Province Législature Session Type de discours Date du discours Locuteur Fonction du locuteur Parti politique Nouveau-Brunswick 52e 1e Discours sur le Budget 31 mars 1992 M. Allan E. Maher Ministre des Finances PL Madam Speaker, the 1992-93 budget is one of the most important ever tabled in this House. The fifth budget of this government represents the beginning of a new fiscal era in this province. Like every province in Canada, we are just starting to emerge from a very difficult period in the fiscal history of our province, and I believe the future will reveal an environment that will be markedly different from what we have experienced in recent years. In order to ensure that New Brunswick is strong and has the capacity to take advantage of future opportunities, we have to exercise leadership. This budget, Madam Speaker, represents a bold new approach to delivering quality but lower cost and more accessible services, and it lays the foundation for a brighter future for New Brunswickers. The overall objective of this budget is to accelerate a fragile economic recovery, freeze new taxes and allow for modest strategic tax reductions, reduce the deficit from the year just ending, introduce a program of capital investment to further stimulate the economy, and create new jobs. As well, this budget streamlines government services, establishes a responsible wage policy, allows services to be delivered in the best way possible to all New Brunswickers, and protects those most vulnerable in our society. Our government has accepted the need for a deficit this year in the Ordinary Account because we are convinced that a fragile economy would not sustain further expenditure reductions, and that modest investments could in fact help stimulate economic recovery. Madam Speaker, this budget came about as a result of the thoughtful deliberations of New Brunswickers expressed in open consultation sessions around the province. I wish to offer my most sincere thanks for their efforts and their suggestions in providing input once again this year during the budget consultation process. People from all walks of life and from all parts of the province actively participated in our budget-making process. Why did they take such an active interest? I believe the reason is clear. New Brunswickers know full well the financial difficulties we face due to federal cutbacks, the recession and the increased demand for services over the years, all leading to a deficit. At the same time, they are well aware that this is not my deficit, this is not the government's deficit, nor is it the deficit of anyone individual or group; it is New Brunswick's deficit. New Brunswickers are saying that they recognize that fact and they want us to deal with it, so that the burden of debt is contained as quickly as is reasonably possible. Madam Speaker, we listen intently to what New Brunswickers have to say, but we also exercise leadership by doing what we believe is right, even though sometimes that is not the popular course. While we cannot incorporate every suggestion we hear into the budget, I am proud that we are able to include a great many suggestions that are reasonable and workable, and that we believe will keep the province firmly on the right track and living within its means. Madam Speaker, in the budget I am introducing today, I will be asking members of this House to approve a budgeted ordinary deficit for the first time since 1988-89. I will also be asking for approval of supplementary estimates for capital spending on highways to stimulate the economy and improve our infrastructure. The ordinary deficit will be $135 million. Keeping the ordinary deficit this low has been difficult, and has required many long hours of deliberation by the government, and some tough decisions, as well. Last fall, when we started building the budget for 1992-93, we were looking at an Ordinary Account deficit of $267 million for 1992-93. As the economy worsened and the federal government further reduced our transfer payments, it grew to over $300 million. To reduce the projected deficit has been extraordinarily difficult for a great many people, but we have been able to do it while protecting essential services. That is what people wanted, and that is what this budget delivers. To have balanced the budget this year would have created extraordinary hardship for New Brunswickers and imperilled our economic recovery. Madam Speaker, because some of the critical developments of the past year will affect the province's fiscal circumstances in the year ahead, I would like to review the year just ending before outlining plans for 1992-93. The 1991-92 budget was based on a number of assumptions about federal transfer payments and the economy. It is now clear that those assumptions were incorrect. Last spring, the government, along with virtually every other forecaster in Canada, expected that the country and New Brunswick would begin to recover at a fairly rapid pace from the recession by mid-1991. With this background, the budget for 1991-92 forecast an Ordinary Account surplus of $1.1 million. However, the anticipated recovery did not occur. Although in late summer and early fall there were glimmers of a possible recovery, the impact of weak international markets, large household debt loads and depressed consumer attitudes kept the economy performing well below expectations. This meant that our projections for revenue growth of 4.8% could not be realized. Even though we had anticipated some slowdown, our 1991-92 budget projections did not foresee the length and the severity of the recession. Of our own source revenues, the sales tax has been hardest hit. It is estimated that we are down $43 million from budget on this source alone, because spending is down in virtually every area. In addition to the general decline in the economy, the losses are in part due to increased cross-border shopping. Lost taxes on sales outside our borders continue to erode our consumption tax base. Madam Speaker, that is also a large part of the explanation of why our estimate of revenue from tobacco tax is down by $17.6 million. The decline in the economy has also affected our personal income tax estimate, which is down by $19.5 million. Madam Speaker, reductions in equalization payments had by far the largest impact on our 1991-92 budget. Our government assumed that equalization estimates which had been provided by the federal government last year would be basically correct. It transpired, however, that the adjustments were far greater than normal and that the federal government's estimates were way off the mark. These reductions for New Brunswick were the second worst in the country on a per capita basis. The latest data out of Ottawa suggests that the federal government will pay the province $155 million less for equalization this year than was estimated last spring. Madam Speaker, I believe it is important to put this loss in perspective. To make up $155 million, we would have to raise the sales tax by about three percentage points, raise the income tax by 14 points, or almost double the property tax rate. If we tried to make it up on the spending side, we would have to close more than the equivalent of the Dr. Everett Chalmers Hospital and the Saint John Regional Hospital for a year, or shut down the four universities and part of the Community College system for a year, or eliminate all road maintenance and part of our new road construction for an entire year. The severity of the recession has also taken its toll on the expenditure side of the budget. Nonetheless, we have had to fund some additional spending, particularly the income assistance program which is up by $39.6 million from budget. Overall, ordinary spending is up by $26 million over budget and only $8.3 million higher than the second quarter. Madam Speaker, changes in revenues and expenditures over the year mean that the final estimates for 1991-92 will be well off the budgetary targets. The third quarter report showed that the small budgeted surplus of $1.1 million on Ordinary Account is now expected to be a deficit of $232 million. Coupled with a capital deficit of $297.6 million and other requirements of $94.6 million, it means we will have had to borrow about $624.2 million by the end of the 1991-92 fiscal year. Madam Speaker, this will have a profound effect on our debt service payment for next year and for years to come. Once a large deficit like this is created, it does not disappear overnight. It does not disappear within a year, or even within a number of years, without significant changes, and if those changes are not implemented, the pressure on debt service payments will ensure even greater deficits for as far down the road as any of us can see. The fact is, the unhappy events we have experienced for the last year and a half dictate that, even with a recovery in sight, we must change the way we do things-the way we spend our money and the way we raise our revenues. I will elaborate more on both of these initiatives a little later, Madam Speaker. Since federal transfers play such a large role in the province's budget, it is important to review the developments on this front since last spring. Equalization and federal established programs financing payments in support of our health care and postsecondary education programs provide New Brunswick with about one third of our annual gross ordinary revenue, or approximately $1.2 billion. Our entitlements for these programs have most recently been determined under the 1987- 92 Fiscal Arrangements Act, which over the past year has been under review and negotiation between the federal government and the provinces. New Brunswick entered negotiations for the renewal of this legislation with a strong commitment to ensure that the province of New Brunswick would continue to get its fair share. Despite the increasing federal deficit and recent federal initiatives to reduce transfer payments to the provinces, such as the freeze on EPF payments and the GNP ceiling on equalization, we were able to negotiate a number of improvements to the equalization formula. At last January's Finance Ministers Conference, the federal government agreed to implement a number of technical changes to the equalization program. These changes will improve the fairness of the program, and as a consequence, New Brunswick's equalization entitlement will be about $26 million higher in 1992- 93 than it would otherwise have been. The equalization program has also been renewed for a two-year term from April 1, 1992 to March 31, 1994. While the provinces have not been able to convince the federal government to eliminate the ceiling on the equalization program, it will be rebased to 1992-93, which effectively means that there will be no ceiling on equalization for the 1992-93 fiscal year. Due to a number of factors, we can look forward to continued intense consultation and negotiations over the coming months and years. These include the shorter two-year renewal for fiscal arrangements, continuous work on technical equalization issues, an in-depth review of major fiscal transfers, the freeze on EPF payments to 1995, and ongoing constitutional debate. Madam Speaker, while the government is anticipating a recovery this fiscal year, particularly in the second half, the economy is not likely to grow with vigour until well into 1993. The projected growth rate in GDP for 1992 is now expected to be 0.5 %, and while this is low by historical standards, it follows a year when real output declined by 1 %. The impact of swings in the economy has been more severe in some parts of the country. The substance of the recovery from the current recession is not expected until well into the next fiscal year. Madam Speaker, a slow-growing economy is not the only drawback we are carrying forward into the next fiscal year. The federal government is facing a deficit of around $30 billion and has made it clear that it will not be a significant, if any, part of the solution to the province's financial problem in the near future. Because of the recession and reductions in transfer payments in the past year, the 1991-92 base for revenue growth is low. It will take a long while to get that lost revenue back. In fact, for 1992-93, we expect own source revenue growth without any tax changes to be 4.7 %. But this, combined with transfer payments from Ottawa, will not be enough to cover the projected increased costs in 1992-93, let alone deal with the deficit base that was created in 1991- 92. As the government began to develop the budget for 1992-93, ordinary spending was forecast to grow by 7.8%. With projected inflation at only 3 %, this is a high-growth rate, but there are reasons for it. Left unchecked, health care costs were forecast to grow by 8 % because of rising drug prices, increased operating costs in hospitals, new physicians, and inflation related to technological change. Wages are the single largest portion of government spending and those costs were forecast to escalate if we did nothing to keep the wage bill in check. As well, we faced increased pressures for environmental needs and maintenance of roads, and further sharp increases were expected in costs of income assistance. These are all legitimate demands on the system, but because these costs are growing much faster than revenues, we knew we had to find a way to control them without affecting levels of service in essential programs. Madam Speaker, when expenditures grow faster than revenues for a year or two, large fiscal problems soon become evident. When this discrepancy in growth rates appears to be permanent or long term, the resulting deficit is said to be structural in nature and major changes become necessary. We are facing an entrenched deficit that will not correct itself of its own accord, no matter how long we wait. There are a number of reasons for this: The federal government is solving its fiscal problem partially by creating a bigger problem for us. Federal transfers now and for the foreseeable future represent a smaller share of our spending than they did in the past. Consumption tax revenues, such as those for tobacco and gasoline, have stopped growing because of levelling off or decline in demand. The cross-border shopping phenomenon has affected our border communities and provincial revenues. Spending on health care and other essential programs is projected to grow in the future much faster than inflation, unless changes are made. There is a limit to tax room, and while our taxation levels are in the middle of the pack, nationally and internationally, there is increasing evidence that there is little discretionary tax room left and taxpayers vigorously resist paying more. Left unchecked, an Ordinary Account deficit in 1992-93 of $300 million and total financial requirements of close to $700 million would correct itself, it would get appreciably worse. In fact, by 1995-96 if nothing is done, we could be looking at an Ordinary Account deficit of $500 million. That is without adding any new programs and with a growing economy. That is totally unacceptable, Madam Speaker. New Brunswick, however, is not alone in this dilemma. Across the country, and indeed in just about every state in America, governments are facing similar or worse situations. In Canada, the fiscal circumstances of the provinces generally have worsened by at least $4 billion during the 1991-92 fiscal year. By year-end, the final result is expected to be even worse. For example, Quebec, Saskatchewan, Nova Scotia, Prince Edward Island and British Columbia have all indicated their deficits will be higher. The final results for the year are not yet in for those and other provinces such as Ontario, which originally forecast a deficit of $9.7 billion, which is now expected to be higher. For any government which chooses to ignore these developments, the consequences will be disastrous. Without any actions to control deficits, debt service payments would take hold of budgets and dictate spending and revenue choices for the future. I hope that no jurisdiction will seriously entertain the possibility of losing control of its financial and fiscal decisions. That is exactly what would happen if the government did nothing-the province would lose control of its own destiny. On the other hand, if we make the right choices now, New Brunswick's economy and our government's financial situation will be well positioned to take advantage of a turnaround in the economy in North America. We can and we will turn a difficult situation into an advantageous one. With the help of the people of New Brunswick, including members of this House, I am confident the solutions can be found. That is why this government has looked at everything it is doing on both the spending and revenue sides of the ledger. We are examining every possibility to see if there are better ways of delivering services and better ways of raising revenues without increasing the burden, especially for those with lower incomes. Madam Speaker, in order to effect the necessary changes, the government has examined all the services it provides and how they are provided. Clearly, not all public services or government programs have the same priorities. We must ensure that we protect the most essential among them, and that we make all programs as effective and efficient as possible. Much has already been accomplished in managing these costs, but more remains to be done. In order to ensure that services are delivered more effectively, we have to look at how they are delivered. We believe there are opportunities to improve our delivery systems and this budget will address that issue. we introduced a budget which went a long way toward bringing the fiscal situation into line. The following year, we tabled a fiscal plan which was instrumental in providing two successive Ordinary Account surpluses for the first time since 1980-81. In 1990-91, we expected a small surplus, but because of the slowdown in the economy that began in 1990, we finished the year with a slight deficit. Madam Speaker, that was an enviable three years of fiscal management. We were very successful in managing our finances responsibly, while at the same time improving existing services, without major tax changes. And it paid off. In fact, our success was recognized by Standard & Poor's Corporation, which increased our credit rating to the AA category. We are now in the same credit category as the larger and richer provinces, and we are the only province to be upgraded in the last two years. This is important because it saves the taxpayers of this province millions of dollars in interest costs each year. Madam Speaker, this government is committed to the same sound fiscal and financial principles as the people of this province. We are committed to working hard and ensuring that we live within our means. At the same time, we are committed to caring for those citizens who are not able to protect themselves. We are also committed to developing a sound infrastructure so that New Brunswick can better compete and we can get our products efficiently to market. We are committed to excellence in education, literacy and training, to help students and workers find a secure place in our economy, and to help our province grow and prosper in an increasingly competitive world. Madam Speaker, we are also committed to providing conditions that help the private sector grow and prosper, because that is the real key to economic recovery. We do not believe in taking over the private sector. Our economy has to be competitive, and to do that, we have to be efficient and have the infrastructure in place to allow private enterprise to compete and to prosper. On the Ordinary Account, we are pursuing the same objective: providing support for the economy where we can make a difference and allowing the private sector to grow at the same time. Madam Speaker, given the fact that the 1991-92 deficit will be well over $200 million, it is not realistic to expect the Ordinary Account to be balanced in 1992-93, nor would it be the right thing to do in this economic environment. We do have to keep the deficit at a reasonable level in order to take advantage of the recovery when it is well underway. Over time, however, we must balance our day-to-day spending with our revenues. We believe the time has come in New Brunswick to take our commitment to fiscal responsibility to its logical conclusion: by balancing the Ordinary Account over a five-year cycle. That is what New Brunswickers want; that is what New Brunswickers expect, and that is what they will get. I will be providing more details on this later in the session, but the basic feature of the balanced budget legislation that was announced in the throne speech will be a requirement for the government to cover any ordinary shortfall in one year by surpluses in other years in the cycle. Since we are budgeting for an Ordinary Account deficit in 1992-93 of $135 million, this means that we will have to produce a net surplus of at least $135 million over the last four years, that is, to 1996-97. Madam Speaker, a balanced budget is important because it protects our future-the future of our children-and our economy. A higher debt level means higher taxes, and it could also mean a downgrading of the provincial credit rating. As well, it would work against us in our efforts to attract new investment to New Brunswick. Madam Speaker, some people believe that a balanced budget can only be achieved through the sacrifice of key programs and services. This is not true. What is true is that those key programs and services will be eroded in future years if we do not act now to contain the deficit and future interest payments. While the government is committed to a balanced budget and firmly believes it is the only way we can chart a sustainable course for the future, the choices on how to achieve this are painful and limited. We cannot rely on the federal government to inject more funds into the province. It has major problems of its own with which to contend, and is part of the problem, rather than the solution. We cannot borrow the money, spend our way out of the recession and hope the budget balances itself in a few years. As I have already indicated, Madam Speaker, this approach will lead to a future which is not in our best interest. The deficit cannot be eliminated with tax increases alone. The past has proven that raising taxes is, at best, a temporary solution. Furthermore, New Brunswickers have told us that they do not want to pay increased taxes. While this is not a profound revelation, it is clear that opposition to high taxes, coupled with unchecked and growing government spending, is more pronounced than has been seen for a long time. Clearly, Madam Speaker, it is on the spending side of the budget where we must continue to focus in order to secure our future. People recognize that. They have told us to be more efficient and eliminate low priority programs and services. They want us to cut overhead and layers of administration. Well, we have done just that ever since we were elected, and we will continue to be ever mindful of the need for cost-efficiency. Madam Speaker, the previous four budgets of this government had as a major focus the elimination of overhead. In the 1988-89, 1989-90, 1990-91, 1991-92 budgets, administrative and overhead costs were reduced by $249.5 million. These included reductions in travel expenses, consultants, furniture and other similar costs. But reducing overhead and creating efficiencies are not I enough to deal with the problems we are facing. We have to look at other alternatives. All New Brunswickers have to realize that some programs and their components will have to be. All New Brunswickers have to realize that some programs and their components will have to be adjusted to guarantee the existence of those programs that are most essential to our citizens. Clearly, not everyone agrees on what is essential. There will be criticism, no matter what decisions are made. I know that, but as a government, we must be resolute and do what we believe is right for the majority of New Brunswickers, for today and tomorrow. This means we must make the choices clear to New Brunswickers as we implement this budget. We have to review administrative and overhead spending, but we also must review our essential but high-cost programs, because those programs consume most of our tax dollars. I am referring to such programs and their 1992-93 funding levels as: nursing homes, $99.5 million; Medicare, $196.5 million; hospitals, $554.9 million; prescription drugs, $58.6 million; schools, $586.2 million; universities, $150.3 million; Community Colleges, $98.3 million, and income assistance, $322.1 million. These programs alone total approximately $2.1 billion. Total spending on these programs for our population of 727 000 represents almost $3000 for each person, or $8300 for each household. Based on these numbers, it is abundantly clear that most of the costs of government are for essential programs and services. It follows that, in order to restrain spending to protect taxpaying New Brunswickers, -these programs must also be part of the cost-saving process. Madam Speaker, New Brunswickers have told us they want government expenditures kept under control, and they want to see the size of the deficit begin to shrink. They want us to continue to strive for effective and efficient program delivery. New Brunswickers have also told us that we are trying to deliver too many programs with too few dollars. They are right. During the public meetings on the budget carried out in 17 cities and towns during the month of January, New Brunswickers came forward and gave us their views. Approximately 2000 people attended the public meetings held throughout New Brunswick. In addition, there were 10 consultation sessions with provincial organizations and associations during the month of December. Approximately 250 organizations and associations were invited to send a representative to one of these sessions. Government also made presentations to the leaders of the opposition, presidents of the New Brunswick universities, the public sector unions, school board trustees and hospital board executives. I have also received to date over 100 briefs and letters with comments and suggestions on the provincial budget. Madam Speaker, no other government in the history of this province has opened up the budget process in this manner. Some of the major suggestions that were provided at all these meetings included: rationalize the delivery of education and health care programs, without affecting the quality of these programs; take measures to address cross-border shopping; continue construction of a four-lane Trans Canada Highway; place more emphasis on economic development; avoid, if possible, the continuation of the public sector wage freeze; reduce the number of commissions and boards; reduce taxes. Madam Speaker, as I have said, a fundamental feature of our fiscal strategy is to focus on the spending side of the budget. The first step is to apply strict controls on ordinary spending. The government has approved a 4% total growth rate for 1992-93, in line with the growth in spending in 1991-92. This growth rate will be 3.5 % in both 1993-94 and 1994-95. These ceilings will require very careful management by all government departments and honour the government's commitment to implement multiyear budgeting. This measure will have the added benefit of allowing departments to make budget plans one and two years in advance. We also propose to allow more expenditure flexibility within and between programs to reflect the philosophy of "Let the managers manage." Beginning this year, the Legislature will vote Ordinary Account budget allocations on a department rather than a program basis, with the exception of General Government and the Legislative Assembly. Departments will be able to transfer funds from one Ordinary Account program to another, for amounts equal to 15 % of the program budget or $200 000, whichever is less, without prior authorization from the Board of Management. As I stated at the outset, Madam Speaker, the 1992-93 budget represents a bold new approach to delivering quality, but lower cost and more accessible services. Our spending plan has five major thrusts. Each one has been carefully formulated, incorporating as much public input as possible. Our strategy includes: - rebuilding the province's infrastructure; - constructing a responsible wage policy; - rationalizing, streamlining and eliminating low priority services; - providing more funding to critical new and expanded programs. Madam Speaker, many citizens and organizations made strong representations to the government, before and during the public consultation process, to accelerate full-scale construction of a four- lane Trans-Canada Highway and our arterial highway system through the province. One of our highest priorities is to upgrade this major transportation artery to ensure the safety of all travelers and to provide for the more effective movement of goods to the marketplace. The construction of a four-lane Trans-Canada Highway will also provide a major stimulus to help kick-start the provincial economy and get it back on the road to recovery. We know that the economic return to the province from highway construction is among the highest of all types of economic activity. The estimated total cost of building a four-lane Trans-Canada Highway and our arterial highway system is now set at approximately $2.2 billion, which means we will have very strong capital construction activity for the balance of the 1990s. The construction of this highway will create approximately 1000 direct and indirect jobs in New Brunswick each year. This is in addition to jobs created through our planned highway construction, and job creation efforts through other capital activities in the health, education and environment fields. Spending for this project, which would have been paid for out of the arterial highway trust fund, will be provided for in the Capital Account budget for 1992-93 and the future. In total, the Capital Account budget of the Department of Transportation will be $195.3 million in 1992-93. Madam Speaker, I would be remiss if I did not point out that the province has spent close to $60 million per year over the last couple of years on the Trans-Canada Highway. Much more has to be done, and we need the federal government as a partner in this undertaking. Madam Speaker, for four years we have made strong arguments to get the federal government to recognize that rebuilding the Trans-Canada Highway is a national responsibility. I am confident that our efforts will be successful and the two governments will sign a formal agreement in the near future setting out cost-sharing ratios and other details. Madam Speaker, it is essential that government programs be both effective and efficient. Making sure this happens is an ongoing process for this government, but this year we have made a particular effort to ensure that these objectives are reached. Our citizens expect and deserve no less of us. This budget complements initiatives that have been developed in the past year to make government more effective and efficient. Among these initiatives was a 25 % reduction in the size of Cabinet this year, to 18 ministers. Five departments were merged, yielding a reduction of 115 full-time equivalent positions in the civil service with very few layoffs. This will save $5 million annually. Madam Speaker, reduced administration costs and improved management techniques will save the province approximately $14.5 million in 1992-93. Some examples are: - Aggressive price and volume control management of the prescription drug program will save $2.5 million. - Improved management screening of the special needs program in the Department of Income Assistance will save $500 000. - Redefining the level of care in the psychogeriatric sections of our two psychiatric hospitals to a nursing home care level will save $986 000. Reduced infestation levels will allow savings of $2.7 million in the insect and disease protection program and silviculture program in the Department of Natural Resources and Energy. - Service efficiencies in the Department of the Solicitor General will save $880 000. - Strict management of highway maintenance and snow control budgets will save $3.5 million. Madam Speaker, our government is not alone in seeking better ways to conduct its business. Governments across this country and in the United States as well, are struggling to find ways to reduce the widening gap between revenues and expenditures. All departments have been asked to examine every facet of their operations to determine where costs can be saved by making more efficient use of staff and facilities. But reducing costs is not the only means of managing expenditures. Providing more and better service at current costs is just as important. In line with this, Madam Speaker, the government believes a more customer-focused and integrated approach to serving the public will be an important strategy in keeping costs under control while maintaining existing services. Today, the government has at least 1300 locations around the province offering service, each with its own complement of administrative support and technical and/or professional staff. For example, the Department of Transportation has 126 service points throughout the province and the Department of Natural Resources and Energy has 92. In some instances, these service points are across the street from one another. In these times of restraint, we can no longer afford all the expenses associated with the staffing of these offices. We must learn to share resources, coordinate our delivery of service, and in short, do more with less. This year, Madam Speaker, we announced in the throne speech that our government would test a major quality management initiative with the establishment of pilot government service centres in the province. Two dominant forces are converging to make this a critical time to seize the opportunity to make significant changes in the way government offers its services: the serious fiscal situation of the province and the public's interest in obtaining better value for its tax dollars. The government service centres, Madam Speaker, will consolidate a number of existing government services in a community into one convenient location, thereby providing better services to our citizens with greater cost efficiency. This is the one-stop shopping concept which has been so successful in the private sector and in some other provinces. The rationalization process has begun in other areas, too. The government is moving ahead with the consolidation of school districts as recently announced by my colleague, the Minister of Education. The Minister of Municipalities, Culture and Housing has also indicated a need for local governments in the province to provide service on a more cost-effective basis. To this end, the Department of Municipalities, Culture and Housing will be exploring the alternatives of regionalization and amalgamation. I am pleased to announce that the government will undertake a major review of all commissions, boards and tribunals. This review will focus on the rationale, objective and effectiveness of the province's many commissions, boards and tribunals. The government will begin this evaluation immediately. Madam Speaker, the third major thrust on the ordinary spending side is directed at the wage bill and our human resource strategy. Wages constitute the largest single item of expenditure in the overall budget. For many departments, the wage component accounts for 75 % to 85 % of total spending. To attempt to control costs without affecting the total wage bill is impossible. Therefore, if we are to manage government expenditures more effectively, we must reduce the number of people who are paid by tax dollars and only approve wage increases in line with our revenue base and affordability. In today's fiscal and economic climate, it is the only approach that makes sense. Madam Speaker, in a perfect world the government would have sufficient funds to pay higher levels of remuneration. Unfortunately, we are in difficult circumstances and it is unlikely that we will again see the level of wage increases that occurred in the late seventies and early eighties. When I announced the wage freeze last year, it was our intention that this would be for a one-year period only, after which regular collective bargaining would resume. This was based on economic projections which predicted that our economy would begin to emerge from the recession during 1991. As we now know, and too well, these projections were overly optimistic. I have met with representatives of public sector bargaining employees on several occasions since last October. The purpose of these meetings was to inform them of our financial situation and to alert them to possible deficit reduction measures that would affect public sector employees. We have shared with the unions our fiscal framework information and have also provided them with detailed information on our current and projected payroll costs. At my meeting with them on February 14, I outlined the need to reduce our anticipated growth in public sector wages by approximately $100 million in Parts I, II and III of the public service over the next two fiscal years. To achieve this target, negotiated wage increases that were delayed last year will have to be delayed again or altered. Collective agreements that were due for renegotiation will have wage restraint applied to them as well. The government's compensation restraint program will apply to employees in Parts I, II, III and IV of the public service and in nursing homes, to fee- for-service and-salaried physicians, to pharmacists who receive reimbursement under the prescription drug program, and to employees of agencies from whom the government purchases certain services. With respect to universities and municipalities, the operating grant to universities has been frozen and the unconditional grant to municipalities has been reduced by $2.5 million in 1992. The government expects management, employees and unions of the universities and municipalities to develop their own compensation restraint programs to reflect the economic reality of the times. Madam Speaker, balancing the necessity to address our fiscal situation with the need to treat our employees fairly is a difficult challenge. Our neighbours in both Nova Scotia and Newfoundland have frozen employee salaries for a second year. We are very much aware of the impact of a future wage freeze on our employees. We have studied various options which would allow us to address our fiscal situation. We do not want to extend the wage freeze. I want to be very clear, however, that we do require a two-year wage restraint policy with only modest increases to meet our fiscal target. We are prepared to meet with union representatives immediately to discuss this issue further. We hope such a meeting will help to fruitful discussions. We are committed to returning to normal collective bargaining as soon as possible. We are in a difficult period of fiscal restraint, and I hope modest wage increases will help create economic confidence and stability. The wage bill is affected not only by wage rates, but also by the number of people who receive a wage from tax dollars. However, our goal is to minimize the effect on public servants while maximizing financial savings. We have tried to keep the number of people affected by the loss of a job to a minimum and we have been very successful in this. The total number of full-time equivalent positions (FTEs), in Part I of the civil service will be reduced by 391 with the budget I am tabling today. The human resource implications in Part II are 208 FTEs, and in Part III, 150 FTEs. Madam Speaker, this represents a total reduction of 749 full- time equivalent positions. We will continue to do everything in our power to affect as few employees as possible. In fact, to date, over 350 employees have accepted the early retirement program in Part I alone. This has resulted in the elimination of over 275 positions, with annualized savings in excess of $8 million. We understand the government's most valuable asset is its employees. It will be our goal to utilize modem and innovative human resource management practices to avoid layoffs in future streamlining of the public service. We shall make even greater use of training, transfers, redeployment and special retirement provisions to manage further employee reductions. Madam Speaker, the fourth key thrust of our spending plan is to rationalize our service system, streamline where possible, and reduce or eliminate programs that can no longer be sustained. These measures will save on a gross basis a total of approximately $101 million in the 1992-93 fiscal year. Rationalizing means the system will be much more responsive. Madam Speaker, by rationalization, I mean that if we have two or three boards where one will do, we should change it. If we have two or three transportation garages where one will do, we should have one. If we have two or three hospitals offering the same service in a region where one will do, then we should have only one delivering that service. As I said earlier, we have already started the process of rationalizing the school board system and we will use that same philosophy in rationalizing other systems. These measures will save New Brunswick taxpayers $50.5 million. As you know, the Minister of Health and Community Services has already outlined detailed changes to the health care system and individual ministers will elaborate on other initiatives when their estimates are tabled. Let me outline some of them just briefly at this point: The recently announced changes to the health care system will save a gross amount of approximately $19.5 million, but a portion of these savings will be reinvested in community-based services. Amalgamation of the school boards will save $5 million annually beginning in 1993-94. Enrolment decline in schools will allow savings of $4.2 million in 1992-93. The Department of Natural Resources and Energy will rationalize regional management services and parks to save $854 000. Rationalizing, streamlining and service adjustments in the Department of Transportation will produce gross savings of $7 million each year. The Mental Health Commission will restructure head office functions to save $269000. The Department of Advanced Education and Labour will have gross savings of $5.6 million. Gross savings in Municipalities, Culture and Housing and Natural Resources and Energy will amount to $3.7 million and $4.1 million, respectively. Madam Speaker, no matter how necessary restraint and efficiency measures are, there will always be a need to expand some services or introduce new ones. Changes in priority, new technology, public demand and a number of other factors make it necessary to provide for increases in some areas, while others are being reduced. This budget reflects a reinvestment of gross savings in higher priority programs, amounting to $77.8 million. Some highlights include the following: Despite announced changes, our health and community services remain a major priority of this government. This year, over $1.1 billion will be spent to deliver health and community services to New Brunswickers, in the most effective and efficient way possible. As the Minister of Health and Community Services indicated a few days ago, there is a need to refocus our efforts and our spending toward more community-based and less institutional care. Therefore, we will reinvest $6.8 million in these efforts. Resources will be reallocated for the expansion of the Extra-Mural Hospital throughout the province, as well as the extension of the single entry point program for seniors, first piloted in Fredericton and the Acadian Peninsula. This program is designed to assess long-term care service needs and provide appropriate services for the senior citizens of New Brunswick. In the other social service programs, the Department of Health and Community Services will increase its efforts in the area of managing costs, while ensuring appropriate services are available to those who need them most. A physician resources plan will be put in place to ensure that the number of physicians is in balance with the population. The department will also take steps to implement a coordinated, province wide ambulance services program, which includes air ambulance services, to make sure New Brunswickers have appropriate access to care. The province's prescription drug program will focus even more than it does now on those who need it most. In addition, legislation will be introduced making the prescription drug program the payer of last resort. Resources will also be reallocated to health promotion and disease prevention. The Department of the Environment will use savings from the discontinuance of operating several small municipal water systems, to assist in the opening of the $4-million analytical laboratory. There is an allocation of $2.3 million to provide an average 2 % rate increase for social assistance clients, beginning October 1, 1992. Adult basic education contracts, valued at approximately $2 million, will be directed to the private sector to protect higher priority training services. This will have the added benefit of creating job opportunities in the private sector. While on the subject of education, I am pleased to announce that we will be introducing legislation to set up higher education foundations in New Brunswick, in order to provide favourable tax treatment for both corporate and individual donations to these institutions. Under the proposed legislation, a donation to a higher education foundation will qualify as a gift to the Crown, for which income tax provisions are currently more generous than for other charitable donations. This should help to raise private contributions. Given the fiscal realities facing all levels of government today, we recognize that our universities and other postsecondary educational institutions will be looking increasingly at alternative funding sources from the private sector, and this legislation will provide incentive to increase private contributions. Madam Speaker, I also wish to inform the House that I will bring forward this fall a supplementary estimate, to begin to finance implementation of the recommendations in our Excellence in Education report. It is the government's intention to reinvest into the education system all savings from rationalization of school districts. Madam Speaker, as I indicated earlier, the province remains committed to the construction of the Trans-Canada Highway and connecting links. The recent federal budget indicates that the federal government appears committed to this essential project. Therefore, there is no longer a need for a separate trust fund. Effective April 1, 1992, the arterial highway trust fund will be eliminated. The $33 million in revenue scheduled to go into this fund in 1992-93 will now appear as Ordinary Account revenue. No one agency of government has been immune to restraint, and now we must also look at the environmental trust fund for help. Last year, the revenue in this fund was $14.3 million. Effective April I, 1992, the video lottery revenue earmarked for the environmental trust fund will be capped at $10 million, with any excess revenue being transferred to Ordinary Account. This measure will result in a $7 .5-million revenue increase for Ordinary Account. However, the revenue from the Beverage Containers Act, estimated at $3 million in 1992-93, will be added to the environmental trust fund to restore funding for projects close to 1991-92 levels. Madam Speaker, the response to the pre-budget public consultations, the public consultations on cross-border shopping, and the preliminary response to the Green Paper on taxation have made it clear that New Brunswickers feel strongly that our taxes on alcohol, tobacco, gasoline and retail sales are too high. New Brunswickers have told us that there had to be more balance in the provincial tax system, and that our tax system must be fair. As was indicated in the Green Paper on taxation, New Brunswick relies heavily on consumption taxes compared to other provinces, especially compared to the state of Maine. The government accepts that taxes playa role in cross-border shopping. So, too, do other factors, such as the value of the Canadian dollar, differences in distribution costs and differences in wholesale and retail markups, which also playa critical role in the cross-border shopping problem. Effective April I, 1992, the gasoline tax rate will be reduced by 2C per litre, from 12.7C per litre to 1O.7C per litre. The tax on diesel fuel will remain at 13.7C per litre. The gasoline tax reduction will reduce revenues by $18 million in 1992-93. I call upon the petroleum industry at all levels to ensure that these savings are passed on to the consumer, and I challenge the industry to further reduce the price of gasoline. It has become obvious that New Brunswick's high tax on tobacco products has resulted in reduced purchases of tobacco in New Brunswick, not reduced consumption of tobacco by New Brunswickers. Furthermore, the large differential in tax rates between New Brunswick and other jurisdictions has created an environment which encourages people to break the law. It is clear that the tax systems should not create such a situation. Therefore, effective April I, 1992, taxes on tobacco products will be reduced to bring them in line with other Atlantic Provinces. The tax per cigarette will be reduced from 9.38C to 6.8C. The tax per tobacco stick will drop from 7.97C to 5.8C. The tax per gram of fine cut tobacco will fall from 7. 04C to 5.1 C, and the tax on cigars will be reduced from 100% of the normal retail price to 50%. Again, Madam Speaker, I urge all involved to ensure that the tax savings are passed on to the consumer. Government recognizes as well the importance of the tourism industry to the province. For this reason, effective June I, 1992, the mark-up on wine to licensees will be reduced by 30%. This measure will reduce provincial revenues by roughly $300 000, and allow prices in licensed establishments to be reduced. In addition, the hospitality industry in New Brunswick has committed itself to reducing its own mark-ups by at least 30 %, and to reduce prices even further, I call on the industry to voluntarily put in place a ceiling or limit on wine mark-ups. This is expected to have a positive impact on the outlook for tourism and related industries in the province. In fact, we are confident that this measure will promote increased consumption of restaurant meals in New Brunswick. Effective April I, 1992, the retail sales tax will no longer apply to 1-800 toll-line charges. This will have a positive impact on the competitiveness of the growing telecommunications industry in New Brunswick, and will make the province even more attractive as a location for businesses involved in national and international sales and distribution. Our success to date in attracting telecommunications to New Brunswick has been significant, with companies such as CGE's Cameo, Federal Express, CP Express & Transport, and Northern Telecom all locating here in recent months. We are confident that this new measure will bring even greater success in this area. In an effort to level the playing field for the Canadian retail sector, the federal government has extended an offer to the provinces to collect provincial alcohol, tobacco and sales taxes at international borders. The federal government will only collect provincial sales taxes at the border if the province agrees to broaden its sales tax base for goods to duplicate the federal GST base, including such items as clothing and footwear. The province is not prepared at this time to expand the sales tax base to duplicate the GST tax base. Nevertheless, the government feels it is important for the retail sector in the province to move toward a more level playing field. For this reason, the province will be entering into an agreement to have the federal government begin collecting the province's alcohol and tobacco taxes at the border as early as possible in the 1992-93 fiscal year. The collection of tobacco tax at the border will be worth approximately $5 million. The collection of alcohol mark-ups at the border will be worth approximately $2 million. Together these measures should significantly reduce the tax induced incentive to make purchases south of the border. Effective May 1, 1992, motor vehicle fees and fines will be increased to yield an additional $10 million annually. This rebalancing measure partially offsets the previously mentioned reduction in the gasoline tax rate. Madam Speaker, while on the subject of motor vehicles and highways in general, unions and others have recommended that we increase the operating hours of weigh scales in the province as a means of ensuring that weight restrictions are respected, thereby allowing us to maintain the quality of our highway system. We will be carefully evaluating the cost effectiveness of this suggestion in the 1992-93 fiscal year. I have been very pleased with the preliminary response to the Green Paper on taxation which I tabled on February 26, 1992. As was anticipated, there has been a wide range of opinions expressed in the correspondence I have received. The preliminary response to the Green Paper has demonstrated that New Brunswickers are in favour of a lower sales tax rate but are concerned about expanding the sales tax base, removing a portion of the owner-occupied property tax credit and the impact of a 3 % flat tax on net income. Our government remains committed to lowering consumption taxes, as we have done in the areas of alcohol, tobacco and gasoline taxes, given their implications for cross-border shopping. We are concerned that any further adjustments to the tax system at this time, even positive ones, could affect consumer and business confidence. However, we remain committed to tax reform. While we have received considerable input, we have also had requests to allow more time for consultation prior to implementing major tax changes. We look forward to obtaining more public input to the various options open to us. Madam Speaker, this budget has been one of the most difficult tasks I have had to face during almost five years as Minister of Finance. However, while framing this budget has been difficult, I am confident that it sets the stage well for the future: it treats taxpayers fairly and it provides changes to ensure that quality services are provided in a much more efficient and effective manner to all New Brunswickers. This budget represents in a significant way the essence of the public's priorities brought forward in our pre-budget consultation process. I am pleased but not surprised, Madam Speaker, that these priorities are virtually identical to those of this government. Five years ago, we started changing the way we do things by bringing the finances of this province under control. We provided more and better services and improved accessibility. We changed the fiscal and financial planning process by introducing a three-year plan which we adhered to, and by carefully scheduling our capital outlays. For the first time since 1980-81, we achieved two successive Ordinary Account surpluses. We achieved an unprecedented bond rating for an Atlantic Province with the upgrade to an AA category by Standard and Poor's. Madam Speaker, this budget not only builds on our past successes, but establishes a critical beginning for a future that is rapidly unfolding. We have achieved much, and with continued help from New Brunswickers, we will lay a solid foundation for a prosperous decade. To that end, the 1992-93 budget will accomplish the following: - It will improve our infrastructure. - It will stimulate the economy at a time when it is needed; it will create jobs and respond to the cross-border phenomena. - It creates a new vehicle to ensure that services are delivered in the best way possible to all New Brunswickers and protects those vulnerable in our society. - It reduces the projected deficit without raising taxes. Madam Speaker, the Ordinary Account deficit will be $135 million. Total ordinary spending will be $4095.6 million and total ordinary revenue will be $3960.6 million. Ordinary Account spending will grow by 4% over last year's budgeted level and by 3.1 % over the third quarter estimate. This is a fair and balanced increase, given the need to keep the increase in debt at a prudent level and the need, at the same time, to support key services and the economy. Madam Speaker, the Capital Account will be $374 million. This is the right stimulus in the right place and at the right time. With this capital budget, we will ensure that more jobs are created in the short run, while guaranteeing that roads and other facilities needed for the future are put in place. After adjusting for the estimate of sinking fund earnings, the addition to net debt is estimated to be $340.2 million, down by over $50 million from the third quarter estimate of the 1991-92 addition to net debt. Net loans and advances will be $23.6 million and sinking fund payments will be $79.7 million. After adjusting for loan losses, this means we will have financial requirements of $582.6 million. Madam Speaker, this budget deserves the support of every member of this House. It is a budget that is for and by New Brunswickers. It will continue to aid our progress, economically, socially and financially. It will allow us to continue to be an example for others to follow as we create effective, compassionate and dynamic new approaches to delivering efficient government. Thank you, Madam Speaker.