Newfoundland and Labrador achieves significant deficit reduction in Budget 2005

The Williams government delivered its second budget today with a focus on strategic investments to strengthen and enhance development in Newfoundland and Labrador.

New revenues, combined with careful monitoring and control of expenditures, resulted in the deficit for 2004-05 now being $473 million, not $840 million as projected last year. The cash shortfall, projected to be $362, is now $14 million. The deficit for 2005-06 is projected to be $492 million, not $759 million as projected last budget, and the cash shortfall is projected to be $62 million, not $320 million as forecast last year.

�One year ago, our government was faced with the difficult task of addressing a very serious fiscal situation, which left unaddressed would have had serious repercussions for the province. Today, we are proud of the significant progress we have made,� said Premier Danny Williams. �We made some tough but necessary choices and we have been fortunate to benefit from increased revenues in key areas. However, we have also benefited substantially from our new approach of responsible fiscal management and strategic planning. There is still much to be done, and we can not lose sight of our fiscal challenges, however, we must also embrace and capitalize on opportunities for meaningful economic growth.�

Budget 2005 outlines a fiscal plan which continues government�s commitment to improve the province�s financial situation while at the same time using new revenues strategically to make necessary investments in key areas including; investments in cultural industries, economic development, infrastructure, health care, education and assisting our most vulnerable in society.

�The majority of new spending represents strategic investments which will not significantly increase base expenditures and which, over the long-term, will help improve the province�s fiscal situation,� explained Loyola Sullivan, Minister of Finance and President of Treasury Board. �Our goal is to limit increases to our base expenditures to those that will be manageable in the future, for that is the responsible course of action. We want to correct the systemic fiscal problems. By investing and spending strategically we are strengthening our province and building a base for growth and prosperity.�

Fiscal Situation
Over the past year, a number of factors contributed to a significantly improved fiscal situation.
Premier Williams successfully negotiated a new arrangement on the sharing of offshore resources, which enables the province to retain the benefit of 100 per cent of provincial revenues. The province also benefited from significant improvements to improvements to the Equalization Program and a new Health Accord, negotiated by the premiers and territorial leaders in 2004.

The results for 2004-05 reflect government�s decision to repay the outstanding debt of the Newfoundland and Labrador Education Investment Corporation and the Newfoundland and Labrador Heritage Corporation. This debt totaled $117 million.

The accomplishments and fiscal prudence of the past year will continue into the 2005-06 fiscal year. Revenues in Budget 2005 are projected to be significantly higher than previously anticipated, primarily as a result of the new Atlantic Accord 2005, higher offshore royalties, additional Equalization, and expanded Canada Health Transfers.

�We are proud of the remarkable progress we have made in such a short period of time, and we must continue to be diligent in our management of the province�s finances. Newfoundland and Labrador will not achieve true fiscal freedom until we have also dealt with the liabilities resulting from our accumulated deficits,� said Minister Sullivan.

The minister said the cash shortfall is projected to be eliminated by 2006-07, which is an important milestone. �Once the cash shortfall is no more, we can turn our focus to fully tackling the deficit. By progressively lowering the deficit, we will curb the rate of growth of the public debt. Eventually, our province will be in a position to halt the growth of our debt and begin lightening the burden that future generations will have to bear,� he said.

�Gaining control of our deficit and debt levels will empower us to seize new opportunities for economic development in our communities and secure our social programs for generations to come,� said Minister Sullivan. �We can make real change in our province, and it begins with changing the fiscal situation.�

�With this budget, we are taking significant new steps to implement our economic growth agenda by investing in programs and initiatives that will nurture opportunities for development in Newfoundland and Labrador. Our financial plan contained in Budget 2005 contains measures to shore up our fiscal position and to secure and sustain the social programs on which our people rely,� concluded the minister.

Highlights of Budget 2005 may be found at www.gov.nl.ca/Budget2005

Media contact:
Elizabeth Matthews, Premier�s Office, (709) 729-3960, 690-5500, elizabethmatthews@gov.nl.ca
Diane Keough, Finance, (709) 729-6830, 685-4401

2005 03 21              2:15 p.m.