Budget Release 2019

CPA Newfoundland and Labrador highlights of the 2019 provincial budget.

 

Government of Newfoundland and Labrador Budget Release 2019

St. John’s, April 17, 2019

Finance Minister Tom Osborne delivered the Liberal government’s fourth budget, in the 2019-20 year the province is forecasted to realize a surplus of $1.9 million as a result of the newly signed Atlantic Accord agreement. The forecast projects deficits in 2020-21 and 2021-22 and is focused on returning to a sustainable surplus in 2022-23.

In Budget 2018 the government projected a deficit of $683 million and over the course of the past twelve months expenditures have decreased and revenues have increased slightly which has led to a revised deficit of $522 million for 2018. In summary, total expenses for 2018 decreased by $83 million from the budget.

Looking forward through the governments 2022-23 plan, comparing this year’s budgets to what was presented last year, here is a summary of the differences:

 


2019-20 2020-21 2021-22 2022-23
Surplus (Deficit) per 2019 Forecast 1,925 (796) (300) 23
Less Atlantic Accord (2,501) - - -
Adjusted Surplus (Deficit) per 2019 Forecast (576) (796) (300) 23
Surplus (Deficit) per 2018 Forecast (507) (654) (243) 56
Variance (69) (142) (57) (33)

 

 “For comparison purposes, excluding the Atlantic Accord impact on the 2019-20 fiscal year which will result in a one-year surplus, the government has continued on the trajectory for a return to surplus in 2022-23. However, this years budget shows increased deficits on the path to that surplus versus what was presented in last years budget, a plan to return to surplus and deal with the provinces net debt is paramount to the provinces future success.” said Jason Hillyard, CPA, CGA, Chief Executive Officer of the Association of Chartered Professional Accountants of Newfoundland and Labrador.

Revenue Initiatives

Budget 2019 does not include any tax increase, new tax or fee increases. In 2019-20 revenue is expected to reach $10.350 billion, of which $2.501 billion is the result of the Atlantic Accord agreement. Excluding the Atlantic Accord revenue, total revenue would have been $7.849 billion, a favourable increase of $0.179 billion compared to the 2018-19 budget of $7.67 billion.

However, the $7.849 billion revenue, does include $130.8 which is fully funded by federal and provincial sources, which ultimately appears again in the expense line.

The retail sales tax on automobile insurance is scheduled to be eliminated by early July and will be retroactive to April 16, 2019. Those who renew their insurance between now and July will receive a rebate for the RST payment on their insurance.

Here’s a summary of how the revenue forecast has changed versus that of last year’s budget:


2019-20 2020-21 2021-22 2022-23
Total Revenue per 2019 Forecast
10,350 7,442
7,788 7,831
Less Atlantic Accord (2,501) - - -
Adjusted Revenue per 2019 Forecast 7,849 7,442 7,788 7,831
Total Revenue per 2018 Forecast 7,735 7,492 7,763 7,964
Variance 114 (50) 25 (133)

The accumulated change from this year’s budget versus last years for the period from now until 2022-23, results in an overall reduction in revenue of $44 million.

Underlying Assumptions


Budget 2019 incorporates a forecast assumption of a Brent Crude Oil price of $65 USD/barrel for 2019-20 which appears to be a prudent estimate based on current forecasts. The forecast assumes an increase in the Brent Crude Oil price to $71 USD/barrel by 2022-2023. Budget 2019 also forecasts the US-Canada exchange rate to be 0.765 for 2019-2020 to 0.786 in 2022-2023.

“During the pre-budget consultation and through our written submission, we took the opportunity to discuss budget assumptions, we are happy to see that the government is taking both a conservative and a scientific approach in the way it forecasts oil prices and exchange rates” said Jason Hillyard.

Expenses for 2019-2020


The Provincial Government has announced that overall expenditures from 2018-19 to 2019-20 are forecasted to increase by $183 million for a total of $8.425 billion. However, the total expenditures include both one-time expenses as well as federally funded fully recovered expenses.

The 2019-20 expenses include $64.1 million in one-time expenses as follows:

-    New oil and gas corporation     $36.4 million
-    Election 2019     $6.3 million
-    Inquiries (i.e. Muskrat Falls)     $11.1 million
-    Little Bay Islands relocation     $10 million
-    Democratic Reform process     $250,000

In addition, the 2019-20 expenses include $125.2 million in spending that is fully recovered by the province through Federal funding, as well as $5.6 million from other provincial sources for a total of $130.8 in totally funded expenses, this combined with the one-time expenses above account for the forecasted increase in expenses.

Here’s a summary of how the expense forecast has changed versus that of last year’s budget:


2019-20 2020-21 2021-22 2022-23
Total Expenses per 2019 Forecast
8,425 8,238 8,088 7,808
Total Expenses per 2018 Forecast
8,242 8,146 8,006 7,908
Variance 183 92 82 (100)

The accumulated change from this year’s budget versus last years for the period from now until 2022-23, results in an overall increase in expenses of $257 million.

Borrowing

For Budget 2019, gross borrowing will be $1.2 billion, lower than the original Budget 2018 forecast of $1.35 billion due to increased cash flow from the Atlantic Accord. Overall, net new borrowing from 2019-20 through the duration of government’s 2022-23 fiscal plan will total $2.1 billion.

Infrastructure

Budget 2019 notes that approximately $3 billion will be invested from 2019-20 to 2023-24. For 2019-20 there is a total investment of $594.3 million for new and existing schools, healthcare facilities, post-secondary institutions, and roads and bridges.  

Budget 2019 infrastructure investments includes but is not limited to:

  • $108.7 million in health care infrastructure, including:
    • $17.6 million for construction of long-term care homes in Corner Brook, Gander and Grand Falls-Windsor;
    • $8.9 million to advance construction of the new adult mental health and addictions facility;
    • $6.9 million to start construction in 2019 of a new acute care hospital in Corner Brook.
  • $39.2 million for schools in Paradise, Gander, Coley’s Point and St. Alban’s;
  • 9.3 million to support Memorial University’s infrastructure modernization needs;
  • $600,000 to begin procurement on a new corrections facility to replace Her Majesty’s Penitentiary;
  • $131.4 million for the 2019 Provincial Road Improvement Plan, Trans-Labrador Highway and Team Gushue Highway.

In addition to infrastructure projects, the budgets outlined initiatives and funding in the following overarching areas:

Jobs and Industry Development

The government continues to work on jobs and industry development. The budget included:

  • Economic/Sector Development
    • Almost $14 million allocated for research and development;
    • $10 million for economic development infrastructure, marketing, research and capacity building;
    • $3 million to create a Digital Ocean Innovation Centre of Excellence;
    • $2.5 million to support the creation of a Subsea Centre of Excellence
  • Tourism and Culture
    • $13 million annual investment in tourism marketing,
    • $4 million equity investment in the NL Film Development Corporation and renewal of the NL Film and Video Industry Tax Credit until 2021;
    • $3.45 million for the Cultural Economic Development Program;
    • $1 million to the ArtsNL grant program in support of artists.
  • Supporting Renewable Resource Industries
    • Over 14 million for Fisheries, including $10 million through the Atlantic Fisheries Fund for marketing, innovation and sustainably sourced seafood products;
    • Over $10 million for Agriculture, including $7.1 million under the Canadian Agricultural Partnership and $2.25 million for the Provincial Agrifoods Assistance Program;
    • Approximately $10 million for Forestry and Wildlife, including $3.66 million for silviculture, research into reforestation and forest improvement as well as $3.42 million for the Fire Suppression program.
  • Supporting Oil and Gas and Mining Industries
    • $9 million is available for investment within the Innovation and Business Development Fund which allows government to work collaboratively with industry to maximize the potential of the oil and gas sector;
    • $20 million for the acquisition and processing of new 2D and 3D seismic data
    • $4.6 million for the Geological Survey
    • $1.5 million for the College of the North Atlantic and Memorial University’s hyperspectral imaging project; and$1.7 million for the Mineral Incentive Program.

Health and Healthy Living

Health care spending is approximately $3 billion annually, but there are still many areas that need attention. In the budget, the government put explicit focus on the following areas as it relates to programming:

  • Mental Health
    • $1.3 million for the Gathering Place to support them in delivering services;
    • $914,000 to launch mobile crisis intervention teams on the west coast and central region;
  • Better Services; Better Outcomes
    • $4.9 million for 15 new drug therapies through the NL Prescription drug program;
    • $2.5 million to implement the Autism Action Plan, increasing to $5 million annually in 2020-21;
  • Healthy Living
    • $1.79 million for the community Healthy Living Fund
    • $1.8 million to prevent and reduce tobacco and vaping use
    • In excess of $5 million for a myriad of sporting, wellness and physical activity initiates

Education, Skills and Childhood Development

Budget 2019 includes:

  • Approximately $60 million for early childhood development initiatives;
  • $13 million to continue the implementation of the Education Action Plan;
  • $11.3 million for operating grant funding for the provincial information and library resource Board;
  • $363.5 million for Memorial University’s operating grant, which includes $54.1 million for the Faculty of Medicine;
  • $87 million in operational funding for the College of the North Atlantic and its 17 campuses;
  • $78.2 million to maintain current tuition levels for Newfoundland and Labrador students;
  • $161 million is available for investment though the Labour Market Transfer Agreements to help people prepare for, find and maintain employment; and
  • $13 million in provincial funding for employment and training programs

 

Seniors, Children and Inclusive Communities

Budget 2019 includes funding for:

  • Healthy Aging, including $270,000 for 50+ clubs;
  • $66 million for the NL Income Supplement;
  • $57 million for the Seniors’ Benefit;
  • Community-Based Care, including $1.7 million for the Home Dementia Program to provide support at home;
  • Supporting Children and Families through a $10.2 million budget item for maintenance and repair of public housing properties and $7.39 million for the Supportive Living Program and Provincial Homelessness Fund.
  • Inclusive and Accessible Communities, including $3.1 million to modernize and renovate public rental housing, including accessibility needs and $400,000 for the Accessible Taxi Program; and
  • $284 million in approximately 162 poverty reduction initiatives.

Safe and Sustainable Communities

Budget 2019 includes funding for:

  • Justice System, including $1.8 million for the Office of the Chief Medical Examiner for staffing and a data management system, $1 million to expand the Labrador Correctional Centre, and $500,000 for a Serious Incident Response Team to increase police oversight;
  • Creating a Safe Environment for Women and Girls, funding includes $3.2 million for core operational funding for community organizations;
  • Over $3 million has been allocated to First Responders to support with infrastructure and regional expansion;
  • Over $20 million to support Green Communities;
  • $123.9 million to support community funding programs aimed at improving infrastructure and enhancing services;
  • $79 million for community infrastructure projects, and
  • $53.7 million through the Municipal Capital Works Program.