Review of 2006-07
Mr. Speaker, last year, for the first time in our history, our
province achieved a surplus on a fully consolidated basis while budgeting another. The
projected surplus of $6.2 million for 2006-07 was, at midyear, expected to become a deficit,
but at year end I am pleased to report an estimated surplus for 2006-07 of $76.0 million.
Ours is the only administration since Confederation to table
back-to-back surpluses on a fully consolidated basis. Achieving this surplus took careful
fiscal management. Revenues for the year were down overall, primarily because of a longer
than expected shutdown in production at Terra Nova, and were only partially offset by a
rise in oil prices and other revenue gains. In response to the Terra Nova shutdown, our
government took a conscious decision to keep expenditures in check. As a result, we improved
our fiscal position by $69.8 million.
The most significant fiscal challenge facing Newfoundland and
Labrador is the burden of debt we inherited, the highest per capita net debt in Canada, more
than double the national average. High debt loads mean high interest payments, whether for a
family or for a government. Reducing debt frees up money to spend on programs and other
priorities. In 2006-07, our government was able to reduce the provincial net debt by $70
million. Through sound fiscal management, we reduced our net debt as a percentage of GDP
from 54.4% in 2005-06 to just 50.0% in 2006-07. Most significantly, we were able to reduce
our debt expenses as a percentage of revenue from 17.1% in 2005-06 to just 14.2% in 2006-07,
which in turn frees up additional money for debt reduction or new programs. We have moved
responsibly to address unfunded public pension plan liabilities to further strengthen our
province’s fiscal position.
Forecast for 2007-08 and Beyond
Mr. Speaker, I am pleased to report that, for only the second time
in our province’s history, we are budgeting a surplus on a fully consolidated basis. We will
be the first administration since Confederation to record three consecutive fully consolidated
surpluses. We project that our surplus at the end of this year will be $261.2 million, driven
in part by resource sector gains. Any surplus will go towards financing infrastructure
investments and reducing debt.
Equalization and Atlantic Accord amounts for the 2006-07 fiscal
year are fixed. Total income from the 1985 and 2005 Accords will rise by approximately 50% to
$494.3 million. Without the 2005 Accord negotiated by our Premier, we would be receiving
$305.7 million less than we are getting this year. Our Equalization payments this year will
drop by nearly a third to $477.4 million.
The recent federal budget has given the province a choice: stay
with the current, inadequate, equalization program, which does not provide access to new
equalization benefits that other provinces enjoy, or choose a new program which contains a cap
on entitlements and a cap on the determination of whether we are eligible for the 2005 Accord.
The choice the province eventually makes will depend on a financial assessment of those
choices at the appropriate time. Neither of these choices fulfills the commitment made to the
people of Newfoundland and Labrador to remove nonrenewable resource revenues from the
As our revenue position strengthens, we remain committed to
responsible fiscal management to ensure we strengthen rather than erode the gains we are
making and become increasingly more self-reliant. In keeping with this vision, we will
increase program expenses this year over what we budgeted last year by a responsible 5.6%.
We will also continue to reduce the province’s net debt by $66
million. Our debt servicing costs will be reduced by $51 million, freeing up money that would
otherwise be siphoned off in interest payments. Our net debt as a percentage of GDP will fall
from 50.0% last year to 44.9% this year, and our debt expenses as a percentage of revenue will
fall from 14.2% last year to just 11.8% this year.
Our plan is to continue this responsible approach in the years
that follow to ensure we are increasingly strong, less reliant on the whims of others and more
reliant on ourselves.