Fiscal Framework

Review of 2007-08

When I delivered my first Budget speech last year, I said: “We must remain cognizant of the fact that our financial position can be influenced significantly by changes in resource prices. Our estimates were determined based upon advice provided by independent authorities, but these estimates could fluctuate significantly.” While these words are somewhat prophetic, there were few forecasters who foresaw such a dramatic climb in oil and mineral prices, or such a weakening of the American dollar. At Budget last year, we had forecast that offshore royalties would be $1.04 billion. We are now projecting that offshore royalties will be $1.67 billion, an increase of $633 million above the original Budget estimate.

I am pleased to say that the surplus for the year that just ended, the third consecutive surplus, will be the largest in the history of the province. Mr. Speaker, when the books are closed on the 2007-08 fiscal year, we expect a surplus of almost $1.4 billion.

I am also pleased to say that our net debt, which was more than double the per capita national average, will be reduced from $11.6 billion to $10.3 billion. This shows solid progress in reducing the net debt, but I would be remiss if I did not caution that we must remain vigilant in efforts to continue to reduce net debt to a level that promotes long-term sustainability. Unless we substantially reduce our debt, real and meaningful financial stability will continue to elude us. And without financial stability, we will be incapable of sustaining the social programs and services our people need. We must never lose sight of our long-term sustainability.

Forecast for 2008-09

Mr. Speaker, it is with great pleasure and hope for the future that I am projecting a fourth consecutive surplus in 2008-09. This is something that we would not have dared to dream when we took office in 2003 and were grappling with potential consecutive deficits in excess of $1 billion. I am pleased to report that I am forecasting a surplus this year of $544 million.

The surpluses which we will record for 2007-08 and are forecasting for 2008-09 will allow the province to make capital investments of $483 million. They will allow the province to make investments in resource projects such as Hebron and White Rose as well as in our energy corporation totaling $329 million. They will allow the province to repay debt in the amount of $451 million.

Mr. Speaker, the province’s public service employees work hard in a wide variety of roles to serve the people of Newfoundland and Labrador. Early in our first term as we wrestled with the fiscal challenges we inherited, their sacrifices made an important difference. We have made a commitment to them that, as our circumstances improve, they will share in the benefits. Currently, we are working with various bargaining units at the negotiating table in an effort to reach acceptable agreements. We are prepared to commit approximately $1.4 billion cumulatively in the next four years to negotiate contract improvements.

Mr. Speaker, these investments in our future will be made without incurring any new borrowings in 2008-09. This is a monumental achievement for the people of Newfoundland and Labrador.