Budget for 2017-2018 offers new investments, no tax hikes and no layoffs – but future job cuts are still on the table.
After last year’s budget saw mass tax hikes and cuts that brought outrage and protests across Newfoundland and Labrador, the provincial government attempted to balance the scales with the 2017 budget.
The government’s promise of no new tax hikes was fulfilled, as well as no layoffs. Although, Minister of Finance Cathy Bennett did not rule out the possibility of job cuts in the future.
“You cannot change the culture of spending and expect to make choices quickly and sharply,” said Bennett. “We are continuing to look methodically and responsibly to identify more efficient ways to deliver services in the province.
“Any future decisions will be communicated with companies, employees and unions before we communicate them to the public.”
As well as no new tax increases, a 75 per cent reduction in the temporary gas tax will be set in motion. On June 1, the gas tax will be reduced by 8.5 cents per litre, and a further four cents per litre reduction will occur on Dec. 1.
While the provincial government will be losing $60 million by reducing this tax, Bennett says it is the right choice to make.
“The temporary gas tax was designed to give us a bit of breathing room and give us stability in the treasury – and we believe we’ve done that,” said Bennett. “We’re in a very different place than we were last year. With what we see in the future, this is a responsible thing to do.”
The government also proposed a wage-freeze for all management and non-union employees for the current fiscal year.
But there are still declines expected in the province’s economy. The Liberal government will invest $3.3 billion in infrastructure. The projects are expected to bring 4,900 new jobs each year for the next five years, but there will still be an overall increase in unemployment in 2017 – up to 13.9 per cent.
The funding of student assistance through loans and grants will be changed by ending the 60/40 split on federal and provincial funding for students. The new system will be dominated by funding from the federal government.
“Now, students will be assessed through the federal government, and then the provincial government will cover what’s left,” said Minister of Advanced Education, Skills and Labour Gerry Byrne. “Considerable amounts of federal government money not tapped into because of the initial 60/40 split will now be available for students.”
While this maximizes the federal government’s financial input to students and will save the provincial government $12.6 million annually, there are new consequences to this student loan system.
The provincial government offers a loan forgiveness program, where a student loan can be changed to a grant depending on the student’s success. But the federal system works on a combination of grants and loans, and there is no opportunity to have loans converted into grants. Therefore, some students may end up having to pay more back through their education.
“While there will be some consequences as we increase the use of federal assistance, overall the amount of financial assistance available to students will have increased,” said Byrne.
Memorial University and College of the North Atlantic will receive a total of $405 million for operating grants, with $68 million being allocated to maintain the tuition-freeze.
One of the most controversial aspects of the April 2016 budget was the mass cuts brought to libraries across the province. This was reversed in the new budget with a restoration of the $652,000 operating grant to fund the library resources board. Bennet says this reinstatement is temporary while a independent review of the provincial library system takes place.
“While there is a time of unclarity, we wanted to keep the funding,” said Bennett.
The budget put strong emphasis on the role that increased oil royalties has played in benefiting the economy, with government putting its trust in upcoming offshore oil projects like Hebron.
But Bennett insisted the Liberals will reverse the trend of oil dependency in the Newfoundland and Labrador economy.
“The tone is largely the same as last year – we are glad that oil revenues help, but we cannot afford government services now on revenue alone,” she said.
The resulting deficit is projected to be $778 million, slightly lower than the $800 million deficit projected last year, and revenue is projected to be $7.3 billion. The budget also promised a return to surpluses in 2022-2023.
When reflecting on the tumultuous period of last year’s budget announcement, Bennett expressed only one regret with that April 2016 budget – that she hadn’t been elected earlier.
“We still have a way to go but our government is confident we are on the right path,” said Bennett.