Higgs on 2011-2012 Fiscal Update:
Mr. Speaker, I will now provide an update to the House on the situation for the current fiscal year.
As stated in our Third Quarter Report, a deficit of $471.1 million is projected for the current fiscal year. Based on these results, growth in expenses this year is projected to be lower than the previous year. This would be the first time in a very long time that year-over-year expenses have gone down.
As an example, over the last five years, health spending has grown by an average of seven per cent. This year, health spending is projected to grow by just three per cent. This too can be managed to further reduce growth while at the same time focusing on priority improvements financed within the current system.
Mr. Speaker, I am proud to say that departments are very serious about spending restraint and measures we instituted during the year to scrutinize spending to ensure it was managed responsibly were well accepted. We will be successful in meeting our original budget deficit objective of $448.8 million by the time the final numbers for the fiscal year are released in the annual audited statements. For 2011-2012, net debt is now projected to increase $620.2 million to approximately
$10.1 billion, slightly below the budget estimate increase of $630.3 million.
Higgs on 2012-2013 Fiscal Outlook:
Mr. Speaker, I would now like to outline our plan for the upcoming fiscal year. Steps taken by this government in our first budget reduced the projected deficit of $1 billion by more than 50 per cent through a balanced approach of targeted revenue increases combined with restraint and efficiency measures and revenue improvements.
Today's budget continues to implement measures to markedly lower the deficit, slow the growth of net debt and move towards a balanced budget. We are projecting a deficit of $182.9 million for 2012-2013. Spending is projected at $8.196 billion, a 1.3 per cent increase over 2011-2012 revised estimates. Savings and other efficiencies from corporate, departmental and other program initiatives have reduced originally projected spending levels by approximately $226 million in 2012-2013.
Revenues are expected to increase 5.2 per cent over 2011-2012 revised estimates to $8.013 billion.
This includes extraordinary capital revenue relating to the federal government contribution to the Route One Gateway Project, as well as targeted revenue measures in the order of $100 million. Net debt is projected to increase $738.9 million in 2012-2013. Almost one half of this is due to the Route One Gateway Project, reflecting an obligation of the previous Liberal government. Provincial net debt is expected to total $10.8 billion by year-end 2012-2013.
Higgs on changing the culture of government:
This government has acted decisively on the deteriorating fiscal situation and implemented the Government Renewal process announced in the 2011-2012 Budget. This process is leading the change to responsible management of the public purse and is the largest engagement of public
servants in New Brunswick in over 40 years.
Higgs on managing public expectations:
Mr. Speaker, the public's expectation for government services is always high.
That being said, a key process in returning to fiscal responsibility is engaging stakeholders to ensure alignment between providing quality public services we can afford and the expectations of taxpayers.
Both business and New Brunswickers themselves have told us it's time government took seriously the realities of improving and streamlining public service delivery.
It cannot be "business as usual" in government operations. New Brunswickers have been clear about their priorities: they want quality, affordable health care and services for our seniors, they want the best available education for their children, they want a growing economy and job opportunities, and they want strong, vibrant communities. As one emailer suggested to Dave@gnb.ca, the email we set up to allow employees to make suggestions directly to government, "Government needs to focus on the things that make the wheels turn."
Higgs on population growth:
The release of information from the 2011 Census indicated that while New Brunswick posted its strongest population growth in more than 30 years, it was only about half the national rate of increase. As well, there are areas in the northern part of the province continuing to exhibit population declines, while much of the south shows gains. Our population is also aging.
This environment will have considerable policy implications for the costs and efficiencies of future service delivery and infrastructure investment. We need to continue the dialogue about population growth strategies for the province and what kind of growth and development is sustainable.
Here come the measures to "rebuild New Brunswick" together.
Higgs on effectively managing human resources:
There is ample evidence that a culture shift is occurring within the public service. This is not the same public service it was 20 years ago, or even one year ago. A senior public servant who has been in government for over 20 years recently said to me that she has recognized a significant change in the way people think about their work and what we are trying to accomplish within government.
"We are more focused, more concerned with improvement both from a client service and an efficiency standpoint," she said.
"We are re-examining how costs can be contained and more importantly, how we can offer value for taxpayers' dollars. There is a genuine excitement in the opportunity to participate in improvements that have been a long time coming, and about being part of a legacy initiative. Departments less and less ask government for more money to do things; instead they give suggestions about how money can be moved around to better address priorities."
Higgs on attrition and retirements & reduction of public service:
Mr. Speaker, we will take advantage of retirements and natural attrition to achieve savings.
For each of the next three years, we anticipate 1,500 employees to leave the public service due to retirement and personal reasons. We will replace only those positions that are critical to the delivery of core government services, resulting in a net reduction in the size of the public service. We anticipate this reduction to save over $86 million by 2014-2015.
The total wage bill for the public service is close to $3 billion annually and represents one of government's largest expenses. In order to contain costs associated with salaries, we will continue to apply a number of wage restraint measures, including a two-year wage freeze for employees who have not yet participated and a freeze on upward reclassifications.
The Christmas Holiday Leave Initiative that generated over $1 million in wage savings in 2011 will be repeated in 2012. We will also be looking at changes to the current retirement allowance policy on a go forward basis, not to the current earned benefits of individuals.
Higgs on changes to sick leave:
We will increase our efforts to restrain wage bill costs by introducing other measures in today's budget including changes to the sick leave program.
The number of sick days earned each year and the maximum number of sick leave days employees can accumulate need to become more closely aligned to the qualifying period for Long Term Disability benefits. Sick leave is a limited benefit provided to employees whereby salaries are continued if they are unable to work due to illness.
It should not be considered as an entitlement to paid time off for other reasons. We will be launching a comprehensive attendance management program to carefully control and manage employee sick leave usage. It is anticipated that with a concerted effort throughout all parts of government, many millions of dollars could be saved and jobs protected.
Higgs on closing wage gap between men and women:
Mr. Speaker, I am pleased to announce we are honouring our commitment to reduce the wage gap between men and women in New Brunswick with the inclusion in this budget of $6.4 million to address pay equity.
With this allocation, we will provide pay adjustments to a number of female-dominated public sector groups, as well as workers in the private sector that have had job evaluations completed, such as childcare workers, home support workers and workers in transition houses. Workers in community residences will see pay adjustments beginning in 2013- 2014.
This is just the beginning of our investment in pay equity to conform to the current legislative requirements which end in the 2017-2018 fiscal year.
Higgs on collecting of receivables:
Mr. Speaker, we feel, as most New Brunswickers do, that all citizens and businesses should contribute their fair share to pay for the services that people require.
However, not all amounts due to the government are received on a timely basis, leading to a shortfall in revenue that costs every New Brunswick taxpayer and may lead to taxes or fees having to be raised to pay for essential services.
Government will continue to intensify its efforts to collaborate with the Canada Revenue Agency and law enforcement agencies to collect unpaid balances.
As we move toward a more efficient system of program and service delivery, we must also ensure we are diligent in collecting all monies owed to the province.
Departments will make every effort to collect amounts due to the province in a timely manner, as well as work with debtors in developing repayment arrangements.
Higgs on avoidance or evasion of paying taxes on goods and services:
Over the years the avoidance or evasion of paying fair and legally applied taxes has cost the province hundreds of millions of dollars in revenue and contributed to the current financial situation.
Smuggling of alcohol and tobacco products from other provinces or countries to be sold free of New Brunswick taxes are two examples. We have all heard of the "underground economy" that does not pay its fair share of taxes and, according to some studies, could be worth as much as two and one-half per cent of total provincial Gross Domestic Product.
To put this in context, this equates to $630 million or approximately the size of the province's deficit in 2010- 2011. The construction industry is another example, as who among us has not heard of someone getting residential renovations or a deck built "under the table"?
Personal or business income and sales taxes that are unreported or underreported do not contribute their fair share of tax to provincial coffers.
Moving forward, we will be taking further steps to address these issues. In the meantime, we are asking all citizens to do what is right to support our province.
Finding Efficiencies in Program Delivery
Finding cost and efficiency improvements in the delivery of programs and services are important government initiatives.
This budget includes $55.1 million in program delivery savings across a
number of departments.
These initiatives include:
Cost per weighted case savings across the health system of $2.5 million;
Rationalizing the number of school districts from 14 to seven will save
$2.4 million in administrative costs;
Finding operational efficiencies in nursing homes will result in savings of
Reducing unconditional grant funding to municipalities for 2012 by two per cent,
providing savings of $1.4 million;
Establishing a new accountability framework in the Department of Education and Early
Childhood Development to ensure continual improvement in both cost savings and
service delivery will save an estimated $1 million; and
Effective March 31, 2013, the agreement providing supplemental funding to Horse
Racing New Brunswick Inc. in support of the harness racing industry will be terminated,
resulting in savings of an estimated $600,000 beginning in 2013-2014.
Higgs: N.B. to cut funding for harness racing:
Effective March 31, 2013, the agreement providing supplemental funding to Horse Racing New Brunswick Inc. in support of the harness racing industry will be terminated, resulting in savings of an estimated $600,000 beginning in 2013-2014.
Higgs on Performance Excellence in Government:
Mr. Speaker, we believe that every branch of government is accountable to taxpayers.
Accountability requires a government commitment to not only provide appropriate and affordable services to citizens on a sustainable basis, but also the capacity to provide meaningful measures of the performance of public sector services, infrastructure and initiatives. In today's budget, we are already recognizing significant returns in the efficiency and effectiveness of departments and agencies by focusing on strategic priorities and process improvement targets.
Higgs on gov't accountability:
Mr. Speaker, we must all share in the responsibility of making government accountable and effective.
Those who provide public services are as responsible as those who use the services. Indicators of success and outcomes must be regularly reviewed for progress and analysis. If the results are not what we hoped, we must be ready to act quickly and decisively to realign programs to meet our desired goals and priorities.
In support of Government Renewal, the Premier's Panel on Accountability and Responsible Government will provide advice across government in business practices designed to preserve or enhance services and suggest efficiency opportunities. Since the Panel was appointed in January, they have engaged key departments to review a number of government processes including the Government Renewal initiative, productivity improvement and some basic management processes.
Taking a close look at the existing accountability structure, the Panel is assessing how reporting mechanisms can be implemented to drive performance excellence. By engaging the public service in ambitious service delivery targets, the Panel and government share the goal that taxpayers can expect a higher level of service quality for less. I look forward to working with the Panel and hearing their ideas.
Higgs on sale of Crown assets and divestment
Mr. Speaker, the government maintains a large selection of land, buildings, infrastructure, automobiles and heavy equipment and other Crown assets. The Government Renewal process included a review of the management and volume of Crown assets.
This review delineated several immediate opportunities across departments for increased revenues through the sale of assets surplus to current or future program requirements and recommended they be sold at fair market prices.
This budget contains projected revenue of $10 million from Crown asset sales in 2012-2013. Over the coming months, the government will also examine the business cases for other divestiture opportunities such as the viability of owning and operating the government aircraft and an intensive review of government vehicles and related policies.
Higgs on natural resources royalties:
Mr. Speaker, mineral exploration and mining play a significant role in the provincial economy. These natural resources are important to sustaining and growing the economy and creating jobs across the province. New Brunswick must provide an environment that encourages exploration, development and added value.
Government must also ensure that our natural resource revenue potential is returning maximum benefits to New Brunswickers. Over the past several months, our government has been reviewing the royalty structure in New Brunswick with the objective of ensuring appropriate resource taxation within a consistent framework and maximizing revenues for the benefit of all New Brunswickers.
Government is currently working on developing a royalty system that will see the province receive its fair share of profits from the development of our natural resources.
Higgs on shale gas exploration in N.B.:
Mr. Speaker, as I have said on a number of occasions, we have to look at every opportunity to not only sustain the services we have today, which are so important to all New Brunswickers, but to make sure we can afford them into the future.
That is why we believe we owe it to future generations to see if opportunities exist and whether there is potential in an expanded oil and natural gas industry in our province. More specifically, we must see if there can be a commercial industry of extracting natural gas from shale. While we are still at the research stage in this regard,
Higgs on shale gas cont'd:
I can assure you that there already is a great deal of work being done. If it is determined that we have a commercially viable industry, we will be prepared in all aspects whether we are speaking about environmental protection or maximizing revenue from an expanded industry.
To that end, I want to advise the House that my colleague, the Minister of Natural Resources, will in the weeks ahead be discussing these issues in more detail.
As the Minister has said many times, the development of a commercial industry, if one indeed exists, would be several years away.
Higgs on returning to a balanced budget by 2014-2015
Mr. Speaker, initiatives undertaken in this budget will not only help realign the province's fiscal position today but into the future. In fact, savings will grow as we implement measures across government.
Our work is not done, however.
Government Renewal is about fostering a culture of doing things more efficiently and effectively, and of looking at how we can do business differently. We must strive for continuous improvement, each and every year.