Province Législature Session Type de discours Date du discours Locuteur Fonction du locuteur Parti politique Nouveau-Brunswick 52e 3e Discours sur le Budget 25 février 1994 M. Allan E. Maher Ministre des Finances PL Madam Speaker, I have the honour of bringing before this House the seventh budget of this government. Like previous budgets, the 1994-95 Budget maintains our commitment to quality public service, equity, competitiveness, and economic progress. As well, the 1994-95 Budget is in keeping with the fiscal and financial goals outlined in detail last year, that the province would balance its ordinary account over the period 1993-94 to 1995-96. The 1994-95 Budget is committed to a number of key objectives: I. There will be no new taxes and no increase in taxes in this budget. With this budget, the overall tax burden in New Brunswick will remain below the average of all provinces. 2. Funds have been provided to preserve and modestly enhance key programs and services, such as health care, education and income assistance. 3. In keeping with our drive to improve productivity and efficiency, this budget provides for continued downsizing and streamlining of the public service. The 1994-95 Budget provides for an ordinary account surplus of $4.8 million. This budget also provides the basis for achieving the goals of last year's Balanced Budget Legislation. The budget will set the stage for New Brunswick to become the first "pay as you go" province in Canada by next year. Regardless of political persuasion, the rush by governments across the country to control deficits and spending is well documented. Rationalization of services, efforts to control public sector wage bills, restructuring, privatization, and controls on program growth have become the major thrusts of government budgets in all provinces. Madam Speaker, as a result of actions in meeting the fiscal challenges facing the province in the last few years, I am proud to say that New Brunswick is now in a better financial position than many provinces in Canada. Through wise stewardship over its resources, the province has been able to minimize the need to take the kind of sudden and drastic spending cuts that are occurring elsewhere in Canada. Our deliberate and consistent effort at responsible fiscal management has ensured that we can preserve those programs and services which are at the heart of our social infrastructure. Last year, I asked for a joint effort from all members of this House and from all New Brunswickers to help make a success of the three-year fiscal plan that was introduced with the 1993-94 Budget. That plan, which was put in place because of the need for the province to meet its day-to-day spending obligations without adding to the province's debt, called for a cumulative surplus in the ordinary account over the three-year period ending in 1995-96. This budget, Madam Speaker, provides the measures necessary to ensure that our fiscal plan is met. Before I outline the elements of the budget plan for 1994-95, I would first like to review the events of the past year. What has occurred in 1993-94 will impact on our plans for the year ahead. Madam Speaker, on the international front, economic performance was mixed in 1993. In Japan and Europe the economies were in recession. Several Asian countries on the other hand have been experiencing a period of economic "boom," and for the immediate future these, and some developing countries, are expected to see major gains in output. The United States continues to have growth which is above that of most of the other industrialized countries. This augurs well for both Canada and for New Brunswick. I say this because the United States is by far the largest external market for our exports. In fact, exports from this province were up by 13.5% in the first 11 months of 1993, mainly because of improved markets in the United States. Meanwhile Madam Speaker, 1993-94 was a recovery year for Canada and for New Brunswick. While the New Brunswick economy did not grow as rapidly as we anticipated, there was renewed strength in virtually every sector. It now appears that our real Gross Domestic Product (GDP) for 1993 was up by about 2.1 %, only slightly below last spring's forecast. This is consistent with developments at the national level where actual output levels were somewhat lower than expected. Manufacturing shipments were up by 14.4% in the province and 8.4% at the national level; retail sales increased by 5.0%, while the national increase was 4.6 %; housing starts were up by 11.6 % compared to -7.6% nationally. There is no doubt that for most major economic indicators, New Brunswick fared well last year compared to Canada as a whole, even though growth here was not as high as anticipated at the beginning of 1993. For the year ahead, the economic recovery in Canada and the United States is expected to continue and strengthen with growth in Canada of 3.0% or more being forecast for 1994 and 1995. This improving economic picture will aid and support the recovery in New Brunswick. Real growth of2.8% is anticipated in New Brunswick this year, with next year expected to be even better. All industries are expected to contribute to increased output in 1994. The greatest contributions will come from forestry, transportation, communications, trade and finance. Weak international markets for minerals and pulp and paper will keep the New Brunswick growth rate slightly below that forecast for Canada. The Infrastructure Works Program and the fixed link project will significantly increase construction activity in New Brunswick. Personal income is projected to rise 3.9% this year. Increased employment, low interest rates and moderate inflation are expected to boost consumer confidence levels in the coming months. Along with the pickup in overall economic activity, these factors should result in some acceleration of consumer spending this year and next. In spite of a generally improving economic situation, the province suffered two major revenue setbacks in the past fiscal year, both related to the economy. The most difficult problem arose as a result of re-estimates of federal equalization payments which were provided to the province late last year. These estimates resulted in a significant reduction in equalization revenues to New Brunswick of $99 million. This decline in equalization payments was the result of poorer than expected economic performance in Canada in general, and in some of the larger provinces in particular. The other major setback on the revenue side is related to our economy. While New Brunswick's economy performed relatively well last year, many important economic indicators were lower than forecast. Personal income growth, inflation and consumer expenditures were all lower than expected. Slower growth in these major economic indicators affected sales tax revenues which are now expected to be $27 million less than budgeted last year. It is clear that consumer confidence remained a problem throughout Canada in 1993. While not a new development in 1993-94, an additional problem has been the impact of the underground economy on our revenue base. All provinces and the federal government have been affected by those individuals and businesses which have chosen to operate outside the system and avoid paying their fair share of taxes. New Brunswick's revenues have fallen short as well, to the point where restoring the integrity of the overall tax system will become a major priority of the province in the coming year. While the province suffered setbacks on the revenue side, I am proud to say that on the expenditure side of the budget we were able to maintain government spending within budgeted amounts. This was accomplished, Madam Speaker, despite considerable pressures on income assistance payments and increased costs associated with flooding on the Saint John River. A debt of thanks is owed to all New Brunswickers who worked so hard to ensure that the expenditure budget came in on target, including members of this House, the people who deliver the programs, and most importantly, New Brunswickers who exercised restraint in their demands on their government. As a matter of fact, Madam Speaker, I want to inform this House that this represents the sixth year in succession that we have come in under our expenditure budget targets, and that is no small achievement. As a result of the changes in revenues and expenditures, the ordinary account deficit for 1993-94 is now estimated at $131.5 million, down from the $142.9 million reported in the Mid-Year Financial Review. It is interesting to note that if we had not experienced a decline in equalization payments of $99 million, New Brunswick would have come in under budget on the ordinary account. With the capital account deficit and the special purpose account close to the budgeted level, the budgetary deficit for 1993-94 is now estimated at $438.1 million or $13.1 million lower than in the Mid-Year Financial Review. While I am disappointed that the forecast ordinary account deficit target in 1993-94 will not be met, primarily, as noted earlier, because of the large reduction in equalization payments, I am confident that the measures provided for in this budget will keep the province on track in terms of achieving an ordinary account surplus over the 1993-94 to 1995-96 period. Madam Speaker, the government is firmly committed to the provisions of the fiscal plan outlined last year. The province will have ordinary account surpluses in the next two fiscal years sufficient to exceed the amount of the ordinary deficit incurred in 1993-94. And Madam Speaker, we still plan to begin making modest reductions in the province's net debt starting in next year's budget. Before outlining the budget plan for the coming year, I would like to briefly review developments in intergovernmental fiscal relations in the past year. Madam Speaker, during the last three months, federal and provincial finance ministers have had two very productive meetings. I have had a number of bilateral discussions with the new Minister of Finance for Canada. It is fair to say that there is a more positive atmosphere at federal-provincial forums. There is definitely a new spirit of cooperation and a desire to work cooperatively towards solving this country's difficult financial problems. While New Brunswick is ready to assist in helping to resolve national economic and fiscal problems, there are certain principles which must be supported by all governments if we are to achieve equity and fairness, and maintain a national scope for those important social programs which Canadians expect from their governments. By far, the most important principle is that all provinces should be able to provide comparable public services at reasonably comparable levels of taxation. I am pleased to say that the recent renewal of the equalization program, although not perfect, keeps us on track in our efforts to achieve that goal. Because the equalization program is so important, I would like to outline briefly the scope of the renewal of the program that was recently announced. First of all the equalization program has been extended for a period of five years. This is important as it will provide stability for fiscal planning in the equalization receiving provinces. Secondly, by not freezing equalization payments, the federal government has acknowledged the importance of the equalization program as a cornerstone of the federation, and upheld its role in narrowing fiscal disparities which exist between "have" and "have not" provinces. While New Brunswick is pleased that the program has been renewed for a five-year term, I remain concerned that the ceiling on the program remains in place. This will prevent the formula from doing what it is supposed to do, which is to ensure that comparable levels of service can be provided at reasonably comparable levels of taxation. The ceiling has cost the less affluent provinces about $3 billion since 1988-89, resulting in significant savings to the federal treasury. Madam Speaker, in an effort to be constructive, New Brunswick proposed a compromise on the ceiling provision of the equalization program at the last Federal-Provincial Conference of Finance Ministers. New Brunswick proposed that the federal government consider a compromise which would maintain a ceiling on the equalization program, but such a ceiling would not come on until pre-ceiling entitlements reach the level that they were in 1989-90. Material provided at the recent finance ministers' conference suggests that level of entitlement will not be reached again until 1996-97. I specifically suggested that the federal government delay applying the ceiling until after 1995-96 or whenever pre-ceiling entitlements reach the level the equalization payout should have been in 1989-90.If this compromise were agreed to, it would cost the federal treasury about $600 million over the next two fiscal years, however it would give equalization receiving provinces some additional revenue over the next two years as Canada's economy gains strength. I believe New Brunswick's proposal was a fair compromise that would protect federal program spending, yet provide more flexibility in meeting the objectives of the equalization program in the equalization receiving provinces. Although the equalization program is now set for the next five years, other major transfer programs to both people and governments remain to be settled. Established Programs Financing (which provides funding in support of our health care and postsecondary education programs), and the Canada Assistance Plan (which helps pay for our Income Assistance programs), are now both under review. In discussions with the federal government during the process of review, we intend to make it clear that the principles of adequacy, equity, predictability and financial stability are of utmost concern to New Brunswick. Our bottom line throughout the discussions will be the protection of people who cannot provide for themselves. It will be as well to provide equity in application across the country, and protection of basic health care, education and welfare programming. As well, New Brunswick will be working to find new and more efficient and effective methods of providing government programs and services. Madam Speaker, I would now like to outline the budget plan for the coming year. Madam Speaker, last year I outlined a strategy to manage our finances with a responsible and planned approach. As identified earlier, the first component of that strategy was to enact Balanced Budget Legislation which required the province to ensure that day-to-day ordinary spending does not exceed ordinary revenues over the 1993-94 to 1995-96 fiscal years. When last year's budget was introduced, projections showed an overall surplus over three years of $126.5 million by the end of 1995-96. As I noted above, there have been significant changes in the outlook for revenues for the current year, because of the equalization reduction we received from the federal government. These changes in our revenue forecast will carry forward into 1994-95 and 1995-96, and will require that action be taken in the year ahead. Our projections indicate that if no action is taken in the coming year, the surplus of $126.5 million for the period forecast last spring could deteriorate to a cumulative deficit of $302.1 million over the three-year period. This is mainly because of significant change in the estimate of equalization for the period, and lower forecasts of consumption tax revenue. Madam Speaker, we will not allow that deterioration to occur. We have and will continue to take action to ensure that the provisions of the Balanced Budget Legislation are met. Let there be no mistaking that. We will be taking action on both sides of the ledger. First and foremost, it is clear that the growth rate in ordinary account spending for 1994-95 and 1995-96, as outlined last year, will have to be reduced. Last year, the fiscal plan which was put forward provided for a growth rate in ordinary spending of 2.5 %. In light of the reduced outlook for revenues for 1994-95 and 1995-96, ordinary expenditures for 1994-95 have been budgeted at $3,917.8 million, or $122.5 million lower than forecast last spring. This reduction will be accomplished without undue hardship for any of the key programs, and without major changes in services. The other element in meeting the Balanced Budget Legislation is to be found in our efforts to protect the integrity of the tax system. This challenge is now facing all governments in Canada. Further in this budget, I will be providing details on how we intend to reduce the problem created by those who evade taxes. Madam Speaker, it is essential that we stick to our plan to balance the budget over the three-year cycle. New Brunswick has performed well through the recession and we have managed our finances better than most provinces in Canada. However, history has shown that if a province is not ready or able to adapt quickly to a changed environment, it will almost surely suffer from rapidly deteriorating finances. This government will not stand by and allow New Brunswick to lose its preferred financial and credit position, even when circumstances beyond our immediate control create a major roadblock for us. If we did not respect our three-year fiscal plan, our job creation efforts and New Brunswick's reputation with potential investors and credit rating agencies would be affected. We have worked too hard over the past several years to regain control of our finances, and to make New Brunswick an attractive location for business investment, to walk away from our three-year fiscal plan. As a result of the actions taken in the budget I am tabling today, I am pleased to report to the Legislature that the forecast of the ordinary account balance for the 1993-94 to 1995-96 period will result in an overall surplus of $11.6 million. With a revised estimate of $131.5 million for the ordinary account deficit for 1993-94, a budgeted ordinary account surplus of $4.8 million in 1994-95, and a forecast surplus of $138.3 million for 1995-96, the 1994-95 Budget will ensure that the province will have balanced its ordinary account over the three-year period. Madam Speaker, I would now like to outline how the government intends to manage expenditures in the year ahead. Madam Speaker, for the past four years we have deliberately opened up the budget process, seeking more public input on the development of the provincial budget. This year the process was slightly different. Three ad hoc committees were formed in the areas of income assistance, education, and health, to discuss ways to ensure cost-efficient delivery of essential programs and services. These committees involved numerous interest group representatives’ individual stakeholders and interested citizens, in a genuine effort to solicit valuable input from New Brunswickers. Madam Speaker, the various groups and individuals who worked with us were quick to recognize that savings had to be made if budget targets were to be met, and that solutions would have to involve every part of the system. Madam Speaker, I am very pleased to report that through this extensive consultation exercise and the very useful input and suggestions we received, total savings of $33 million have been identified in the departments of Income Assistance, Education and Health and Community Services. The ministers of these departments will identify these savings during the presentation of their estimates. As well, Madam Speaker, every year we receive numerous unsolicited briefs from various interest groups and associations. For example, this year one such brief was from the Certified General Accountants Association of New Brunswick. The group asked the government to carry on with our efforts to reduce the size of the public service and to reduce unnecessary overhead and administrative costs. They also want us to make serious attempts to rationalize expenditures through program reductions and eliminations. Another was from the Fredericton Chamber of Commerce which asked the government to reduce transfers to individuals and replace them with programs that foster permanent reductions in the number of social assistance recipients. It also recommended that we continue our privatization efforts and across-the-board expenditure cuts. And another was from the Construction Association of New Brunswick which recommended that the government consider innovative ways to finance capital and infrastructure facilities that would help address the high unemployment rate in the construction industry. The association also recommended that, where possible, these projects should use private financing and to some degree should be self-sufficient. The New Brunswick Federation of Labour wanted the government to continue to emphasize the use of the Community Development Bond Program to foster the use of New Brunswick funds to promote economic development. Finally, Madam Speaker, numerous government committees actively solicited the input of New Brunswickers in the development of policies, such as highway upgrading, land use and the rural environment, and social program reform. Each of these committees also provided valuable suggestions to government, some of which have been particularly useful in the preparation of this budget. Through these various processes, Madam Speaker, the government received a tremendous amount of valuable advice from New Brunswickers from all walks of life. I want to take this opportunity to thank: each and every New Brunswicker who provided input to this budget. This input was invaluable to our government as we prepared this budget, which I believe reflects a good deal of what we heard from New Brunswickers. Madam Speaker, the government has had to manage its finances through difficult times and unforeseen circumstances. The slow recovery from a lengthy recession has put serious pressure on such areas as income assistance payments and job creation activities. From time to time, we have had to spend more in these key areas than was budgeted. However, careful management of other essential programs has allowed us to respond quickly to these situations, including such unforeseen costs as the 1993 spring flood damage. Currently. I expect that sixteen departments will underspend their budgets for 1993-94, and seven departments will be on budget. Madam Speaker, I am asked many times how the government will create surplus budgets and reduce net debt. My answer is simple; we will do it through more emphasis on the rationalization of government services, privatization where it makes good business sense, elimination of overlap and duplication, and the continued elimination of low priority activities. In other words, through good, sound management techniques. Madam Speaker, I would like to give you a few specific examples: All who deal with the construction industry agreed that bringing down the capital budget in the previous fall is a tremendous advantage. It expands the planning time, for both government and industry, to make sound business decisions with respect to capital financing. Madam Speaker, I am pleased to confirm that the plan to reduce the net capital budget to $275 million in 1994-95 and to $250 million in 1995-96 will be realized. We start and complete the bud gel process as early as possible. This budget is slightly earlier than last year's and is one of the first provincial budgets to be tabled this year. Furthermore, it is the earliest budget in recent memory, with no February budget since the 1950s. Madam Speaker, all government departments received 1994-95 preliminary budget targets in June, 1993, and departments will receive 1995-96 preliminary budget targets in March, 1994. This gives departments plenty of lead time to develop budget management options. This approach was particularly beneficial to hospital boards, as the Department of Health and Community Services was able to announce the 1994-95 macro growth rates for the hospital services budget in early January, 1994. Madam Speaker, we believe that the key to expenditure management is to move quickly into multi- year expenditure forecasts for hospital boards, school boards and other important service providers. For 1995-96 and subsequent fiscal years, hospital and school boards will receive their actual budgets before the final budget is tabled in the Legislative Assembly. This substantially increases the time which organizations have to plan for their next budget year. Madam Speaker, since wages are the largest single expense in government spending, managing our wage bill is a major key to responsible fiscal management. In the face of continuing fiscal pressures, we must redouble efforts to control our labour costs, which represent 82 % of the operating costs of government departments. Two components make up our labour costs: (1) wage rates and benefits, and (2) the number of employees on the payroll. In order to reduce labour costs, both components must be managed. Over the past four years, we have reduced the number of positions in Part I, II and III of the Public Service by more than 1900 full-time equivalent positions. This has been accomplished primarily through attrition. Since January, 1991, wage rates have increased by less than the rate of inflation. While wage rates have increased by an average of 2.15% per year over this period, inflation in New Brunswick averaged 2.8% per year. Under normal circumstances this would be a satisfying accomplishment. But these are not normal times. Consequently, we must continue to focus on reducing labour costs as a proportion of the total operating costs of government. To do so we intend to employ a number of strategies. First, we will continue our drive to eliminate unproductive work practices. Where these practices are embedded in collective agreements, they will be eliminated, where possible, through negotiation with individual unions. I want to emphasize that, one way or another outdated and unproductive work practices have to go. Second, we will continue to examine privatization opportunities and out-source or privatize existing services wherever it makes good financial sense. In this process, we will do our utmost to continue to ensure that the economic well-being of our employees is respected. Third, we intend to accelerate the reengineering of existing service delivery practices to make them more effective and more cost-efficient. Through the redesign of work and the use of more modem and efficient business practices and technology, every effort will be made to drive down the costs of government. Fourth, we will be seeking the cooperation of our employees and their unions to help us reduce the cost of sick leave. Our current plan is a generous one. By far the great majority of employees use it sparingly and honestly. However, there continues to be a small minority of employees who take advantage of our sick leave plan and misuse it. This must stop. The responsibility to put an end to this misuse lies first and foremost with our managers. They will be held much more accountable in future for the proper use of this benefit. Inappropriate use of sick leave brings a high cost in terms of lost productivity. And when an absent worker has to be replaced, as is the case of most of our workers who provide direct service to the public in hospitals, schools and the civil service, the cost is doubly high. We believe that significant cost savings can be achieved through better management and by redesigning our current benefit to provide a disincentive to sick leave abusers. We believe these improvements can and must be realized without negatively impacting on those employees who use the benefit responsibly and for the purpose for which it was intended. Fifth, wage policy: During the past two years, our employees have fared better than public sector workers in most other provinces of Canada. In New Brunswick, the Expenditure Management Act, 1992 set pay limits of 1 % in 1992 and 2% in 1993. During these same two years, pay rates were frozen in the other Atlantic Provinces. And wage increases in Prince Edward Island, Nova Scotia and Newfoundland are highly unlikely in 1994. In fact, Prince Edward Island has already reached agreement with some of its unions on a wage freeze in 1994. Yesterday Alberta announced its intention to achieve a 5 % wage rollback. Similarly, the federal government and the province of Quebec have frozen wages for their employees in both 1993 and 1994. Earlier this week the federal government announced a further two-year continuation of their wage freeze. Public sector workers in Ontario will not receive any wage increases before 1996. Following a wage freeze in the Alberta public service in both 1992 and 1993, the government of Alberta has mandated a 5 % wage cut in 1994. We will be unable to offer a wage increase to unionized employees whose collective agreements have already expired or will expire in the coming year. We are hoping to achieve this objective through negotiations with our employees. To continue showing leadership in this respect, salaries of Cabinet ministers, MLAs, management and non-bargaining employees will be frozen in 1994- 95. For ministers this comes on the heels of a freeze in 1991, a 2 % reduction in 1992 and continuation of this reduction in 1993. Ministers' salaries were higher in 1990 than they will be in 1994. Madam Speaker, there is a direct link between salary rates and jobs. If salary rates increase, the number of jobs must decrease. It's just that simple. Our goal is to preserve as many jobs of existing employees as we can. Sixth, closing government offices: Four provinces have implemented leave without pay programs for their employees. Nova Scotia legislated 5 days without pay in 1993-94 while Quebec implemented 2.6 days' leave. Manitoba legislated 10 days' leave in 1993-94 and again in 1994-95. Ontario has settled on 8.6 days' leave without pay for its workers in each of 1993-94, 1994-95 and 1995-96. In New Brunswick in 1994, we will be reducing government operations and closing government offices as much as possible between Christmas and New Year's, a time when there is traditionally less demand for government services. Essential public services will not be adversely impacted. Unlike some other provinces we do not intend to impose mandatory time off without pay during this period. Employees will be permitted to use vacation benefits to cover the time off during this Christmas period closure. However, we will also be making a leave without pay option available to employees who wish to use their vacation at another time during the year. Our voluntary leave without pay program during the 1993 Christmas period proved to be very popular with employees. Approximately 500 employees participated in this program, producing savings of three hundred thousand dollars. In addition, we are changing the design of the program so that any leave without pay taken may be deducted from employees' biweekly paycheques over twenty-six pay periods. For example, for someone earning $30,000 per year, the net loss in take-home pay every two weeks will be about $3.00 for each day taken. With a far greater lead time to plan their time off, we expect many more employees will take advantage of this program. The government has made impressive strides in its commitment to reduce the size of the public service. From 1990 to 1993, a total of 1346 Fees These accounting changes do not alter the funding strategy to eliminate the unfunded liability over a period of 25 years. This strategy was adopted three years ago, and requires annual amortization payments to the pension funds which escalate by the rate of inflation plus 2 % each year until the Public Service Superannuation and Teachers' Pension Plans are fully funded. In 1994-95, $77 million will be contributed to the pension funds in accordance with the funding strategy. Madam Speaker, again, let there be no misunderstanding, despite the improvement in the unfunded pension liability, the government will continue to provide the funding that it identified to address the liability that was announced three years ago. While the province will continue to report a $1.6 billion unfunded liability, the $600 million gain indicates much greater progress in reducing this liability than previously anticipated. The primary reason for the gain has been consistently superior investment returns earned on the pension funds. Over the three most recent fiscal years, the returns have ranked among the top 5 % of Canadian pension funds. I am confident that the investment gain will be maintained and with continuing good investment performance the pension funds will reach fully funded status earlier than planned. Madam Speaker, I am particularly pleased with the progress which has been achieved toward solving the pension funding problem. We recognized the seriousness of the large and rapidly increasing unfunded pension liability early in our first mandate. At that time, the liability was projected to grow at a rate which would have made it impossible for future governments to meet their obligations to retirees. The funding strategy we have adopted to deal with the problem combined with continuing good investment returns will ensure a secure retirement income for current and future retirees from government service. Madam Speaker, the 1994-95 Main Estimates are $24 million below the corresponding figures for 1993-94. A year-to-year reduction in Ordinary Account spending has not occurred in New Brunswick in recent memory. During the next few weeks, ministers will be tabling their departmental estimates and informing the Legislature where reductions and efficiencies will be achieved. However, Madam Speaker, there are some initiatives which I would like to highlight. Madam Speaker, I am announcing a reduction in the funding provided to political parties under the Political Process Financing Act Last year, I announced that the provincial municipal fiscal transfers envelope would be reduced by eight million dollars in the 1994 municipal fiscal year. To ensure that this reduction was applied fairly and reflected the views of municipalities, a Provincial-Municipal Review Committee was established to make recommendations. Madam Speaker, municipalities again this year are being asked to play their part in reaching fiscal 1994-95 restraint objectives. As previously announced, the provincial-municipal fiscal transfers envelope will be reduced by an additional $8 million in the 1995 municipal fiscal year. At its most recent meeting, the Provincial-Municipal Review Committee considered available options to achieve the $8 million reduction in provincial-municipal fiscal transfers in 1995. The committee concluded that in the January to March 1995 period, the reduction would be achieved by a reduction in the unconditional grant. The balance of the reduction will be determined subsequently. It is the intention of the Minister of Municipalities, Culture and Housing to propose a reduction package for the balance of the 1995 fiscal year by late spring. Madam Speaker, in recent months there has been a great deal of interest in finding ways to use private sector financing for public sector capital and infrastructure projects. New Brunswick, along with other provinces and the federal government, is seriously exploring new public-private partnership arrangements. There are good reasons to develop these new types of financial arrangements. First of all, there is an estimated need in Canada for $25 billion investment in new and replacement infrastructure systems. Given current debt loads, this level of financing is beyond the borrowing capacity of governments. Secondly, Madam Speaker, infrastructure projects are very suitable for private sector financing, especially those which can provide revenues, such as highways and water and sewer systems. Thirdly, these projects provide immediate job creation opportunities at a time when the construction industry is experiencing serious levels of unemployment. The government recognizes the importance of infrastructure to facilitate a healthy and growing economy providing new, well paying jobs. The Electronic Information Highway is an important part of that infrastructure, and over the next two years we will be giving priority attention to advancing the capabilities of the information highway and using it to attract new business investment. The Minister of State for the Electronic Information Highway will be devoted to leading this new initiative. In the last year, Madam Speaker, the government has been testing a number of alternative methods of delivering services with the objective of providing quality service, convenience and accessibility at a most reasonable cost. I am pleased to report to this House that the two Service New Brunswick pilot sites which were opened in Woodstock and Caraquet in the winter of 1992-93 have been extremely successful in meeting our objectives of providing "one-stop shopping" convenience for New Brunswickers seeking government services. Madam Speaker, the government will increase its own internal use of the information highway to reduce costs and improve services, particularly where those services are information related. It is our intention to become a model user of this advanced technology where it helps us improve service delivery and reduce costs. Efforts will be made to improve the coordination of departments' use of information technology and the information highway, in order that we exploit to the fullest extent possible the capacity of this technology to help us provide more and better services to New Brunswickers at reduced costs. We are now planning to move from "one-stop" to "non-stop" customer service. We are currently examining the feasibility of kiosks or electronic storefronts" to receive payments and deliver a number of transactional services, such as licenses and permits. Kiosks located in high traffic areas, which can operate practically 24 hours a day and 7 days a week, provide service in the language of choice, and can answer questions regularly asked by residents on such matters as education, health, employment and financial assistance. The government will also be exploring other potential opportunities for providing better services, such as using videoconferencing, electronic bulletin boards, touch fax and franchises to increase the accessibility of government services in communities right across the province. Madam Speaker, tax evasion is illegal and has become a very serious problem in Canada. It is a problem because, left unchecked, tax evasion threatens the ability of governments to provide services such as health care, education, highways and income assistance. In New Brunswick, revenues from tobacco taxes, income taxes, sales tax, and liquor sales are all lower than they should be. The reason for this is that some New Brunswickers are prepared to break the law for their own gain. The vast majority of New Brunswickers pay their fair share of taxes. Most individuals and businesses in New Brunswick pay income taxes that are legally due, and consumption taxes as required by law. There are others, however, who operate outside the system, and who go out of their way to avoid paying their fair share. When this happens, those who pay have to pay more, and those who pay and operate a legitimate business are placed at a competitive disadvantage. If these circumstances persist, the integrity of the overall tax system is threatened. Madam Speaker, to protect the province's tax system and to ensure that the honest taxpayers do not pay higher taxes to make up for those who illegally avoid taxation, the government must redouble its effort to ensure that a small number of New Brunswickers who cheat the system are not allowed to drive up the tax burden on the majority of honest New Brunswickers. Therefore, in the months ahead, New Brunswick will be undertaking a comprehensive program of increased enforcement of existing tax statutes, and renewed cooperation between Canada and New Brunswick in the area of tax compliance. Two weeks ago, New Brunswick joined Quebec and the government of Canada in a major assault on tobacco smuggling. This cooperative effort, which includes reduced tobacco taxes, coupled with a major increase in enforcement by the RCMP, Revenue Canada-Customs, the province's Solicitor General Department, the Department of Justice, and my own Department of Finance, will reduce tax evasion and contraband tobacco sales. I fully expect that, in addition to reducing tobacco smuggling, the increased enforcement activities at the border will also lead to reduced smuggling of alcohol and other goods into New Brunswick. Today, I am announcing that New Brunswick and the federal government through Revenue Canada, will be undertaking a number of cooperative initiatives in the coming weeks and months to improve taxpayers' compliance with respect to both federal and provincial income taxes 1) and consumption taxes acceleration of efforts to share information for both income and consumption taxes in an effort to ensure a high degree of taxpayer compliance from both individuals and businesses; 2) implementation of measures to encourage voluntary compliance and disclosure with respect to federal and provincial tax laws, so that those who may be evading taxes can be encouraged to come forward; 3) implementation of joint audit and investigations so that federal and provincial officials can be more effective in enforcing federal and provincial tax laws in those sectors such as construction, renovations, auto repair and other services that have been operating in the "cash economy"; 4) implementation of joint communication efforts to ensure that taxpayers are aware of their legal obligations with respect to federal and provincial taxes, and requesting taxpayers' assistance and suggestions on ways both levels of government can improve taxpayer compliance in general. I am also announcing, as well, Madam Speaker, that my department and Revenue Canada have recently signed a formal agreement to exchange information to support the proper administration of federal and provincial tax laws. Sharing information such as vendors lists, audit results and audit schedules will greatly expand taxpayer coverage by federal and provincial officials. I expect that this type of federal-provincial cooperation will not only result in less tax evasion, but will also reduce the tax payers' cost of compliance. Madam Speaker, in 1992 and again last year, the province entered into agreements with the federal government to have Revenue Canada collect New Brunswick's sales tax, tobacco tax and alcohol mark-ups at the international border. These agreements have been successful in ensuring that taxes are paid on products purchased outside New Brunswick but consumed here. Last year, when the agreement with respect to collection of the sales tax was signed, the collection of provincial sales tax on postal imports was not put in place at that time. I am pleased to announce today, that in keeping with our policy of levelling the playing field with respect to collection of the sales tax, Revenue Canada will be collecting the sales tax on postal imports when GST is due, by early summer this year. During this session, I will be introducing amendments to the Social Services and Education Tax Act to give authority for Revenue Canada to collect sales tax on postal and courier imports. Madam Speaker, in addition to our joint initiatives with Revenue Canada, 1 am confirming that the province will not tolerate tax evasion in any way, and the Department of Finance will be enforcing provincial tax codes to the letter of the law. There will be a policy of "zero tolerance" as far as illegal tax evasion is concerned. This policy will be enforced by increased audits and investigations, increased compliance efforts, and inter-jurisdictional information sharing, as 1 indicated earlier. Madam Speaker, the Tax Administration Division of the Department of Finance has recently been restructured to better serve the public and to better enforce existing tax laws. This change will enable the department to increase its emphasis on ensuring that all taxes owed to the province are collected. Measures to be taken represent an acceleration of an ongoing process which has been in place for many years. Since the early 1970s, New Brunswick and most other provinces have informally shared information on individuals and businesses making out-of-province purchases to avoid paying sales tax. Recently, New Brunswick formalized this process in the form of intergovernmental agreements with all provinces. We intend to use the information we gain from these information exchanges to the fullest. The Department of Finance will also be reviewing penalties within provincial taxation statutes, with the objective of ensuring that such penalties are sufficient to discourage those who will fully evade taxes. We are determined to ensure that the tax burden among New Brunswickers is shared in a fair and equitable manner. With the public's assistance, we can achieve this goal. In fact, the province will be working with Crime Stoppers to help us in this endeavour. Madam Speaker, the government also intends to aggressively pursue collection of back taxes. In this respect, my department will be adopting measures to ensure better coordination between receivables owed to the province, and with payments such as grants that are paid out by the province. As well, the department will be enforcing legislative provisions respecting sales tax trust accounts and payment due dates. It will also be developing more effective and automated collection systems which ensure more timely collection of tax revenues, the identification and collection of delinquencies and the identification of repeat offenders. And it will also ensure immediate securing of liabilities when payment arrangements are not met. Madam Speaker, the province has incurred significant losses of tax revenues as a result of companies deliberately failing to remit taxes due-in many cases, retail sales tax which had been collected from customers and held in trust have not been forwarded to the province. In numerous cases involving business failures, the province has suffered a tax loss only to find the same directors of the failed business reappearing with new companies. We intend to take steps to correct this and prevent this problem from recurring with such new companies. Madam Speaker, our efforts to protect the integrity of the tax system are not meant to impede business development, and are not aimed at those honest New Brunswickers who have been paying their fair share. What we intend to do is to improve tax administration so that honest taxpayers can feel confident that all New Brunswickers are contributing their fair share toward the cost of the services provided by the government. We also want businesses to be confident that, by complying with the tax laws, they are not going to be left at a disadvantage because a competitive business may not be paying its fair share. We will be reviewing the effect of our efforts at dealing with the problem of tax evasion in the year ahead. If we are successful and if all New Brunswickers bear their fair share of the burden, we are confident we will not need to increase taxes, and the possibility exists that some modest tax reductions could be instituted, perhaps in next year's budget. Madam Speaker, as I noted at the outset, this budget contains no new taxes, nor does it include any tax increases. In fact, I am very pleased to announce two modest tax reductions, designed to further encourage investment and job creation in New Brunswick. The focus of this budget is clearly to manage the province's financial affairs responsibly. This is important to all New Brunswickers and the business sector. It is absolutely essential that the private sector get back on its feet so that businesses can create jobs and New Brunswickers can get back to work. Madam Speaker, in order to ensure that New Brunswick businesses are able to compete at home a::1d abroad, our tax system must allow individual companies to be competitive on a worldwide scale. Madam Speaker, two years ago I announced a sales tax exemption for 1-800 telephone service. Last year I announced the introduction of a sales tax exemption for machinery and equipment and parts used for research and development. Both of these measures have been successful in securing jobs for New Brunswickers. As everyone in this House is aware:, a larger and larger share of new jobs will, in the future, be created in the knowledge-based industries. New Brunswick is determined to provide a tax system which is conducive to attracting firms which create these types of jobs in the province. Therefore, to complement the efforts taken in the last two budgets, and to encourage research and development activity in New Brunswick, I am today announcing a 10% non-refundable New Brunswick Research and Development Tax Credit. This tax credit can be used to reduce New Brunswick corporate income tax otherwise payable. To qualify, expenditures must be incurred after midnight tonight, and must be eligible for the federal scientific research and development tax credit. Qualifying expenditures must also be in respect of scientific research and experimental development carried on in New Brunswick. The New Brunswick Research and Development Tax Credit will reduce qualified expenditures for the purposes of the federal Income Tax Act. Therefore, where a corporation does not anticipate having taxable income, it may renounce its rights to the provincial credit in order to maximize its federal refund. The New Brunswick Research and Development Tax Credit will be administered on behalf of the province by Revenue Canada, Taxation. In an effort to improve the competitiveness of New Brunswick's mining industry so that it can continue to contribute to employment growth, I am also announcing a change in the sales tax as it affects that industry. Effective midnight tonight, expenditures on machinery and equipment for ventilation shafts for mining will be exempt from sales tax. This applies where the major use of such equipment is to provide breathable air, or to remove hazardous dust or noxious fumes. Expenditures for basic air conditioning or heating will not qualify for this exemption. This measure is the direct result of a recommendation from the mining industry, and represents a continuation of the open and constructive dialogue between government and the New Brunswick business community. Madam Speaker, if I were to characterize this budget, I would say it is one that makes sure that the province is on track for achieving its well-earned place at the forefront of economic, social and fiscal well-being in this country. It does this by carefully managing the province's resources, and by ensuring that every New Brunswicker participates in the benefits that are obtained. Programs are protected, tax evaders are forced to accept their rightful responsibilities, the civil service is entering a phase where wages and employment prospects are more clearly defined, and the province's commitment to achieving its financial goals is re-affirmed. As a result, New Brunswick will continue to be a leader and provide an example for others. In this day of increasing financial pressures, I think the budget is also a tribute to the hard work and cooperation of all New Brunswickers in keeping their demands on the government system at a level that allows our fiscal management plan to be successful. And just as the country as a whole appears to be adopting a greater sense of cooperation, in New Brunswick, entrepreneurs, private sector workers, government employees and taxpayers are continuing the spirit of cooperation that has developed over the last few years. I am continually impressed, Madam Speaker, with the things that can be accomplished by everyone working together towards the same goals. It is an environment which is now being replicated across the country and leads me to believe that there is a bright future ahead for this wonderful country. As a result of this budget, ordinary account revenues will be $3922.6 million and ordinary account expenditures will be $3917.8 million, resulting in an ordinary account surplus of $4.8 million in 1994-95. Combining the deficit on the ordinary account with the net capital spending of $274.6 million and the special. purpose account, the budgetary deficit will be $270.1 million for 1994-95. With net loans and advances of $31.5 million and adjustments for provision for losses and sinking fund instalments and serial redemptions, financial requirements will be $378.1 million. Sinking fund earnings will be $149.2 million and net debt will increase by $120.9 million. Madam Speaker, this year's budget will set the stage which will lead to a surplus of $138 million in 1995-96. This means the requirements of the Balanced Budget Legislation will be met and the province will have achieved a cumulative ordinary account surplus over the period 1993-94 to 1995-96. Furthermore, next year the province expects to be the first in the country to begin reducing its net debt. This is a significant achievement, especially in this fiscal environment. I believe it will serve to lay the foundation for growth and prosperity in New Brunswick in the years to come. Madam Speaker, in closing I want to thank all New Brunswickers for their valuable participation and input in making this budget a success.