P.E.I. budget misses balanced target in 2016-17

The P.E.I. government will carry a $9.6 million deficit in 2016-17.

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The government had been promising to balance the budget in 2016-17. The four-year budget plan published with the budget last year predicted a $11.9 million surplus.

"Islanders have told us that a balanced budget should not come at the expense of essential public services," said Roach in his budget speech.

Both the deficit and the need to increase the HST can be explained by an economy that did not perform as hoped.

When the budget was presented last June the government was bullish about income tax revenues, predicting a five per cent increase on the strength of expected job growth that would see the unemployment rate fall below 10 per cent for the year.

But the unemployment rate was below 10 per cent for only three months in 2015, and rose up to 11 per cent in February and March in this year. The number of jobs on the Island has been declining since October.

The government expects only about a one per cent increase in income tax revenue this year.

Spending is up

But the deficit is not just about revenue. The government has also increased program spending by 3.3 per cent, or $48.5 million, over its estimates for last year.

The spending is spread across the board, with health and education, as the two largest departments in terms of expenditures, taking up the bulk of the new money.

The Workforce and Advanced Learning budget is relatively flat, but the province's post-secondary institutions are all receiving small increases in their operating grants, with savings being made elsewhere within the department.

Roach emphasized that the budget not only maintains services, but also public sector jobs.

"There's no cuts to the civil service in this budget," he said.

Other tax measures

The budget included three tax changes which the government said will be of particular benefit to low- and modest-income Islanders.

The basic personal income tax exemption for 2016 will go up to $8,000 from $7,708, the first increase since 2008.

• The Low Income Tax Program will be increased by $50.
• The P.E.I. portion of the HST rebate will be increased by 10 per cent.
• The Real Property Transfer Tax will be eliminated for first-time buyers.
• Surplus budget next year.

Surplus budget next year

The government is predicting it will bring in a surplus of $9.2 million in 2017-18.

Since the Liberals came to power in 2007 they have repeatedly promised a return to balanced budgets, and that promise has repeatedly been put off.

Most recently, in the spring of 2015, the government said the budget would be balanced this year. As shown by the table below, that plan has now changed.

The first plan put forward by the Liberals to balance the budget, presented by then-finance minister Wes Sheridan, looked forward to an end of deficits in the 2013-14 budget year. The deficit in that year came in at $45.9 million. 

Speaking to journalists in the budget lockup, Roach defended the government's record. He pointed out a $9 million deficit on a $1.7 billion budget is very small.

"We're at virtual balance," he said.

"We're very confident we're going to see the revenues over the next year to get to balance."

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