The Brian Gallant Liberal Government delivered its muchanticipated first budget on March 31, 2015. Overall, the cuts were probably not as deep and tax increases not as intense as some had predicted, but all New Brunswickers are impacted in some way. Ministers Melanson and Boudreau have also been laying the groundwork for a much “tougher” budget for 201617 throughout the prebudget process and the Engage NB program review, which has continued in the immediate aftermath of releasing this year’s document.
As expected, the provincial debt will grow in 201516. The government is estimating a $476 million deficit, which includes the controversial $150 million contingency fund (if the fund is not needed, the deficit is expected to be $326 million). This means we are spending more than $1.3 million per day more than we are taking in as revenue. Overall, the provincial net debt will grow $585 million to reach nearly $13 billion more than $17,000 per person in the province. Servicing the public debt will cost $685 million this year. While specific cuts to the civil service were not extensive in this budget, we hope that indirect cuts and possible future cuts will be geographically proportional, equitable and strategic.
Taxes and Credits
Income Tax:The government created two new tax brackets at the top of the income scale. Individuals earning between $150,000 and $250,000 will now being paying 21% in provincial tax, while those earning more than $250,000 are at 25.75% (both up from 17.84%). Minister Melanson expects the province to increase its revenue by $30 million with these increases.
Fuel Tax:On April 1, 2015 gasoline increased by 1.9 cents/litre and diesel by 2.3 cents/litre. JeanMarc Picard of the Atlantic Provinces Trucking Association warns that “aside from British Columbia, we have the highest diesel tax in the country, and it will have a devastating impact on every consumer as they will pay more for their goods going forward.” For their part, the government estimates a $28.2 million bump to provincial revenues annually.
Property Tax:The previously announced increase to commercial property tax (reverting to 2012 rates) is also expected to bring in $30 million to the government. The Fredericton chamber has previously spoken in opposition to this decision.
Tuition Rebate Program:The government eliminated the province’s tuition rebate program, saving $25 million per year. In his budget speech, the minister stated: “with limited resources at our disposal, we feel that there are better ways to support students who need it most. The New Brunswick Tuition Rebate helped only those students who have already graduated and are collecting salaries. It did nothing to help needy students enter the system in the first place.” Increasing access to postsecondary education (PSE) is undoubtedly a good thing and we can debate whether the rebate was effective (since there’s no data), but the program was never about access to PSE, but rather retaining our young, skilled workers in New Brunswick. People who are ‘collecting salaries’ are also ‘paying taxes.’
Youth Employment Fund:The Youth Employment Fund (YEF) will compliment the existing OneJob Pledge. Under the YEF, eligible individuals between the ages of 18 and 29 can be matched with an eligible employer with the program paying the fulltime salary for up to six months. For further details, contact the Department of PostSecondary Education, Training and Labour or visit their website.
Small Business Investor Tax Credit:The SBITC, as promised in the Liberal platform was increased from 30% to 50%, with the maximum credit also being increased from $75,000 per year to $125,000. Overall, the credit is underused and is a good option for accessing capital. Consult with a legal or accounting professional and contact the Department of Finance for more details and to apply.
Home Renovation Tax Credit:The government announced, but provided no other information on a new Seniors’ Home Renovation Tax Credit. The minister has stated that details will be available in ‘the coming weeks.’ The credit will hopefully allow more seniors to stay in their homes longer, providing some relief to the healthcare system and stimulating the construction industry.
Dividend Tax Credit:The tax credit on dividends will be reduced from 5.3% to 4.0% (matching the current small business tax rate) retroactive to January 1, 2015.
Training Tax Credit:The was no mention of a training tax credit for employers, which appeared in the 2014 Liberal Party platform.
One of our biggest concerns heading into the budget, as reflected in our prebudget brief, was our postsecondary institutions, which are key drivers of innovation, entrepreneurship and employment in New Brunswick and especially in Fredericton. The government chose to both freeze their contributions to PSE, while also freezing their ability to raise tuition stating in a news release “so that they become more focused and efficient in delivering their important services to New Brunswick students.” Perhaps our PSE institutions can be more focused and efficient, but these moves signal that the government sees them as more of an expense than an investment. Many of the province’s commercialized innovations and startup companies are coming from our postsecondary institutions. This is a both a shortterm and longterm hit to the economy.
Opportunities New Brunswick
The province’s new economic development arm, Opportunities New Brunswick officially came into existence on April 1, 2015. Its 201516 budget of $50.8 million is less than what the province spent in 201415 on economic development prior to the change Department of Economic Development ($25 million), Invest NB ($8.4 million) and the Regional Development Corporation (budget reduced by $23 million).
Red Tape and the Civil Service
We were pleased that the government plans to deal with reducing red tape for business through the Jobs Board, the performance management system and working with regional partners such as Nova Scotia, but are keen to see realworld examples that matter to business.
Complete details, including main estimates can be found online here.