P.E.I. budget slashes deficit in half

P.E.I. is halfway to eliminating the deficit, Finance Minister Allen Roach said in his budget address Friday.

Last April the government was estimating a $39.7-million deficit for 2014-15. That was revised Friday to a $34.7-million deficit. For 2015-16 the deficit is estimated at $19.9 million.

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The government was also projecting a balanced budget this year. Premier Wade MacLauchlan rejected that plan during April's election campaign, saying that would take another year.

The government is now projecting an $11.9-million surplus in 2016-17.

Income tax revenue on the rise

With expenditures largely flat across the board, the big change for the budget in the coming year is income tax revenue, which is projected to rise about six per cent.

Roach told media in the budget lockup that there are no increases in tax rates, and the increase is coming solely from economic growth. He pointed out that employment levels in the province have been at all-time highs in recent years.

The province is projecting the unemployment rate could fall below 10 per cent on an annual basis for the first time in 38 years.

It quotes a Conference Board of Canada projection that personal incomes will grow 3.2 per cent in 2016, and Roach said the economy could perform even better than that.

"A lot of our businesses and residents of Prince Edward Island have been doing very well," he said.

The province is increasing tobacco tax as of midnight Friday, by 2.5 cents per cigarette or 4 cents per gram.

• Small increases for education, health

Pensions continue to bite

Employee benefits are going to cost the government another $8 million over what was forecast last year.

The change in cost comes from a study done last fall on costs associated with the pension fund, which led to a revised estimate for 2014-15 and for all following years.

Pension costs hit the government hard in previous years, driving up the deficit tens of millions of dollars. In 2013 Sheridan reformed public pensions, and declared the problem solved.

A new 4-year plan

The Liberal government presented its first plan to eliminate the deficit in 2011, which would have eliminated the deficit in 2013-14.

Successive plans have pushed that projection forward.

The most recent plan, released with the budget Friday, goes beyond balance to projections of significant surpluses, and reduction in the province's net debt.