The government of Newfoundland and Labrador is forecasting a $750 million dollar deficit for 2009-10. The Williams government unveiled is 2009 budget on Thursday.

“Our government will run a deficit for the current fiscal year rather than cut spending for important programs and services,” said the Jerome Kennedy, Minister of Finance and President of Treasury Board.

The province says more than half of the deficit, $414 million, can be attributed to the federal government’s decision to eliminate benefits this year under the 1985 Atlantic Accord. The balance is primarily attributed to a decline in the value of the province’s pooled pension fund.

“We maintain our commitment to prudent fiscal management and are projecting a surplus in 2011-12,” Kennedy said.

Tax relief

The 2009 budget includes new tax reductions for low-income earners.

The Low-Income Tax Reduction program will be enhanced. The income threshold will be increased from $13,511 to $15,911 for individuals and from $21,825 to $26,625 for families, resulting in a number of individuals and families paying a reduced amount of provincial tax, and individuals with income less than the new threshold levels paying no provincial income tax.

For investors, the Dividend Tax Credit rate on eligible dividends will be increased from 6.65% to 9.75% in order to bring these dividends more in line with other provinces. This will result in a tax savings of $1.3 million.

The budget also increases the small business threshold for corporate income tax and enhances the Labour-Sponsored Venture Capital Tax Credit.

While the general corporate income tax rate is 14%, the small business tax rate is 5% on the first $400,000 of income. Effective Jan. 1, 2009, the corporate income tax small business threshold will increase from $400,000 to $500,000.

Effective April 1, the province will enhance the Labour-Sponsored Venture Capital Tax Credit program by increasing the provincial tax credit rate for individuals who invest in a labour-sponsored venture capital corporation (LSVCC) fund from 15% to 20%. In addition, the maximum annual contribution per year will be increased from $5,000 to $10,000.

Infrastructure and program spending

The 2009 budget includes targeted expenditures in economic development, infrastructure, health, education, poverty reduction, and the environment.

Investments for economic stimulus and development will top $900 million, which includes a substantial investment in infrastructure. The infrastructure investment represents a 50% increase over last year and includes projects such as roads, hospitals, schools and long-term care facilities. The investment will result in the creation of 5,400 jobs in the province this year, the province said.

Additional economic stimulus will be provided by Nalcor Energy through a $228 million equity investment to take full advantage of potential opportunities.

The budget includes an investment of $81 million to strengthen the province’s research and development capacity and encourage innovation, economic growth, and enhance local development of new products and services that can result in employment opportunities and successful businesses.

A record $2.6 billion is earmarked for health and community services, and the province will invest $8 million this year to address growth in the home support program, $16.5 million, with an annualized investment of $24.6 million, to support an increase to the home support hourly subsidy rate, and $1.5 million to increase the personal care home subsidy.

Additional investments will be made in foster care, family services, education, and poverty reduction.

“The budget our government has presented today will guide Newfoundland and Labrador through this global economic downturn by providing substantial economic stimulus while protecting important social programs,” said Danny Williams, Premier of Newfoundland and Labrador.

IE