Spending up, despite projected deficit

The province isn't going to let a little recession get in the way of its grand scheme for the future.
Despite a projected deficit of three-quarters of a billion dollars for the coming year, the province announced an increase to program spending of almost 10 per cent in Thursday's budget.
Finance Minister Jerome Kennedy said in his first budget speech "Our government will run a deficit of $750 million in 2009-10 rather than cut spending for important programs and services."
Program spending has gone from $5.3 billion last year to $5.8 billion for the coming year, an increase of $519 million. The total spending in the budget is $6.7 billion, the largest budget the province has ever delivered.
Even though increased program spending equals two-thirds of the projected deficit, Mr. Kennedy blamed this year's shortfall on the fluctuating price of oil, pension liabilities and the federal Conservatives.
"Approximately $383 million of the projected deficit for this fiscal year is related to the impact of stock market declines on the value of our pension funds. More than half of this deficit, $414 million, can be attributed to the unilateral action of the (Stephen) Harper government to eliminate benefits under the 1985 Atlantic Accord."
Oil revenues are estimated to decline $913.5 million for the coming year. Mr. Kennedy is basing his budget on an average price for oil of US$50 a barrel for the coming year.
The good news is the province won't need to borrow money to cover the shortfall because last year's surplus was $2.4 billion, due to larger than expected oil revenues and an accounting decision respecting the 2005 Atlantic Accord advance payment.
So where will the money be spent?
The province already announced infrastructure spending of $800 million for the year - everything from roads, ferries, schools and hospitals. The money will be spent in all regions of the province.
The central region got its own section of the budget to help reduce the impact of the closure of the Abitibi-Bowater paper mill. Beyond the already-announced infrastructure spending, two small government offices will be relocated to Grand Falls-Windsor.
It was also announced a planned residential treatment centre for youth with addictions will be built in the town.
The two provincial departments that got the most money were health and education.
A total of $2.6 billion will go into hospitals, diagnostic equipment and salaries for new doctors. Some of that money will also be spent to continue implementing recommendations from both the Cameron report and the province's task force on adverse health effects.
There will also be more seats created in Memorial University's medical school and the schools of nursing, pharmacy and social work. Education got a $130.9-million boost - the department now has a budget of $1.29 billion.
Under that banner was the continuation of tuition freezes at Memorial University and the College of the North Atlantic. Representatives of the Canadian Federation of Students were practically beaming as they learned the provincial portion of the interest on student loans has been eliminated.
That includes outstanding, current and future loans.
In the category of social services, there were modest wage increases for home-care workers, improvements to mental-health and addictions services, and the continuation of the province's poverty-reduction strategy.
Stemming from a report on the province's prison system, the Department of Justice received money for upgrades to Her Majesty's Penitentiary and other corrections facilities. There was also money for violence-prevention strategies.
The province is investing $81 million in research and development to diversify the province's economy, especially in ocean-related fields. There are also modest investments in the aerospace and defence, cultural and fishing sectors.
Mr. Kennedy also noted there will no public-sector layoffs or wage rollbacks this year.
The budget also noted the province will continue to have the lowest personal income tax rates in Atlantic Canada. There are also new tax reductions for people on the lower end of the economic scale.
St. John's Telegram