter report will be nearly $55 million, not $67 million as predicted. Mr. Speaker, I would like now to provide details of the financing program of the province and the New Brunswick Electric Power Commission in 1982-83. During the 1982-83 fiscal year, the province issued debentures for total amounts of $173.2 million in Canadian currency and $175 million in United States currency. The Canadian currency financing included: $100 million of debentures issued at an interest rate of l5t% for a tem of five years extendible for another five years, and $73.2 million of debentures issued to the Canada Pension Plan Investment Fund at an average rate of 14.67% for a term of 20 years. The United States currency financing included $100 million of debentures issued at a rate of 1st% for a term of 10 years and $75 million of debentures issued at a rate of l5i% for a tem of five years. The New Brunswick Electric Power Commission offered one issue during the year for a total of $100 million in Canadian currency at a rate of 11.0 % for a tem of 10 years. Subsequent to the end of the fiscal year, the province completed its borrowing program authorized under the Loan Act 1982 with a $100 million issue on Canadian public markets at an interest rate of 11% for a term of six years extendible for another five years. I shall now review the more important developments in federal provincial fiscal relations during 1982-83. There were two federal-provincial meetings of Finance Ministers and treasurers last year. At these meetings, our attention was focused on the state of the economy and on our collective fiscal positions. All provinces have seen revenues fall below budget estimates. All have had to deal with increased spending demands over the course of the year. The result has been higher provincial deficits everywhere. Mr. Speaker, in 1982-83 provincial Finance Ministers and treasurers also have had to cope with changes made in the Federal-Provincial Fiscal Arrangements and Established Programs Financing Act in 1982. All provinces are opposed to federal reductions in grants for Medicare, hospital services and post secondary education through EPF. The changes made to this formula in the spring of 1982 resulted in New Brunswick receiving $20 million less in 1982-83 and in excess of $20 million less in each subsequent year than we would have received under the previous formula. All provinces together received about $1 billion less. Over the course of 1982-83, Health Ministers and ministers responsib1e for post secondary education held discussions with the federal government. It is regrettable that no agreement was reached because the federal government insists on reducing its funding and changing the terms under which provinces receive grants for these important programs. Both these steps are detrimental to the provinces and will be costly to New Brunswick. Early this year the federal Minister of Finance announced a further change to the formula by which Canada contributes to the cost of health care and post secondary education. Application of the federal six and five restraint guidelines to Canada's contributions to post secondary education in 1983-84 and 1984-85 will further reduce this grant by $3 million in 1983-84 and by $7.1 million in 1984-85. By arbitrarily dividing the block grant into separate health and post secondary education components, the federal government has stressed the relatively large share of provincial spending on post secondary education that is financed by Ottawa. What they leave out in presenting these statistics is the substantial decline in federal contributions to health care which peaked at 31% of provincial spending on health programs in 197980 and which had fallen to 23% by 1982-83. Given the increasing cost of health care, the transfers designated by Canada for this purpose will continue to cover a declining share of costs for some time to come. This will place considerable strain on the capacity of provinces to maintain the quality of health care, leading to tax increases, provincial deficits and cuts in other programs. This is my hope that the outstanding differences between the provinces and the federal government can be resolved in the com1ng year. Mr. Speaker, during its term in office since 1970, the government has improved services, narrowed the wage differentials between our employees and those of wealthier governments and maintained a low tax burden. We were able to do this because we are committed to helping people and because we manage well. However, financial reality dictates that we must retrench for a time. Until our revenue situation improves, ways must be found to reduce the growth in government spending. This does not mean that our commitment to providing better services and to improving the lot of the people of this province is any less, it simply means that the funds are not available at present to further our goals. Our major concern in approaching the task of reducing expenditures was to ensure that everyone should be treated fairly and that no group would appear to be singled out either for particularly harsh or particularly generous treatment. The government feels that people understand the need for restraint and will support it if it is applied as fairly and equitably as possible. We must take action to bring spending down, to increase revenues and to reduce our deficit, otherwise progress will be severely hindered for years to come by the need to pay increased interest charges on borrowed money. Last year, we counted on a stimulative budget to push our economy through to a time of more rapid growth that would help to bring revenues and expenditures into closer alignment. While our actions did soften the blow, the severity of the international recession of 1982 exceeded everyone's expectations and had the impact on our deficit of several years of slow economic growth. It was also indicated in last year's budget that we believed that the federal government would reverse its policy of reducing support for social programs and provide additional funds, particularly in slow growth regions where services often fall short of national standards. But with its deficit rising from $10.5 billion to $25.3 billion, we found that the federal government itself had lost all its financial flexibility. Instead of helping, it made our problem worse by pressing ahead with new plans that would further reduce its financial contribution to key programs. The seriousness of the recession, the federal government's response to it and the relatively slow growth expected for the next two or three years have reduced our estimated revenues for 19~3-84 below the level which would ordinarily be expected in a year of economic recovery. Corporate losses, for example, were so large last year that they will depress corporate tax for several years. As far as income to individuals is concerned, lower dividend payments and interest income, reduced transfers from Canada and higher deductions from taxable income, because of increased unemployment insurance premiums, will result in lower tax revenue than should be expected in a year of economic recovery. On the spending side, however, expenditure demands continue unabated, regardless of the revenue situation. Much of the new equipment for hospitals, for example, tends to be very expensive and health care costs are climbing so fast that they may soon threaten the quality of care. The costs of running the school system are also increasing rapidly with higher costs for heating schools and running school buses. The demands on social assistance are also mounting as the slow economy fails to generate sufficient job opportunities. Furthermore, much of total government spending goes to pay wages and salaries which people not only expect to keep pace with inflation but also to gain further increases to reflect increased experience and capabilities on the job. However, government is largely a service industry where it is very difficult to effect productivity gains to offset these higher wages. With the depth of the recession in 1982-83 and the re1ative1y slow growth expected over the next few years, the deficit situation, if not acted upon, wou1d get much worse over the next three years. Fiscal projections prepared last winter predicted that unless corrective actions were taken, the Ordinary Account deficit would reach $381 million in 1983-84, $466 million in 1984-85 and $553 million in 1985-86. In other words, we face not a cyclical situation in which the Ordinary Account deficit will disappear with the end of the recession but a deeply rooted structural problem arising from an ingrained expenditure level which is growing faster than revenues. As difficu1t as it may be, we must now accept the circumstances that the province has been thrust into and begin to make the revenue and expenditure adjustments which will reverse the trend to widening deficits and restore the financial hea1th of the prov1nce. The crux of our difficulty resides in a national economy that has performed far below potential for several years and is predicted to continue this lackluster performance for the next two or three years. In such an environment our tax revenue and grants from Canada, which are largely determined by economic factors, are not rising enough to cover the growing costs of government. This is a particular problem for provinces in slow growth regions. In addition to the cost pressures associated with existing service 1evels, we are under constant pressure to expand services to bring them closer to the standard of more wealthy areas. At the same time, public sector unions are making it increasingly difficult to maintain the traditional spread in government wage levels between rich and poor regions of the country. In this connection it should be noted that a province like New Brunswick has a very limited tax base and therefore has little capacity to increase revenue, either by increasing tax rates or by broadening the base on which taxes apply. Because of the several factors, we face a difficult situation which may well require special federal adjustment grants to help us cope with rising expenditures which national programs have imposed upon us in the face of limited revenue growth. Until we are able to convince the federal authorities of the soundness of our case for further federal assistance, we have to deal with the situation as best we can, using our own resources. While a restraint budget must by definition be characterized by reductions in spending, the government has no intention of abandoning key social programs. Although economic conditions may warrant a reassessment of our spending priorities, it by no means signals the end of new and needed economic and social programs. It is necessary, however, to keep the cost of running government to a minimum in order to ensure that the maximum amount of money is available for services to people and industry. These considerations, Mr. Speaker, have led to a budget plan for 1983-84 with the following elements: 1. Job creation and new programs. 2. A plan to reduce government spending. 3. Measures to en sure that municipalities bear a fair share of the restraint burden. 4. Tax increases to enable us to reduce our dependence on borrowing to pay for operating expenses. I would now like to review elements of the budget plan in detail. While it is not possible to protect the jobs of everyone during a difficult economic period such as the one we are experiencing, in this budget priority is attached to making funds available to create and maintain jobs to help relieve economic hardships. Programs of the economic development departments were reviewed in terms of their contribution to protecting jobs and creating jobs. A projected increase in the current service level of economic development departments of some $45 million was reduced by nearly $28 million. This has made possible $24.5 million in spending this year on new or expanded programs emphasizing jobs. Consequently, the 1983-84 budget makes provisions for $15 million for a job creation strategy which will create some 7000 jobs. An additional $825 000 is also budgeted in the Department of Natural Resources for short-term job creation in collaboration with the federal government. It is important not to lose sight of the fact that economic conditions are improving and that now is the time to plan for the improved economy ahead. With this in mind, we have added $4.3 mi Ilion to the Community College budget for new equipment and courses as well as $1.6 million for CAD- CAM related courses. It is not enough to have computer aided design and computer aided manufacturing centres in the province, we must also provide the opportunity for people to acquire the operating skills associated with this technology. The recent recession taught us the importance of being able to bring all the resources of government to bear quickly on a situation where an industry proposed to shut down. This budget provides $270 000 for a job protection unit which will coordinate the provincial government's response to possible industrial closures. The Environment Department has made great strides in recent years in reducing the environmental costs associated with urban and industrial activity. I am pleased to announce that in 1983-84 we will continue this program of improvement s. In this budget, $1.7 mi Ilion is allocated to the Greater Moncton Sewage Commission to begin work on a sewage system in Moncton and $700 000 is budgeted for sewage system construction in Fredericton. Work will continue on the Saint John North sewage treatment facility at a cost of $2.67 million. This will service the Saint John Regional Hospital. The budget makes provision for $200 000 in the Department of Commerce and Development as a commitment to the implementation of the Main Street revitalization program. This new program promised in last fall's election platform will assist in physical improvements in the downtown area of several of our communities. During the recent election campaign, the government made a commitment to provide grants to senior citizens eligible for the guaranteed income supplement beginning on April I, 1983. The present financial situation does not allow us to implement this program on the date promised. Instead, it will be introduced on November I, 1983. I also wish to announce that basic social assistance payments will increase by 3% commencing in June 1983. Our intention is to reduce the deficit on Ordinary Account to zero as quickly as we possibly can without disturbing the momentum of economic recovery. The more quickly we act, the more quickly borrowing will be reduced and debt service costs will be saved. The longer the problem is allowed to continue, the greater will be the debt incurred and the larger will be the debt service costs that will become entrenched in Ordinary Account spending at the expense of other programs, in fact, the entire fiscal system. The 1983-84 budget reflects reduced overhead expenditures and cuts in programs where the economic and social impact is likely to be least. This process has involved a detailed analysis of many government spending programs in order to identify those cuts with the least impact on service levels. Over the coming months, ministers responsible for the program of reform will be investigating ways of delivering programs at less cost as well as identifying other areas of spending where economies can be realized. In order to focus the efforts of ministers and program managers to effect additional savings, departmental spending targets for 1984-85 will shortly be sent to all ministers and deputy ministers. However, reducing the level of spending in one year does not deal adequately with the problem. The rate of growth in spending must be permanently brought in line with the rate of increase in revenue. In the short run, one of the costs that will be most difficult to sustain is that represented by the almost continuous demand for higher wages. The government is not unmindful of the fact that New Brunswick lags in provincial comparisons of wages, as indeed it does in provincial comparisons of a number of other things, such as population, distance from markets and industrial development. It is most unfortunate, but a fact of our existence in Canada. This government and previous governments have tried to correct these inequities with some success; however, further attempts will have to wait for a future more blessed with abundance. Labour costs, like others, must be trimmed. Employment is such a significant component of government expenditure that all employees in the public service, bargaining and non bargaining, including those employed in provincial Crown corporations and agencies, will be called upon to accept a zero increase in wages for a one-year period as not to disrupt the free collective bargaining process, some limited delay will be encountered in realizing this objective. In those instances where contracts are in force or where bargaining has been essentially completed, the zero increase objective will be applied in the next round of bargaining. Where bargaining is not so advanced, the objective will be applied in the first year of a new contract. This sacrifice will allow the vast majority of employees to keep their jobs at a time when many others will have lost theirs. When the economy rejuvenates, the collective bargaining process can again provide normal increases based on productivity gains. Today our ability to pay even higher wages and other benefits is limited by our scarce resources. The Premier will shortly be meeting with representatives of public sector unions and professional associations to outline in detail the government's position on wage settlements. As difficult as it is in a service industry, the government intends to achieve productivity gains. Every effort will be made to minimize layoffs resulting from the attainment of productivity gains. Where elimination of jobs does occur, we will try to find employment for the employee in question elsewhere in the government service. This will result in restricting hiring from outside the service for a period of time. In the process of preparing this budget, the government reviewed its policy regarding fees levied for such goods or services as birth certificates or night school registration fees. Many of these have been increased to better reflect the current cost. There are government services that are very expensive and to which the user makes no direct cost contribution. Since the result is heavy demand for the se services, we are introducing a charge in certain areas. The prescription drug program for senior citizens is one such area where rapid cost escalation can be offset by a small charge. The prescription drug program provides coverage for the full cost of prescription drugs and the pharmacist's professional fee for those aged 65 and over and for people with cystic fibrosis. Since its inception on October 1, 1975, the cost of the program has escalated at an annual rate of approximately 20%, from an annual cost of $6.9 million to its present annual cost of $23 million. These increasing costs are due to a number of factors: high utilization, increases in medication costs, increases in professional fees and increases in the number of persons covered by the program. By providing total coverage, no contribution is required by the beneficiary and therefore no deterrent exists to prevent cost increases due to unnecessary utilization of the program. It is this government's intention to propose that a cost participation mechanism be added to the program. This will require payment of a portion of the dispensing fee by the beneficiary at the time the prescription is picked up from the pharmacy. The proposed cost of $3 per prescription is 50% of the pharmacist's professional fee for dispensing the prescription. The cast to be shared should not present a hardship to users as the co payment will be modest in comparison to the overall cost of the prescription which averages $15. In recognition of the delay in implementing the provincial grant to guaranteed income supplement recipients, this charge will not be levied until November I, when the grant program begins. Health care is one of the most difficult areas in which to reconcile availability of service with efficient use of resources. Accessible health care is fundamental to being a citizen in this country. Provincial governments, as well as boards of trustees and administrators of the hospital system, are very conscious of the importance of maintaining and improving the quality of the delivery of health care. The government accepts the view of many hospital boards, hospital administrators and other people in the province that a charge for outpatient services can contribute significantly to efficient use of hospital facilities. Accordingly, outpatient charges will be made for all hospital and diagnostic services. Social assistance recipients will pay $3 per visit or per day and all others will pay $6 per visit or per day. Senior citizens will pay no outpatient charge prior to November I, when the charge will be $3 per visit or per day. The Department of Health will begin work immediately with hospital boards to implement the outpatient charge which will incorporate limits to ensure that no one will suffer undue hardship. Mr. Speaker, throughout the health system, measures will be taken to restrain the growth of expenditures. The health care system is of vital concern to all New Brunswick residents and it is essential that resources available to this system be used in the most effective manner possible. The impact of the current recession is being felt by governments at all levels and the need to reassess spending priorities is being shared by all levels of government. We have developed over the past 15 years the most generous system of revenue transfer between provincial and municipal governments in North America. The financial pressures faced by the government resulting from the current recession require that we ask the municipal level of government in New Brunswick to take a greater share of the burden of coping with restraint. Amendments will be introduced to the Municipal Assistance Act so that municipalities will receive the same amount of unconditional grants in 1984 as in 1983. The amendments will further provide for a 6% increase in the grant in 1985. In addition, a special levy of 2% per $1000 of assessment will be added to municipal tax rates for 1984 to recover part of the cost to the province of providing assessment services for municipalities. Municipa1ities at present bear the major cost of assessment in all provinces except New Brunswick and Prince Edward Island. Over the coming months the municipal grant formula will be examined to try to ensure that the restraint in government transfers to municipalities will be borne equitably among the different cities, towns and villages of the province. Overall tax levels in New Brunswick are low in relation to most other jurisdictions in Canada, particularly when one considers that New Brunswick does not have hospital or health insurance premiums, capital tax on corporations or a payroll tax and that there are man y exemptions from various consumer taxes. In considering the alternatives available for raising tax revenue, priority was attached to choosing measures which would create a minimum of disruption in the economy. Following are the tax changes in this budget: - Gasoline Tax: Effective midnight tonight, the rate of tax on gasoline will increase from 16% to 20%. The rate on all other fuels is unchanged. This measure will yield an estimated $16 million in increased revenue in 1983-84 and bring our tax into line with our neighbouring provinces, with the exception of Quebec where the tax is 40%. - Tobacco Tax: Effective midnight tonight, the tax rate on tobacco products will increase from 34% to 50%. This will yield an estimated $15 million in increased revenue this fiscal year. - Personal Income Tax: Effective January I, 1983, the personal income tax rate will increase from 55.5% of the federal basic tax to 58%. This will yield an estimated $16 million in increased revenue in 1983-84. - Property Tax: Effective January I, 1984, the provincial property tax rate on owner-occupied residences located outside municipalities will increase from 40~ per $100 of valuation to 65~ per $100 of valuation. This measure will yield an estimated $1 million in additional revenue in 1983-84. - Social Services and Education Tax: Effective midnight tonight, the social services and education tax rate will increase from 8% to 10%, yielding an estimated $56 million in additional revenue this year. This brings our rate up to the level of the other Maritime Provinces. Also effective midnight tonight charges incurred to install, adjust, repair or maintain tangible personal property will be subject to the social services and education tax. This measure will yield $20 million this fiscal year. Four other provinces in Canada apply sales tax to this item. - Liquor Trading Profit: I have instructed the Chairman of the New Brunswick Liquor Corporation to increase the markup on its products to earn an additional $5 million in profit. The actual pr1ce Increase on various products is to the discretion of the corporation. - Property Transfer Tax: A property transfer tax of one-quarter of 1% of the property's value will be introduced to yield about $2.7 million in 1983-84. This tax or similar charge applies in most other provinces. Mr. Speaker, the budget for 1983-84 attempts to be both realistic and fair. It contains measures to restore the province's financial flexibility and to prepare us to take advantage of the opportunities that 1ie ahead. The budget plan for this year is a major improvement over 1982-83. With Ordinary Account revenues of $2199.2 million and Ordinary Account expenditures of $2389.9 million, the Ordinary Account deficit will be $190.6 million. This is a major reduction from the $260.5 million deficit expected for 1982-83. With capital expenditures of $225.3 million and capital recoveries of $24.1 million, the budgetary deficit will be $391.8 million, a reduction of over $119 million from the budgetary deficit expected in 1982-83. The increase in the net debt, at $321.8 million, will be much less than the $453.5 million expected for 1982-83. Mr. Speaker, the budget plan for 1983-84 achieves a major reduction in financial requirements in comparison with those of 1982-83. The overall deficit, in conjunction with net loans and advances of $26.3 million and sinking fund instalments and serial redemptions of $47.3 million, results in financial requirements of $465.4 million in 1983-84. This is a reduction of about $134 million from the expected level of financial requirements in 1982-83. This budget plan goes a long way in correcting the financial imbalance resulting from economic conditions. It demonstrates our commitment to sound financial planning and good management practices. The recent recession and the adjustments that it has forced on individuals, businesses and governments do not alter fundamentally our great prospects as a nation and as a province. The attractiveness of New Brunswick as a location for manufacturing, the potential of our resource base and the advantages offered by our seaports will yield many new jobs and increased income over the course of the 1980's. In taking strong measures now, the government has not lost sight of this potential and has not halted its efforts to make our potential a reality.