Province	  Législature	Session	Type de discours	Date du discours Locuteur			Fonction du locuteur	Parti politique
Nouveau-Brunswick 50e 		5e 	Discours sur le Budget	28 avril 1987	 M. John B. M. Baxter, Jr.	Ministre des Finances	PC

Mr. Speaker, at the outset of my budget address, I would like to thank you for the valuable 
contribution you have made to the deliberations of this Assembly. I look forward to another session 
with you presiding.

As Finance Minister, it is my job to present the New Brunswick budget for 1987-88. It is a budget 
made possible by the sound policies pursued by the government over the past four and a half years 
and the relatively strong provincial economy that those policies nurtured. In 1986, the economy of 
New Brunswick grew by 3.5070, after adjustments for inflation, and the unemployment rate fell to 
14.4%, the first decline in the unemployment rate since 1980. Last year the New Brunswick 
economy not only outpaced all the other Atlantic Provinces, but our economy performed better than 
Canada as a whole, and employment here grew faster than in the rest of Canada.

More people are working and our industries are producing more than ever before. Growth is 
forecast to continue relatively strong this year and the unemployment rate will continue to fall. I am 
particularly encouraged that investment is expected to increase by nearly 5% in 1987.

Critics claimed that our fiscal policies designed to reduce the rate of growth in debt would slow the 
provincial economy and that instead we should cut taxes and let provincial expenditures expand 
without restraint. These critics have been proven wrong; the government has been proven right.

Mr. Speaker, the budget is traditionally the document which gives expression to the multitude of 
choices and decisions that a government has to make. But it does more than assign dollar values to 
programs, it sets a course of action of importance not only to citizens of today but also to citizens of 
tomorrow.

The budget I am presenting today reports on two important subjects, first management of provincial 
finances and, secondly, the government's commitment to maintaining and enhancing essential 
public services in an equitable, cost-effective manner. Later in the session, I will be tabling detailed 
reports on the review of the tax system and on the government's concerns in respect of federal 
provincial fiscal arrangements. I will also be tabling a review and evaluation of the fiscal plan 
developed in 1984 to deal with the budget deficit, together with a new fiscal strategy to guide future 
budget development.

Before describing our plans for 1987-88, I will review the main developments during 1986-87.

The third quarter report on the 1986-87 budget showed some worsening of our deficit, a trend that 
was shared with many other provinces. As honourable members are aware, the government 
incurred several unforeseeable expenditure demands during 1986-87. The very serious forest fires 
early in the year added over $8 million to spending in the Department of Natural Resources and 
Energy. Late in the fiscal year, it became apparent that the unusually severe winter would add about 
$5 million to the Department of Transportation's budget. The other significant over expenditure 
projected in the third quarter was $10.4 million in the Department of Health and Community 
Services, due to increased drug costs, higher hospital and medical expenses and increases in 
community social services.

The largest revenue change was a $16-million reduction in the personal income tax. This revenue 
estimate, which is prepared by the federal government, has been subject to large ups and downs in 
recent years. Honourable members may recall it was underestimated by $21 million in 1985-86. 
The third quarter report also noted that revenue from the sales tax is now expected to be about $11 
million lower than budget. This is primarily due to an overestimate of sales tax for 1985-86, which 
was the basis for our 1986-87 estimates. However, this error of estimation amounts to only 2.3070 
of total sales tax revenue.

At this point, I expect some further worsening of the deficit because of revised federal estimates of 
monies that we receive via the federal government. On the other hand, spending for the year may 
well be less than predicted in the third quarter.

I will now turn to developments in federal provincial fiscal relations in 1986-87.

As honourable members know, the last year has been a busy one in federal-provincial fiscal 
relations, and I will touch only the highlights today. I attended several federal-provincial meetings 
of Finance Ministers as well as having several personal meetings with Canada's Minister of 
Finance, Hon. Michael Wilson. Our gas and oil revenues just went up.

New Brunswick's concerns were given an attentive hearing by Mr. Wilson and our situation will be 
considerably improved as a result. The improvements to equalization that we worked out during the 
past year will add about $42 million to our entitlement when fully implemented. This amounts to 
$59 per person in New Brunswick, the largest improvement of any province. The next largest 
beneficiary of the improved equalization program is Newfoundland which will receive $45 per 
capita when the improvements are fully implemented. I am, of course, very disappointed that only 
half of these improvements will be implemented in 1987-88, with the full benefit only coming in 
1988-89.

Mr. Wilson has indicated he is prepared to consider an additional improvement to the formula that 
we proposed last fall. This improvement, if adopted, would mean about $20 million per annum 
more to New Brunswick.

Last year, the government of Canada changed the formula by which it grants provinces money for 
health and postsecondary education. The federal government has not relented in its plan to reduce 
the rate of increase in these payments, in spite of numerous provincial representations. All 
provinces are affected by this, but it poses special difficulties for poorer provinces that have a more 
limited capacity to offset these reductions.

In other areas, however, the federal government has been prepared to go at least part way in 
addressing provincial concerns. We have pressed Ottawa to make changes in the speed with which 
it pays provinces the income tax revenue which it estimates and collects on their behalf. Although 
he hasn't agreed to this proposal as yet, Mr. Wilson has agreed to share with provinces the benefits 
derived from accelerating remittances by employers of income tax deducted from employees. This 
measure, announced in the 1987 federal budget, will mean a one-time benefit of $20 million to 
New Brunswick this year.

Mr. Wilson has also compromised on the matter of repayments of equalization for 1985 and 1986 
arising from the census. The federal government has agreed to forgive such repayments of 
equalization, net of any positive adjustments that may arise with respect to the years in question. 
While welcoming this insurance, we have drawn the minister's attention to an inequity in this 
arrangement which favours the more affluent equalization receiving provinces. I am still hopeful 
that he will not insist on subtracting any future upward adjustments for these years from the amount 
forgiven due to population changes. In spite of these
improvements, federal financial assistance to poorer provinces is still not sufficient for the 
government to provide reasonably comparable levels of public services at reasonably comparable 
levels of taxation.

I will now turn to the budget plan for 1987-88.

Mr. Speaker, before outlining our plans for 1987-88, I would first like to briefly evaluate the fiscal 
plan that we have pursued since 1984-85 and describe the approach that we propose for the future.

Our plan was to reduce expenditures over a three-year period. Based on revenue and expenditure 
projections prepared in the late winter of 1984, these expenditure reductions would have yielded a 
surplus by the end of 1986-87. Mr. Speaker, it is clear from our experience, and that of other 
governments in Canada, that significant reductions in program spending over a short period of time 
are practically impossible to achieve. However, we have demonstrated that it is possible to curb the 
rate of growth in spending over a period of several years.

The government's experience with a planning process based on a deficit target has been useful, but 
errors of estimation in both revenues and spending limit its practical application as a guide for 
policy. Consequently, we intend to adopt a more strategic approach.

Our fiscal policy thrust remains as articulated in the 1984-85 budget speech, that is to reduce the 
deficit by restricting the growth of government spending and encouraging growth of the private 
sector. However, our plan for implementing this policy in future will relate spending to the growth 
of the economy rather than focussing on the Ordinary Account deficit. This will be accomplished 
by limiting growth in ordinary spending to a rate below the trend rate of growth in the economy. 
Such a policy will result in a gradual decline in the deficit. The deficit may vary up or down from 
year to year in accordance with the short-term swings in revenues, but will trend down to a surplus 
position.

The government's assessment of its fiscal plan also involved a consideration of restraint in the 
context of its reform agenda. This year, 1987-88, is an election year, but it is more so an important 
year in terms of our plans to improve the quality and effectiveness of government programs. The 
government has decided to allow an expansion in spending this year slightly above our long-term 
goal. This is designed to further our program of improved and more cost-effective programs for the 
people of New Brunswick. I would note that some of the increased spending involved in this 
improvement, such as the expanded Extra-Mural Hospital program and the inter-hospital transfer 
service, will in fact save money in subsequent years.

Mr. Speaker, the 1987-88 budget provides for a deficit on the Ordinary Account of $97.4 million, 
which is a larger amount than the government wanted. I wish to emphasize this deficit does not 
arise from extravagant spending, nor are its origins in slow growth in tax revenue. In large part, it 
arises from very slow growth in our federal transfers. Tax revenue is forecast to increase this year 
by a healthy 8.8% over third quarter estimates for last year. This strong growth will occur in spite 
of a forecast decline in gasoline and motive fuel tax revenue. Since New Brunswick retained the 
ad-valorem tax system, taxpayers have received the full benefit of falling fuel prices. Since most 
provinces have reverted to a fixed charge per litre, New Brunswick now has one of the lowest tax 
rates on fuel in Canada.

Nevertheless, the main revenue problem is with equalization and federal payments for health and 
education which are forecast to increase by only 2.9% this year in spite of the improvements to 
equalization which I mentioned earlier. The largest and most dismal single factor in this projection 
is the impact of the census on equalization and EPF payments. Statistics Canada's original estimate 
of New Brunswick's population for 1986 was 721 100, which exceeded the census count by over 10 
000. The lower population figure means not only that we were overpaid in earlier years but that the 
amount we receive in the future will be less than we thought. In 1987-88, the new population 
figures mean that we will receive about $25 million less than we expected. The impact of the 
census on our revenues from Canada underscores the general argument we have been making to 
Ottawa about the inadequacy of federal provincial transfer payments.

Mr. Speaker, before going into the details of our expenditure plans for 1987-88, I would like to 
review some of the arguments that the government of New Brunswick has put to the federal 
government in this regard.

We have long maintained that the current equalization formula does not live up to its objective as 
described in the Canadian Constitution, that is, to ensure that provincial governments have 
sufficient revenues to provide reasonably comparable levels of public services at reasonably 
comparable levels of taxation. To back up this position, we have pointed out that New Brunswick 
has one of the lowest levels of spending in Canada and that there are programs, long established 
elsewhere, that we cannot afford. We also have relatively high taxes and have been exercising 
severe restraint on public service salaries in recent years. In this regard, I want to reiterate our 
thanks to the people of New Brunswick who have shown great forbearance and tolerance in their 
acceptance of our restraint program over the past four years.

However, one very real problem that emerges is that the equalization program does not compare 
program expenditures among provinces but their ability to raise tax revenue. Conceptually, the 
equalization payment makes up for deficiencies in a province's revenue-raising capacity. It is our 
view that New Brunswick's revenue-raising capacity is overstated by the, present program and, 
therefore, the amount of equalization we need is understated.

The current revenue-based equalization program has serious faults in an era when deficit financing 
has become a way of life for provincial governments. Since total revenue collected by all provinces 
is one of the main factors that determine the magnitude of equalization payments, the collective 
decision of provinces to run deficits instead of increasing taxes depressed our equalization 
payment. We estimate that over the five years ending March 31, 1987, deficit financing by 
provincial governments has cost New Brunswick over $200 million in foregone equalization 
payments.


While I am grateful for the improvements which are to be introduced in the equalization formula, I 
have to make the point that the quinquennial tinkering with the formula is not the way to deal with 
the dramatic scale of the fiscal disparities which have become evident in the last seven years.

I have spoken on previous occasions about a structural deficit, which by definition is a deficit that 
will not go away with a recovery in economic activity. This deficit developed as a result of two 
phenomena: the failure of tax revenue to stay abreast of spending, and persistent shortfalls in 
federal transfers. By our own efforts we have corrected the first through expenditure restraint and 
tax increases. We are apprehensive that the second may be beyond our ability to correct, if we are 
to have services and taxes comparable to the national average.

The equalization program has long been the vehicle for achieving fiscal equity among provincial 
governments. That is why we have concentrated much of our energies on advocating substantial 
improvement to that program. The equity problem must be addressed, and addressed soon, for the 
Atlantic Provinces to maintain an acceptable standard of service to Canadians who live and work in 
Atlantic Canada.

The effect of federal cost control on New Brunswick's revenues can be seen in the decline in 
federal transfers as a percentage of total revenues. Over the last five years they have fallen from 
46.2% to 40.6%. The average decline in the Maritimes is 6.4 percentage points. Had federal 
payments continued to make the same relative contribution to our total ordinary revenues in 1987-
88 as in the late seventies, we would have had about $200 million more revenue from Canada this 
fiscal year. Under these circumstances, New Brunswick's fiscal position would be very different. 
Instead of having to budget for an Ordinary Account deficit of $97.4 million, today's budget would 
show an operating surplus of over $100 million. Alternatively, we would have been able to increase 
spending on essential programs or reduce some of our taxes.

The federal government, and we ourselves, must be reminded from time to time of the history of 
our country. The initial fiscal arrangement in 1867 involved a per capita subsidy to the provinces. 
Since 1867, the arrangements have become more sophisticated, as the services provided by 
provincial governments became more costly and diverse. In the Canada of today, no citizen should 
be deprived or penalized because we have a constitutional structure consisting of a federal 
government and 10 provincial governments. For our citizens, the services received and taxes paid 
should not vary any more among provinces than if we were a unitary state.

Mr. Speaker, I will now turn to the government's plans to improve the quality of services in 
education and health.

The government's 1986 budget included new funds for the first year of a three-year program to 
improve the quality of primary and secondary education. I am pleased to announce that in spite of 
revenue setbacks, our 1987 budget contains funds to implement the second year of this program. 
This additional expenditure, together with monies for educational reform, will result in a 10.74% 
increase over the amount budgeted for the Department of Education last year. With the forecast 
decline in our student population, we will be spending approximately $3966 per student, compared 
to $3540 in 1986-87. One result will be a decline in the pupil-teacher ratio and a significant 
increase in the quality of education.

In keeping with our thrust toward improved quality of education for our children, the expanded 
educational capital program begun last year will be carried over into 1987-88, with a record $58 
million for school projects. These expenditure plans will be achieved not simply by adding to the 
expenditure budget but by achieving economies elsewhere to free funds for education. This 
represents an important shift in government priorities.

Mr. Speaker, I will now briefly outline our plans for the Department of Health and Community 
Services.

This government feels strongly that in the development of improved social programs and services, 
it is the community-based approach that holds the best promise for the future. The time is rapidly 
approaching when all governments have to rely on more community-based services, not only as a 
lower-cost alternative to institutional care but also to improve the quality of care. As a result, 
community-based services will continue to expand. Additional patients will be discharged from the 
Saint John and Campbelton psychiatric hospitals and will be supported in the community through 
strengthened programs. The Extra-Mural Hospital program will be further expanded into new areas 
as a home-based alternative to hospital care.

The government is also concerned about effective use of institutional facilities now in place or 
under construction. With several new and expanding hospitals under construction in northern 
communities, the master plan of hospital services will be supported by additional resources to 
ensure that staff and equipment are in place to fully utilize the potential of these facilities to meet 
health care needs.

Much of the health care system's effectiveness depends on the ability to move people quickly and 
efficiently to the location of diagnosis and treatment. Our ambulance service network is an integral 
part of the health care system and will receive increased resources to ensure its contribution to a 
sound health care system. The budget contains $70 million for health capital spending, following 
through on last year's decision to accelerate our program of hospital construction.

In periods of budgetary restraint, a special effort has to be made to ensure fair treatment to those 
who are prevented from fully enjoying the benefits that most of us take for granted as Canadians. I 
have said many times at federal-provincial meetings of Finance Ministers that the burden of deficit 
reduction must be borne fairly among all Canadians. These remarks, made largely in reference to 
the regions of Canada, are equally valid in our own budgeting. Accordingly, the Department of 
Income Assistance will be allocated sufficient funds to increase basic assistance rates by 6% to help 
those who must unfortunately rely on direct government financial support. At the same time, to 
enhance the potential for financial self-sufficiency and to decrease the risk of long-term reliance on 
the social assistance system, the government will expand upgrading, training and placement 
initiatives begun last year.

There are many among us who, because of a disability, do not share fully in the benefits available 
to most Canadians. New Brunswick has an enviable record in providing services to the disabled and 
was the second province in Canada to implement an action plan for the disabled. As we begin our 
second year of this 100 year action plan, we will be undertaking a number of new initiatives which 
emphasize education, employment, community-based services and recreation. The government will 
take over operation of community residences for disabled adults in Moncton, Fredericton and 
Woodstock, as well as sheltered workshops in Saint-Quentin, Saint-Jacques and in the Victoria-
Tobique area. Additional funds will be provided to the Canadian National Institute for the Blind. 
The program for the vocational rehabilitation of disabled persons will receive a major infusion of 
funds. A special needs transportation program will be based in the Department of Transportation. 
The Department of Tourism, Recreation and Heritage has funding for and increased participation 
by disabled persons in recreational activities. A sales tax rebate will be provided on elevators and 
lifts specifically designed and installed for the benefit of the handicapped in buildings utilized by 
the public.

Mr. Speaker, a measure of a government's success is its sensitivity to social concerns as they 
evolve. In keeping with our past record in this regard, the 1987-88 budget contains funding to 
address problems of growing public concern.

The government is deeply troubled by the apparent trend of family violence and child abuse. 
Traditional approaches to detection and punishment of this terrible problem must be supplemented 
by preventive and remedial efforts. A high priority will be placed on protection of the rights of 
affected family members, but every effort will be made to keep the family together through the 
combined efforts of professionals working with the family.

To assist in this direction, a crisis response project will be piloted in the Peninsula and Saint John 
regions. New transition homes will be established in the Bathurst, Edmundston and Miramichi 
regions. The government will also strengthen current programs and services to provide a quicker 
and more effective response to complaints of child abuse and neglect. Funds are provided in the 
Department of Justice to ensure integration of services in Justice with those offered by Health and 
Community Services to address problems associated with family violence and child abuse. The 
Department of Justice budget also contains an increase of $2.5 million for programs associated with 
young offenders, and will enable a significant increase in the use of the open custody system by the 
courts.

Mr. Speaker, I will now describe the aspects of the 1987-88 budget intended to stimulate economic 
growth and job creation. The economy of the province is expected to continue to show relatively 
good growth in the coming year. At the same time the structure of our economy is changing in the 
same way as that of the rest of North America, with a greater development of the service sector.

The government's economic development strategy is to continue support to the primary and 
manufacturing base of the economy, while at the same time encouraging future development in 
other sectors. Now more than ever, the future depends on the availability of a small, well-educated 
labour force. Preparing young people with the skills they need to enter the work force and 
contribute to a growing economy is a priority of this government and this budget.

The development of our universities and the development of science and technology is critical to all 
our futures. In the 1987-88 budget, the government has not only met the recommendations of the 
Maritime Provinces Higher Education Commission for the universities of the province this year but 
we have exceeded them.

We also propose to increase our contribution to the Research and Productivity Council, to enable 
them to improve their own research base, and thus be better equipped to meet the needs of our 
industries in the future.

The role of the Department of Commerce and Technology will be strengthened by additional 
funding for promotion of the province, to set up the Minister's Advisory Board on Science and 
Technology and to provide better advice for the service sector. It is important that the province of 
New Brunswick provides an adequate transportation system for the people and products of the 
province. To this end, we have increased the capital budget of the Department of Transportation by 
$15 million for fiscal 1987-88.

The ongoing need for the protection of water supplies and for the treatment of water is also 
important for orderly growth and development. We have increased the capital funding for 
Municipal Affairs and Environment to assist in the construction of facilities, while at the same time 
providing funds to increase the environmental staff to monitor and control problems related to 
contamination of ground and surface water. This will also enable us to better control potential 
leakage from buried fuel tanks.

We shall also be encouraging further work on environmentally-sound budworm control through the 
Department of Natural Resources and Energy, to ensure the long-term protection of our forests.

The tourist industry in New Brunswick showed remarkable growth last year, and we will provide 
additional funding for this important sector of the service economy.

Mr. Speaker, I will now describe some of the government's concerns in respect of the capital budget 
and the action it has taken in this regard.

Since the 1982 recession, the government has struggled to contain the growth of its capital 
spending. This has been necessary to reduce borrowing which has been required to finance a 
portion of Ordinary Account spending as well as the capital budget since the recession.

Since 1970, the government of New Brunswick has been engaged in a process of catch-up with the 
rest of Canada in building provincial infrastructure. We must support a modern economy with a 
level of capital facilities in line with that offered elsewhere. High interest rates have prevailed over 
much of this period, adding to the cost of our basic infrastructure.

Mr. Speaker, we see the capital problem as part of the larger issue of fiscal inequities in Canada. 
Consequently, we have approached the federal government on this issue and proposed an interest-
free loan from Canada to enable us to complete our catch-up in capital facilities. If we could obtain 
such funding interest free, it would enable us to complete our catch-up without further additions to 
interest charges which have already added substantially to the costs of our infrastructure in 
comparison to provinces that were able to build these facilities several decades ago. If we could 
obtain such a loan, interest free, repayable over a 20-year period, we could build our schools, 
hospitals and roads without adding to our interest costs. Free from such costs, we would be much 
better situated to get our Ordinary Account back into balance.

The government has decided to continue with a large capital program this year because of the need 
to keep pace with our citizens' requirements for essential services. I remain optimistic that the 
federal government will recognize the special difficulty that we face in this regard and offer us 
some further financial assistance, either through equalization or some special arrangement, to help 
us bear the costs of providing services comparable to the Canadian average.

I will now outline the one tax increase that is included in the 1987-88 budget.

Effective April 1, 1987, New Brunswick will levy a 2% tax on the paid-up capital of banks, trust 
and loan companies with permanent establishments in New Brunswick. An exemption provision 
will ensure that the tax will apply only to the large banks and trust companies operating in this 
province. New Brunswick becomes the eighth province to levy such a tax. This measure will yield 
an estimated $4 million in 1987-88 and legislation outlining the details of this tax will be 
introduced shortly.

This budget enhances the quality of services to people in a careful and cost-effective way. The 
government's continuing attention to fairness in allocating government funds and its attention to the 
needs of the disadvantaged are readily evident. Our commitment to economic development is 
sustained, and improving employment and good economic growth speak well for the success of our 
economic development and fiscal policies.

Mr. Speaker, abstract economic statistics do not adequately reflect the economic expansion and 
confident mood that prevails throughout New Brunswick today. Let me cite a few specific 
examples of the vigour that we see in our province. In Newcastle, a major expansion of the Repap 
pulp and paper mill has just been completed. In Sussex, potash production continues to expand at 
two mines and another is under consideration. A new gold mine recently went into production in 
Saint John County. In Saint John, the frigate program is well underway, offering a showcase of the 
expertise of our shipbuilding industry. The first oil shale from Albert County has been mined and 
used in a thermal-generating station. In Bathurst, Consolidated-Bathurst has recently announced 
another expansion of their mill. Moncton's attractiveness as a regional service centre has been 
enhanced by the new Atlantic Wholesalers complex, a major expansion of Place Champlain in 
Dieppe and the Blue Cross complex. These are but a few examples of the dynamism that has 
developed in our provincial economy.

On the fiscal front, we have laboured hard to bring down the deficit which we inherited with the 
1981-82 recession, and I am proud to say that we have done a better job than any of the 
governments of Canada.

As J have already stated, the deficit problem we face today is due in large part to the cost-control 
policy of the federal government. Discussions with the federal Finance Minister have helped him to 
a better understanding of New Brunswick's problem. As a result, we are hopeful that an 
arrangement may be worked out in the near future to enable us to complete our large capital 
program with federal assistance.

The budget provides for $3054.5 million in spending on Ordinary Account. With revenues forecast 
to amount to $2957.1 million, the deficit on Ordinary Account is forecast to be $97.4 million. With 
a total capital budget of $353.4 million and gross loans and advances of $69.8 million, financial 
requirements will be $506.1 million.

This is another responsible budget which improves the quality of services without excessive 
spending. It reflects an improvement in fiscal arrangements with Canada and lays the groundwork 
for further improvements. I commend it to the members of this Assembly and the people of New 
Brunswick.