Department of Development and Rural Renewal

Budget 1996-97
Backgrounder

OVERVIEW

1. The Department of Development and Rural Renewal was created March 14th, 1996 to consolidate the functions and services of Enterprise Newfoundland and Labrador and its subsidiary Fisheries and Farm Loans Development Inc., the Economic Recovery Commission, Enterprise Network Inc., the Crafts Division of the Department of Tourism, Culture and Recreation, and the Employment Branch of the former Department of Employment and Labour Relations.
2. The Department's three core lines of business are regional economic development focusing on the 19 economic zones; development of small- and medium-sized business enterprises with particular emphasis on rural areas of the province; and labour market adjustment and employment development services. The objective throughout the budget process has been to preserve these core lines.
3. Significant savings through government restructuring and administrative efficiencies arise from bringing these three lines together. They will be fully implemented once the department's organizational structure is finalized which is expected by July 1st.
4. Front line delivery of employment, business and regional economic services will not be significantly affected by this budget. Direct program reductions are limited to the termination of the Fisheries Loan Board Interest Forgiveness Program, and a reduction in capital available for business financing programs of the former Enterprise Newfoundland and Labrador and Fisheries and Farm Development Loans Inc.

POSITIVE ASPECTS OF THE BUDGET

1. Government's commitment to stimulating small business development, especially in rural areas, is maintained and strengthened through refocussing of departmental efforts. There will be an added emphasis on proactive business opportunity identification and business development services including business information, counselling and mentoring.
2. The commitment to regional economic development in the 19 zones is strengthened through the Strategic Regional Diversification Agreement (SRDA). We are now moving aggressively to the implementation stage with formation of the permanent boards and financing of regional economic initiatives. SRDA spending this year will increase from $4.3 million to $9.7 million.
3. Employment development and labour market services functions have been integrated with the business and regional development activities of the Department. Commitment to employment programs has been maintained with programs targeted at youth, at women, and at high risk individuals in geographic areas of the province most in need. Total spending on employment generation programs is $10.8 million.
4. The programs of the former ENL will continue to exist, as will business development programs funded through various federal/provincial initiatives. However, there will be a refocusing on small-scale seed financing activities with resources being primarily devoted to the development of business ideas and the setting up of businesses on a sound management foundation. Financial services will emphasize seed financing and helping businesses reach a stage where they can lever funding from other sources including federal government agencies and commercial lenders. A budget of $8.1 million has been provided for business lending activities.
5. Front-line staff will be able to concentrate on providing the services that rural Newfoundland requires, business plan development, counselling and mentoring. Businesses often fail not so much from a lack of capital as from a lack of business skills and business information.

SAVINGS GENERATED BY BUDGET

1. Current account savings identified represent 28% of the department's discretionary current account base budget for 1996-97 (31% on an annualized basis), including a 35% reduction in operating accounts.
2. Internal administrative and restructuring efficiencies save $3.9 million through the following actions
   • a. Government restructuring including the dissolution of the ERC.

     b. The consolidation of a multitude of employment, business development, regional economic development, and other economic development related activities formerly carried out by three different organizations namely, ERC, ENL and the Employment Branch.

     c. The integration of the business financing portfolios of the Fisheries and Farm Loan Boards and ENL which were previously divided under separate administrative structures.

     d. Decentralized delivery and administration of employment services through the regional offices of the Department rather than through a centralized St. John's-based operation.

     e. Sharing the internal corporate administrative support functions of human resources, administration/finance and information technology among three departments, those being Municipal and Provincial Affairs, Government Services and Lands, and DDRR. This eliminates the need to maintain separate groups for all three departments as existed previously.

3. There will also be a saving of $1.3 million generated by the elimination of the Fisheries Loan Board Interest Forgiveness Program.
4. The small business/lending capital account has been maintained but at a reduced level of $8.1 million for the current year. This is in keeping with the Department's plans to support small-scale seed financing needs of the small-business community. This level of support will continue to complement other sources of government funding in the province including the Business Development Bank of Canada, the BDCs, ACOA and the Atlantic Investment Fund

FISHERIES AND FARM INTEREST FORGIVENESS PROGRAM

• This program was introduced in 1992 to provide temporary relief to fishermen affected by the closure of the groundfish fishery who had loans with the Fisheries Loan Board. Only 400 of 4.000 clients served by the Board have qualified historically for assistance under this program. Given the Province's fiscal circumstances, this program of general application has been eliminated to the extent that the department will undertake to restructure fishermens' loan payments on a case-by-case basis in a manner that reflects their ability to pay consistent with the manner with which all clients of the Department are accorded consideration in similar circumstances.