Big-deficit budget promises benefits for everybody

James McLeod
Published on March 28, 2014

The first question Finance Minister Charlene Johnson faced from reporters during her budget day news conference was, “So minister, is this an election budget?”
Johnson didn’t give a straight yes or no answer, but there was plenty on offer Thursday that would be good fodder for the Tories if they decide to hit the campaign trail.

The provincial government will bring in full-day kindergarten starting in September 2016, it will replace student loans with non-repayable grants for post-secondary students, and there will be tax cuts, seniors’ benefits and more money for people on income support.

Johnson said the government is giving the people what they want.

“This is a budget that reflects what we've heard from the residents of the province, from stakeholders, from our own constituents,” she said. “I think it reflects our theme of the budget: shared prosperity, fair society and a balanced outlook.”

This year was supposed to be about more belt-tightening.

Last year, when then-finance minister Jerome Kennedy laid off close to a thousand civil servants and delivered across-the-board spending cuts, he said it was just the first year of a “10-year sustainability plan.”

Year 2 of that plan was supposed to put Memorial University, the College of the North Atlantic and the province’s four regional health authorities under the microscope.

But there were no cuts on display Thursday. The government kicked in $5.1 million to keep the tuition freeze going for another year, along with the $50.6 million over five years to turn student loans into grants.

There were no cuts in health care, either. This year, the government will spend $3 billion on health. Johnson said people told her cuts wouldn’t go over well.

“The health authorities, I mean, as I heard going around the province, the biggest thing that people wanted more spending on is health care,” she said.

“Our population is aging and when you see what we have in here in terms of health care, it's not only spending for new cancer drugs, breast cancer, prostate cancer.

It’s also looking at how to better use the health-care dollars we have.”

Johnson insisted the government is still committed to the ultimate aim of the sustainability plan — getting net debt down to the per capita Canadian average within 10 years.

But the government is running a $537-million deficit — the second year in a row that the government has forecast more than half a billion budget shortfall.

And net debt continues to climb; this year, it will rise to $9.8 billion, fuelled by the ever-growing unfunded pension liability and related retirement benefits.

The gap between what the government has in the pension fund and what it’ll need to pay out to retirees in coming years has widened to $7.3 billion, and if something isn’t done, the pension and retirement benefits liability will account for 85 per cent of the total net debt by 2016.

Johnson told reporters that she takes the problem very seriously, and she’s got meetings scheduled for mid-April to talk to the unions about a way to fix things.

“It's the most significant financial issue facing the province,” she said.

Even that kind of language wasn’t strong enough for Richard Alexander, executive director of the Newfoundland and Labrador Employers’ Council, who was visibly angry in the lobby of Confederation Building reacting to what he saw in the budget.

“Overall, the budget is frightening, I think, because it’s overshadowed by the fact that our net debt in this province continues to increase at a rapid rate,” he said. “What we have now is a government that’s increased the size of the public service to be the largest of any workforce in North America. The province obviously can’t afford that. If we could afford it, we wouldn’t be running these massive deficits.”

But at least for the people benefitting from Johnson’s budgetary offerings, Thursday was a good day. Michael Walsh, representative for the Newfoundland and Labrador branch of the Canadian Federation of Students, said replacing student loans with grants is something the federation has wanted to see for a while.

“There’s always more than can be done, but today is about applauding the good work which is happening here,” he said. “By reducing student debt in the way that they have, new graduates are going to be able to contribute meaningfully to the economy by doing things like starting families, starting small businesses and really helping to build Newfoundland and Labrador.”

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Newfoundland and Labrador Finance Minister Charlene Johnson reads the 2014 budget in the House of Assembly Thursday afternoon. — Photo by Keith Gosse/The Telegram