The Newfoundland and Labrador government tabled its 2013-14 budget featuring no tax increases and steps towards cutting government spending.

Objective:

  • Commend the Newfoundland and Labrador government for listening to RCC’s advocacy of not raising taxes.
  • Remind the government of its pre-election promise to lower payroll taxes.
  • Communicate to RCC members that the provincial government will be eliminating 1,200 government jobs, which should have an effect on spending in the retail sector.
  • Remind the government of RCC’s call for government to lower the Workplace Health Safety Compensation Commission (WHSCC) employer premiums and to work with WHSCC to increase return to work percentages.  Newfoundland and Labrador will continue to have the highest employer premiums in the country while continuing to have an average recovery time from work place injuries that is nearly double the national average.  Government is still reviewing the WHSCC system and thus, did not address these issues in their budget.

Background:

Pre-Budget Consultations:

  • The deficit for 2012-13 was projected in December 2012 to be $725.8 million.
  • The budget deficit for 2013-14 was projected to be $1.6 billion in January, 2013.

Budget 2013-14:

Points of interest for retailers in the 2013-14 Newfoundland and Labrador Budget are as follows:

  • There will be no tax increases.
  • Spending will increase by a modest 1.6%.
  • Government projects that they will be able to balance the budget by 2015.
  • Government is continuing to reduce the size of the public service by eliminating 1,200 positions.  Less than 200 of these job losses will be through early retirements.  Finance Minister Kennedy stated that public sector salary and other employee costs account for up to 55 per cent of the total provincial budget.
  • The tobacco tax will increase immediately.  There will be a 1.5 cent increase per cigarette, which will bring in an expected $8 million in additional revenue.
  • Government will invest $1.1 million to fund the Kids Eat Smart Foundation
  • Government estimates that revenue from Newfoundland Liquor Corporation will grow from $141 million in 2012-13 to $156 million in 2013-14.  This would represent approximately 2.4% of government revenues.

The following are general highlights of other items of note in the 2013-14 Newfoundland and Labrador Budget.  The majority of these items do not specifically affect retailers but are included as general points of interest:

  • The budget deficit for 2012-13 is expected to be $430.9 million.  For 2013-14 it is now projected to be $563.8 million.  Given that the government projected a $1.6 billion deficit just two months ago, opposition politicians are wondering how the deficit numbers could change by more than $1 billion in a two months period.
  • Government states that this $1 billion change consists of government cuts (over $300 million) and almost $700 million coming from increased revenues.
  • Most of the increased revenue is projected to come from increased prices for oil.  The government is projecting that volatile oil prices will reach $105 per barrel which they feel will allow government to raise an additional $1 billion in revenue and help them eliminate their deficit in two years.
  • The government has hired consultants to provide recommendations addressing the rapidly-growing liabilities for the retirement benefits of provincial government employees.  The government will consider all options including a shared risk model.  The current unfunded pension and retirement benefits liability is $5.6 million and will grow to $6.5 billion this year.
  • Government will be offering up to $270,000 per household to encourage Newfoundlanders and Labradoreans to move from remote communities to larger towns.  This is an increase from the current rate of $100,000.
  • University tuition will remain frozen at one of the lowest levels in Canada.  The number of school boards in the province will be reduced from five to two.
  • Rates for using the provincial ferries will increase by 10% (Note: this is not Marine Atlantic)
  • The government will invest more in municipal infrastructure, a capital works program for the eleven largest municipalities and the Poverty Reduction Strategy.
  • The province will be investing $9.5 million in 22 new drug therapies under the Newfoundland and Labrador Prescription Drug Program and the Cancer Care and Hematology Program.
  • The total net debt of the province will rise $1 billion this year to reach a total of $9.5 billion.  The vast majority of this increase can be attributed to increases in retirement liabilities.

Current Status:

RCC commends the government for not raising taxes.  However, the elimination of 1,200 government jobs will have an effect on disposable income, particularly in towns / cities with a significant number of government employees.  This could have an effect on the amount of money spent at retail establishments throughout the province.

Next Steps:

RCC will continue to monitor any details emanating from the Newfoundland and Labrador Budget.  RCC will also continue to call for the government to lower Workplace Health Safety Compensation Commission (WHSCC) employer premiums and to work with WHSCC to increase return to work percentages.

Should RCC members wish to discuss the Newfoundland and Labrador budget, Jim Cormier, Director (Atlantic) for RCC would be happy to oblige.

If you have any questions or concerns, please don't hesitate to contact Jim Cormier at [email protected] or (902) 422-4144.