Newfoundland and Labrador’s new $8.4-billion budget forecasts a $683 million deficit, escalating debt and a shakeup at the Crown corporation responsible for huge cost overruns at the Muskrat Falls hydroelectric project.
Expenses will slightly rise as net debt for the province of about 529,000 people is expected to hit a historic high at $15.5 billion.
Finance Minister Tom Osborne said Tuesday the profitable oil and gas sector will be hived off from Nalcor Energy, which oversees the delayed and over-budget Muskrat Falls project in Labrador. A new Crown corporation will focus on developing the oil sector off Newfoundland.
“We want to make sure that this industry reaches its full potential,” Osborne said of the Nalcor changes. “The maximum number of jobs, the maximum spin off, the maximum number of industry players, the maximum amount of oil production and the maximum royalties to the people of this province.
“We have a very, very strong future in the oil industry.”
The budget forecasts deficits in each of the next three fiscal years, returning to a modest surplus by 2023.
The province will spend almost $3.2 billion on health care this year — far higher per person than what’s spent elsewhere in Canada, as the province aims to cut smoking rates and increase exercise.
Osborne said the governing Liberals have made strides to get the province’s battered fiscal house in order since the oil-price slide in 2014. They’ve cut 759 public sector jobs in the last two years and will reduce more through attrition as about 5,000 workers are eligible to retire, he told a news conference.
More radical reductions would “shock” an already fragile economy, he said.
Cost-cutting efforts also include less discretionary spending, and working with management and unions to reduce overtime and sick leave.
“Back at the peak of oil, we were 30% reliant on (it) as a revenue source for the province,” Osborne said. “Through finding efficiencies, through diversifying the economy, we’re now 14% reliant on oil.”
If those revenues increase, they’ll be used to eliminate deficits and pay down debt, he added.
The budget forecasts oil at an average price of US$63 per barrel in 2018-19 and 2019-20, based on forecasts from 11 analysts. Brent crude was trading early Tuesday at about US$70 a barrel.
Also announced in the budget, a 15% tax on auto insurance imposed in 2016 will be cut 5% over four years, starting with a 2% reduction Jan. 1.