The Higgs government says the economy will recover in the coming fiscal year as COVID-19 wanes, but it won’t be enough for the province to avoid a large deficit.
Treasury Secretary Ernie Steeves predicts the provincial economy will grow 2.9 percent this year after shrinking 3.5 percent in 2020 due to pandemic restrictions.
However, government spending will continue to outpace revenue, leading to a deficit forecast of $ 244.8 million for the 2021-22 period.
“It’s not the budget I want to deliver, but it’s the budget New Brunswick needs,” Steeves told reporters.
“It’s a different world. The pandemic has completely changed things for everyone.”
Raising vaccination rates and easing restrictions on public health and travel later this year should boost the economy. “However, the forecast remains very uncertain and the return to pre-COVID economic activity will take some time,” Steeves said of his budget speech.
Overall, spending will increase 3.4 percent in the coming year, while revenues will only increase 1.2 percent. This is an imbalance that goes against the frugal instincts of the progressive conservative, but which Steeves believes is necessary after an exceptional first year of the pandemic.
“This budget continues to owe us,” said Steeves. “We don’t want any debt, but guess what? Now is the time. We have to spend money this year.”
The large deficit forecast is based in part on federal funding for a number of COVID-19 programs that expire at the end of the fiscal year on March 31.
Ottawa conditional grants rose from $ 324 million to $ 599 million that year, with almost all of the additional money going to support the province’s pandemic response. These grants are expected to decrease to $ 357 million in the coming year.
Steeves said the provinces would urge the federal government to continue funding.
“You just can’t cut it. It can’t be a hard stop.”
New Brunswick Treasury Secretary Ernie Steeves revealed details of his government’s budget for 2021-2022 during a news conference on Tuesday, March 16. (Shane Magee / CBC)
Ottawa hasn’t yet said exactly how much it will fund in 2021-22, but if there is a new inflow of money after April 1, it could lower the deficit in New Brunswick. A massive inflow of federal dollars that year resulted in a one-time surge in the pandemic deficit to $ 12.7 million.
The budget is $ 64 million for certain pandemic expenses, including $ 30 million for the current vaccination program.
“New Brunswickers will come up with a financial plan demonstrating our commitment to providing the necessary support to deal with the pressures the pandemic will continue to put on the province,” said Steeves.
There has also been a significant increase in some non-COVID-19 areas. Several departments saw an increase in mental health of approximately $ 7 million, including $ 3 million to address increased demand for addiction and mental health services.
There is also $ 10.8 million in new spending on affordable housing.
The budget projects an even bigger deficit of $ 296 million in 2022-23 before dropping to $ 220 million the following year.
The government will increase the province’s carbon tax, which drivers pay on the pumps, by about two cents to 4.21 cents per liter in the coming year. However, that announcement was missing some key information about how the revenue will be spent.
Officially, the national climate plan provides for a CO2 tax rate for gasoline of 6.6 cents this year. The PCs went along with this a year ago, but reduced the gas consumption tax by more than four cents so that the consumer pays around two cents per liter on the pumps.
This year the national plan provides for a tax of 8.8 cents per liter, so that the province would have to lower the gas consumption tax again in order to keep the net tax on the pumps stable.
But there is still no decision to do so.
If the province leaves the excise tax where it is, about $ 28 million will be left.
It wasn’t clear on Tuesday what other options the government was considering, but Steeves said there were four options on the table and everyone would see the money returned to New Brunswickers.
“I don’t know if I want to discuss them all. I have my favorite,” he said. “In one form or another, it will return to the people.”