Minister Loyola Sullivan
FMI Conference
June 6, 2006

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Good afternoon and thank-you for the opportunity to speak to you today. I hope those of you who are here for the first time are enjoying everything our province has to offer � and that you�ve been treated with the hospitality for which our people are so well-known �.and I hope that pesky 15 per cent harmonized sales tax doesn�t bother you too much � but if it does, you can talk to Jim Flaherty!

This forum is an excellent opportunity for me to provide to you an overview of our province's fiscal situation, our financial management style and a snapshot of some of opportunities we, as a province, see before us in the coming months and years.

As financial managers in the public sector, you will likely relate to much of what I have to say today. You know, as well as I do, that numbers and figures are complex, but they can be invigorating as well.

First, let me begin by saying I applaud your dedication to the sound financial management you so diligently practise on a daily basis. Just by being here, you�ve proven you are dedicated to your craft and willing to continue to learn from your peers. More often than not, those who have to balance the books and run the numbers don�t get many of the kudos, the thank-you�s or the applause they certainly deserve.

Here in Newfoundland and Labrador, our government has been practising sound financial management as well .

You hear a lot about the need for transparency and accountability in government. Through many financial initiatives, we have given that to the residents of Newfoundland and Labrador.

Inside of our government, we�ve under-taken reviews of travel policies, cell phone usage, taken account of our vehicle fleet and initiated an entire program renewal process that has resulted in numerous efficiencies.

My department has been instrumental in improving collections on accounts receivable � some of which were in arrears for years and years.

We put a plan in place to reduce and to hopefully eventually eliminate the rush of year-end spending.

On the technological side � we have made great strides as a government in getting our information systems to where they should be. We aren�t there yet, but we are progressing well. We have increased productivity in the public service by improving our Financial Systems Software, Banking Tools, Financial Reporting and have created a collaborative and cooperative approach when dealing with fiscal situations for budgets, tax and debt management.

To date, 2005 was our best year as the government in power. It was certainly an interesting year � and I think I�m safe in saying that it was the year that turned things around for our province.

As a government we became more comfortable with the direction we were going and we secured a firm grip on our financial situation. In 2005 the province�s economy grew by 1.7 per cent. That was driven by an increase in our mineral exports and modest growth in investment and, of course, more consumer spending.

The unemployment rate dropped, to 15.2 % � the lowest it�s been in our province since 1981. Retail sales continue to show robust growth, especially in our more urban centres like here in St. John�s, expanding by 2.2 per cent - up to a record $5.9 Billion. Housing starts continued to be strong with almost 2,500 new homes breaking ground in 2005.

We had anticipated a deficit last year of nearly $500 million dollars but because of some of the things I�ve already told you about and some that I�m getting to, we ended that year with a surplus in the $100 million dollar range.

We have seen a substantial increase in revenues, predominately oil related, and have allowed this increase to eliminate the projected deficit.

We owe some of this turnaround to high energy prices in the oil and gas sector and strength in our other non-renewable resource sectors. In November, first oil flowed from White Rose and we saw the first shipment of nickel concentrate and other ores from Voisey�s Bay.

In our 2005 budget we had forecast oil prices to average $38 US per barrel. The average price for the year was closer to $55 US per barrel. And it�s been up steadily since then.

Other things contributed to the turnaround as well. Amendments to the equalization programs brought increased revenues and some stability. Increased money from the federal government to support health care was also a contributing factor. The Premier was instrumental in enhancing these two revenue sources.

Of course the other item which has had a huge impact on the province was the acquisition of the Atlantic Accord 2005. This revenue, which we should have had all along, has had a substantive positive impact on our finances and the advance payment of $2 billion has given us the flexibility to make a large reduction in the unfunded liabilities of our pension plans.

But having a windfall such as this would mean nothing without a department full of sound financial managers to advise us on how to get the best gains for our dollar. That�s where people like you come in. You�re integral to the way governments operate.

While I mentioned that 2005 was our best year yet, 2006 is looking just as promising. We brought down our budget in late March. It�s the first time in our province�s history that we�ve projected a balanced budget on a fully consolidated basis. It includes all of government and all the entities over which it has control. This coming fiscal year we are projecting a $6.2 million surplus.

We will achieve this surplus having made substantial investments in the people and economy of Newfoundland and Labrador�by making investments in the social fabric of the province because this is a role of government � to ensure all residents of the province have access to the services they need�..investments like these have long term economic benefits in for our province.

I need not tell experts like you, but this is an incredible achievement in itself when you look back at this provinces financial picture over the past two decades.

To run though some of our budget highlights:

• Investments of $20 million into a four year innovation strategy that will create jobs all over our province

• staffing our new Department of Business

• $17.6 million three year Cultural Strategy

• additional $100 million dollars in education and skills training,

• a 6-year $2 BILLION dollar infrastructure strategy to deal with aging roads, buildings, and ferries

• Reducing the red tape many face in dealing with government entities.

• reducing or eliminating several fees that will effect small and medium size businesses

• in health-care, we always struggle with where to invest most strategically to meet the needs of so many; so this year we have given the Department of Health and Community Services nearly 10 per cent more resources to deal with its growing needs- that�s another $180 million.

• plus a $10 million, three year investment in an aquaculture fund and implementation of a Strategy for the Recovery and Management of Cod, another $6 million to grow the agriculture and agrifoods industry and a more than 50 per cent increase to mining exploration incentives.

• there�s more, but too much to list here today.

All of this proves that as a government, we recognize the potential of this province and the investments we are making are designed to harness that potential.

In the past we�ve been held back because of our poor financial situation. Such an uncertain environment for business investment discourages investors, stifles economic growth and opportunities for new jobs.
We�re still working on making our government even more efficient. Our officials are in the midst of a corporate service reorganization to ensure that all government departments are running as smoothly as they can be.

We�re doing all of this reorganization without laying off staff. We�ve committed to retraining them and putting their skills and experience to work in areas where they can be challenged.

I think you�ll agree that it is vital for our government and for governments everywhere to keep good records, manage the money well and not leave a burden to the generations who are coming after us.
During this mandate I have committed to introducing balanced budget legislation so the days of passing on our debt to our children and grandchildren in this province are over.

We want to reduce our debt and bring taxes down too.

But slow and steady wins the race��and at all times I try to keep in mind that it�s not always the most popular decisions that pave the road for our children, but it�s the smartest, soundest decision � based on good financial advice that can make all the difference.

Thank you.