New Brunswick is the first province to present its budget for fiscal 2003/2004. Yesterday Finance Minister Peter Mesheau tabled a $7.5 million surplus.

“This marks a small improvement over FY02/03’s surplus, which was revised down to $3 million from the initial estimate of $21 million,” notes BMO Nesbitt Burns. “However, to achieve this surplus, the government will withdraw the last $108.5 million from the Fiscal Stabilization Fund.”

Two years ago, the province created the “rainy day fund” to cover any budget shortfalls.

“Decreased revenues at NB Power and the Workplace Health, Safety and Compensation Commission ate into last year’s surplus, amid investment losses as stock markets floundered,” says Nesbitt. It reports that return on investments came in $100.5 million below plan this year, more than offsetting increased tax revenues, and lower expenditures.

“However, officials look for investment income to almost triple in FY03/04 to $188 million. Total expenditures are expected to rise by 4.5% in the upcoming year,” says Nesbitt. “There are three main destinations for the new funds. First, capital spending will rise by $25.5 million, with money earmarked for highways and other key projects. Second, health care spending remains a key challenge for provincial budgets as costs continue to rise. New Brunswick is planning on a 4.4% increase in health care funds. And third, education will receive $25.9 million in additional funds in the upcoming fiscal year.”

The province continues to cut income taxes, Nesbitt says, reaffirming plans announced in prior budgets, which will trim personal income taxes by $130 million in FY03/04. Corporate income taxes will also fall as the planned cuts to general and small business tax rates will proceed. But excise taxes are going up, notably gas and cigarette levies.

“The Province assumed real GDP growth of 2.8% in 2003 in these projections, which is in line with our forecast. Gross borrowing requirements are expected to total $607 million, $432 million of which is new borrowing. Net debt will increase for a second year, reaching $6.86 billion (or 29.9% of GDP versus 31.0% in 2002),” Nesbitt concludes.

http://www.bmonb.com/economics/budget/2002nb2/article.asp