Newfoundland and Labrador sprinkles new cash in $538 million deficit budget

“It’s a budget that shares the wealth that we are currently seeing in the economy,” Finance Minister Charlene Johnson told a news conference before delivering the budget.

“And as the premier said when he was sworn in, we need to share that wealth and do more around social justice.”

It’s Johnson’s first budget since former finance minister Tom Marshall was sworn in as premier Jan. 24. He replaced Kathy Dunderdale, who resigned as premier amid questions about her leadership, but is not running to remain in the job.

A new Progressive Conservative leader will be chosen at a convention July 5 in St. John’s. Under provincial law, an election must be called within 12 months after the new premier is sworn in.

Johnson downplayed questions about whether the budget lays the groundwork for a coming campaign. Opposition critics, for example, have long pushed the Tory government to make good on promised early learning and kindergarten programs.

The new budget commits $35.4 million to enhance such services and offer all-day kindergarten starting in September 2016.

Overall new spending is up a restrained 2.1 per cent from last year, Johnson said. It includes salary increases for government workers and $50.6 million over five years to convert provincial student loans into grants for those who qualify.

Johnson said moves to reduce student debt, freeze tuition for another year, increase low-income supports and improve early learning programs all reflect concerns raised in pre-budget consultations.

For the third straight year, however, the budget dips into the red and will see the province borrow $1 billion to cover its investments — the first time since 2005 it has had to do so.

Cash reserves that have helped cover recent budget shortfalls have dwindled as the province helps finance the $7.7-billion Muskrat Falls hydro project in Labrador.

Next: A return to the black
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A return to the black

The budget predicts a return to the black in 2015-16 with a surplus of about $28.5 million.

But it also includes a hike of almost $808 million in net debt to a total of $9.8 billion in 2014-15. That’s down from a high of almost $12 billion in 2004 but is climbing as unfunded public pension liabilities now account for almost 75 per cent of net debt.

Johnson said talks are underway with business and union leaders in an effort to reach a negotiated solution. The answer may include increased pension contributions, reduced benefits or a combination of both, she said.

But what’s clear is that the mounting cost of government retirement plans is now the biggest fiscal challenge, Johnson said.

“It does make up such a huge portion of our net debt so we really have to work diligently, have very meaningful consultations with all stakeholders — not just the unions but with the business community, with the taxpayers,” she said.

“Everybody needs to be a part of this because it’s the most significant financial issue facing our province.”