For most of the provinces, wrestling their deficits to the ground is not going to be easy this year or next. That’s partly because they have chosen to reduce spending rather than raise income taxes. Indeed, this year’s tax hikes have been confined mainly to fuel and tobacco, while several provinces even found ways to cut taxes. And while most expect to make progress in their budgetary situations in the coming year, those with debt and/or deficits don’t expect to balance their budgets (unless they decide to access rainy-day funds put away in previous years) until at least fiscal 2014.

Several provincial debts have reached significant levels. Ontario’s net debt as of Mar. 31, 2011, was 35.4% of GDP. On-ly Nova Scotia’s (36.3%) and Quebec’s (50.1%) were higher. However, New Brunswick’s (33.5%) and Prince Edward Island’s (35.2%) were somewhat lower. Newfoundland and Labrador’s, Manitoba’s and British Columbia’s are lower still (27.7%, 24.7% and 16.8%, respectively).

When it comes to cuts, many provincial governments are focusing on their own bureaucracies. Quebec and New Brunswick are continuing with wage freezes for both politicians and civil servants, Alberta has a freeze on the salaries of public-sector managers and B.C.’s public-sector wage freeze continues. Manitoba is going to try for a two-year wage freeze for the civil service in the next round of union negotiations. It is also continuing its freeze on the wages of cabinet ministers and their senior staff.

B.C. and Nova Scotia both are reducing the size of their civil services by 10%; Saskatchewan’s is shrinking by 15%. Ontario is also reducing its civil service, but by only 5% — more than a third of those reductions will come from jobs that are no longer needed due to the introduction of the harmonized sales tax, which is administered by Ottawa. However, Ontario also is implementing a 10% permanent cut in executive-office funding for the agencies that it funds, as well as for health and education institutions.

But even though these are the only provinces with specific targets for reducing the number of government employees along with public-sector wage freezes, all provinces now have restraints in place that take the form of cuts to departmental or ministerial budgets or have issued directions to find specified savings.

It’s worth noting that several provinces will be having elections in the autumn, including Ontario, Saskatchewan, Manitoba, Prince Edward Island and, perhaps, B.C.

Details of the fiscal situation in the regions or provinces follow:

> Saskatchewan. High prices for commodities are continuing to support Saskatchewan’s economy. It’s the only province except Newfoundland and Labrador that’s expected to be in surplus this year. Saskatchewan’s Growth & Financial Security Fund is forecast to have $711 million as of March 31, 2012 — down from $1.2 billion as of March 31, 2009.

The province does have debt, but only $4.1 billion, or 6.9% of GDP, as of Mar. 31, 2011. “Barring a severe correction in [resource] prices,” says Robert Kavcic, econ-omist with BMO Capital Markets Inc. , “Saskatchewan is Canada’s most fiscally fit province.” (All sources quoted are based in Toronto unless otherwise noted.)

Saskatchewan moved early to get its finances back in order after the global credit crisis/recession. In the province’s 2010 budget, all of its government ministries — except education, health care and social services — were required to reduce their expenditures by 1.2%. Saskatchewan also started on a program to shrink its civil service by 15% over four years.

Sonya Glati, economist with Toronto-Dominion Bank, says the province “is in the enviable position [in which] it can provide new tax relief and significant new spending.”

The province is lowering its small-business tax rate to 2% from 4.5% as of July 1; increasing basic personal and spousal income tax exemption levels by $1,000 each; increasing the dependent child tax credit by $500 for the 2011 tax year; providing education property tax relief; and increasing municipal revenue to one percentage point of provincial sales tax collected. As well, when Saskatchewan-based small financial institutions pass the $1.5-billion threshold for the small-business capital tax, they will pay the higher rate only on capital in excess of $1.5 billion.

However, Kirsten Cornelson, economist with Royal Bank of Canada, says it’s difficult to assess the extent to which Saskatchewan will be able to meet its fiscal targets without a detailed plan.

> Ontario. Canada’s most populous province is at the other end of the fiscal spectrum. Much could happen in the seven years it is planning to take to eliminate its deficit. That period could include another recession, which could significantly delay the province’s return to a surplus position and add to the debt load. Even if Ontario’s books are balanced in fiscal 2018, the province will be left with a large net debt of $316.9 billion — equivalent to 38% of GDP and way up from 26.2% as of March 31, 2008.

Michael Gregory, senior economist with BMO Capital, is critical of the Ontario budget, noting that the province has not been fully using money received from stronger than expected revenue and lower than expected expenditures to reduce its deficit. Gregory points out that delaying deficit reduction results in less flexibility in the future, and spending-restraint decisions that are hard to make now will only become harder in the years ahead as the aging baby boomers’ demand for health care increases.

Cornelson points out that Ontario’s program spending restraint in the early years of the plan arise from one-time factors. She says underlying spending growth, excluding the one-time factors, will be up by a substantial 3.7% in fiscal 2012 from fiscal 2011.

Ontario still plans to reduce its corporate tax rate gradually to 10% by mid 2013, with the rate falling to 11.5% from 12% July 1, 2011, and to 11% as of July 2012.

> Manitoba. The decision by Manitoba to take an extra year to return to surplus is considered more acceptable than Ontario’s approach, given both the modest size of the prairie province’s debt and deficit.@page_break@Manitoba decided not to cut spending in real (after inflation) terms and to provide some tax breaks, including a $1,000 increase in the basic personal, spousal and eligible dependent tax exemption over four years. The province also will increase the basic education tax credit and extend the manufacturing investment tax credit (the latter of which was to end at Dec. 31 this year) to 2014.

However, Manitoba is imposing a new emissions tax of $10 per tonne of carbon dioxide-equivalent emissions as of Jan. 1, 2012. The province will ban the use of coal for space and water heating, although coal will be permitted for generating electricity for industrial purposes.

> Quebec. Cornelson likes this province’s “impressively detailed road map” in its 2010 budget for returning to surplus. However, she is disappointed that Quebec is planning increases in program spending over fiscal 2012-14 that are higher than the 2010 budget’s planned maximum of 2.2%.

She’s also unhappy about the province’s decision to ramp up capital spending when its economy no longer appears to need it.

Mary Webb, senior economist with Bank of Nova Scotia, points out that Quebec’s spending — including public entities and special funds — is rising by 6.2% this year before interest payments. That’s much higher than the 1.7% level for program spending. Webb also feels that “some [of the province’s] assumptions, such as continued growth in Ottawa’s major transfers beyond fiscal 2014 at today’s current buoyant rate, appear optimistic.” But, she adds, if Quebec gets the $2.2 billion in transition money from the harmonized sales tax that it has asked Ottawa for, its path will be easier.

Quebec is increasing the contribution rates for the Quebec Pension Plan in each of the next six years and plans a new voluntary retirement savings plan. However, no details of that new plan are available. The province also is increasing incentives to encourage people to work beyond age 65 and to penalize those who retire early. And, in an effort to create more jobs, Quebec is planning incentives to promote the creation of small businesses.

> Atlantic Canada. New Bruns-wick will reduce the corporate income tax rate to 10% from 11% on July 1, but won’t drop it to the 8% in 2012 as previously planned. The province also is delaying cuts in personal income tax rates that had been scheduled for 2012 and has increased the top marginal rate to 14.3% from 12.7%.

New Brunswick and Nova Scotia both are reducing their small-business tax rates — to 4.5% from 5% and to 4% from 4.5%, respectively — as of Jan. 1, 2012. New Brunswick then plans to reduce it to 2.5% over the following three years.

Nova Scotia is raising its basic personal exemption by $250 and will be indexing the affordable living and poverty-reducing tax credits to inflation.

Prince Edward Island will no longer be including the national child benefit in its calculations for eligibility for social assistance as of April 1, 2011.

Newfoundland and Labrador is a cipher. With oil revenue rising, the province clearly feels that it can afford to plunge back into a substantial deficit position in 2013 and 2014. Finance Minister Thomas Marshall spoke in his budget speech about “bold new ways of thinking” — which is all very well, but the province is very sensitive to what happens to oil prices and could find itself in deep trouble if prices fall and stay low. The province is assuming an average price of US$108.50 for Brent crude in 2011. Like Saskatchewan, Newfoundland and Labrador will have a surplus this year but expects to be back in deficit in fiscal 2013 and 2014.

Newfoundland and Labrador is bucking the spending-restraint trend, planning a 4.9% increase in program spending. This includes a 5% increase for health care and a big 11% rise for education. There also will be continued strong increases in infrastructure spending.

The province will refund 8% of the HST on residential electricity and heating bills, as of Oct. 1, 2011, and introduce a new, non-refundable child-care tax credit. The province is also increasing the payroll tax exemption to $1.2 million from $1 million, retroactive to Jan. 1, 2011.

> Alberta And British Columbia. Like Saskatchewan, Alberta has a rainy-day fund. It expects to withdraw $3.4 billion in fiscal 2012 and $681 million in fiscal 2013 from that fund to achieve a zero budget balance. Alberta’s Sustainability Fund is expected to be down to $1.7 billion by March 31, 2014, from $16.8 billion as of March 31, 2009. However, the province has other assets and will still be in an overall net asset position in 2014 to the tune of an estimated $31.5 billion, or 10.3% of GDP. Alberta continues to lower property taxes.

Webb says Alberta has “moved forward on a number of challenges — embarking on more rigorous environmental monitoring and remediation in the oilsands region, investing in carbon capture and storage, and revising its royalty framework.”

B.C.’s budget was a status quo budget, as the ruling Liberal party was in the middle of choosing a new party leader and premier. As a result, the budget did not include the 15% cut in personal rates proposed by former premier Gordon Campbell last autumn. Newly installed Premier Christy Clark will decide whether to go ahead with this.

It’s noteworthy that B.C. is having a referendum in September about whether to keep the HST. If the HST is revoked, B.C. will have to repay the $1.6 billion in transition money it has received from Ottawa. If this happens, says RBC economist David Onyett-Jeffries, there could be serious implications for B.C.’s finances.

B.C. will eliminate its small-business income tax as of April 1, 2012. As scheduled, its corporate income tax rate fell to 10% from 10.5% on Jan. 1, 2011. IE