Government Liberals highlight lower taxes but fiscal plans call for cutbacks, years of deficits

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FREDERICTON - The Liberal government did its best to put a gloss on a sombre provincial budget Tuesday, highlighting business and income tax cuts in a document loaded with government cutbacks and dark predictions about New Brunswick's fiscal future.

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Peter Walsh/Telegraph-Journal

Premier Shawn Graham and Finance Minister Victor Boudreau walk outside the legislature in Fredericton before the provincial budget was presented on Tuesday afternoon.

The Liberals' $7.8-billion budget includes a deficit of $741 million, largely thanks to the $300-million worth of pressure the province's ailing pension assets are putting on the books.

That deficit spending will increase the province's net debt by $968 million, pushing the total to $8.3 billion, or $11,000 per person.

In all, it's a spectacular reversal of the province's fiscal fortunes. This time last year the Grits predicted a $19-million surplus, yet they will end the current fiscal period $265 million in the red.

And the 2009-10 budget predicts it will be nearly half a decade until the province is anywhere near surplus territory again.

"The government will face significant deficits and increases in our net debt as it confronts the challenges of one of the most significant global economic and financial crises in decades," said Finance Minister Victor Boudreau while presenting his fiscal document in the legislature.

Concluded Premier Shawn Graham: "This is a budget like no other."

The Grits' budget - their third since taking office - pledges to balance the books by 2012-2013 with a razor-thin surplus of $27 million. But that figure entirely ignores continuing expenses connected to the province's sagging pension investments - $300 million a year.

That means that even in 2012-13 the province will be grappling with a $273-million shortfall. Further still, that figure assumes the economy will start to grow by a rosy five per cent annually, starting this time next year.

So in reality, the Liberals are unable to forecast a surplus any time in the near future.

"To me it is smoke and mirrors €¦ they're not being realistic. It's not accurate," said Conservative finance critic Bruce Fitch.

"Every year that pension calculation is included in your budget. Every year, whether it's a surplus or a deficit," continued the Riverview MLA.

"There's no way they can get back to balanced budgets in four years. This government is a long, long way from that."

With the prognosis bleak, the Grits announced both government cuts and tax reforms they say will help stimulate the economy.

Their four-year tax plan will deliver $143.5 million in personal and business tax savings in 2009-10, and $380.2 million in savings by 2012-2013.

Graham said the reforms represent the largest one-time tax reduction in the province's history.

He said the tax savings will attract and retain business, and leave more money in New Brunswickers' pockets to save, invest and spend.

But those tax cuts couldn't overshadow the elimination of government programs and public sector layoffs.

For example, 700 public service positions will be eliminated this year, with further cuts looming.

The Grits are also implementing a two-year wage freeze for all public employees and are placing a hold on government hiring.

As well, the budget outlined myriad program cuts, from some ferry services to plowing church parking lots in winter.

In all, the province expects cut more than $180 million in spending this year.

Tom Mann, head of the New Brunswick Union of Public and Private Employees, said all New Brunswickers should be concerned about government cuts - not just public service employees.

"For those who work (for government) there's no rest tonight. There's going to be great anxiety. This is a false-hope budget," said Mann, who represents 8,100 public workers.

"There's nothing concrete in this budget to suggest that the sacrifices being demanded of New Brunswickers today are going to work toward a solution."

For his part, Graham said his government is simply reacting to the current state of the economy.

"There are going to be New Brunswickers impacted by the difficult choices we had to make," he said.

"But the government is no different than any household in this province. New Brunswickers are today faced with difficult choices.

"And this is just the beginning of the process. I don't want to create any allusions that this a quick fix."