samsonyuen
April 5th, 2006, 11:51 PM
From: http://www.theglobeandmail.com/servlet/story/RTGAM.20060331.wxrnfld31/BNStory/National/home
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Newfoundland in black
Province books first definitive surplus on back of offshore oil revenue
JANE ARMSTRONG
From Friday's Globe and Mail
Canada's poorest province is projecting an unqualified budget surplus for the first time in history, thanks to new royalties and corporate taxes from Newfoundland and Labrador's thriving offshore oil industry.
This year alone, the province is expecting to reap $927-million in royalties and income taxes, giving it a $6.2-million surplus. The budget forecast is predicated on oil staying above $57 (U.S.) a barrel.
"I am pleased to report that for the first time in our history, the province is budgeting a surplus on a fully consolidated basis," Finance Minister Loyola Sullivan said in his budget speech.
"I think we have turned the corner," Mr. Sullivan said. "We have enormous potential."
The province has balanced its books prior to this budget, but in the past it didn't have to account for all of its liabilities. Newfoundland has an unfunded pension liability. Now, the province is pulling in money from three Grand banks oil projects and accounting for its pension commitments.
And in a display of optimism, the government announced that it will ban deficit financing. In the future, provincial budgets must be balanced, Mr. Sullivan said.
"We will not burden our grandchildren with the consequences of our own [actions]," Mr. Sullivan said.
Though flush now with oil money, the province has still has a staggering $11.9-billion (Canadian) debt, the highest per capita in the country, calculated at $23,000 per person.
Still, the first-ever surplus represents a dramatic turnaround for Newfoundland under the Conservative government of Premier Danny Williams.
Just two years ago, Mr. Williams faced a nearly $900-million deficit and was slashing programs and public sector jobs.
Last year's budget wasn't much better, with Mr. Sullivan predicting a crippling $492-million deficit for the province in 2005-06.
That projected deficit was also eradicated by new oil money, Mr. Sullivan said, adding that the province will end this current fiscal year with a $76.5-million surplus.
Mr. Williams, who took power in 2003, can take some credit for the province's ascent from deficit. Last year, the Premier negotiated a new deal with Ottawa -- the Atlantic Accord -- that allows Newfoundland to keep a greater proportion of its offshore oil royalties without losing them in clawbacks.
Newfoundland has directed most of the $2-billion it has received under the accord toward the unfunded pension liability for the province's teachers.
Finance officials said that deal was instrumental in putting Newfoundland in the black. "I think we started to turn the corner when we landed the deal," Mr. Sullivan said. "You can have an oil industry with significant revenues, but if you receive it on the one hand and lose it on the other hand, we're not much better off in the long term."
The $5.4-billion budget includes $350-million in new money for schools, health and the arts. The province has also increased social assistance rates and poured money into improving roads, bridges and ferries. It has no tax cuts but no hikes, either, except for an increase in cigarette levies.
At the same time, the province has slashed or eliminated user fees for a range of government services. It also reduced fees parents were required to pay for their children's school books and supplies.
Despite yesterday's rosy forecast, Newfoundland still faces considerable economic hurdles. The new jobs and money from the offshore oil boom is confined almost entirely to St. John's and has done little to improve rural Newfoundland, where the unemployment rate is stuck in the double-digits.
"Rural Newfoundland is still in decline," Memorial University political scientist Stephen Tomblin said. "I don't think they [the government] have been able to deal with the problems of rural Newfoundland and I think that's going to be the biggest problem."
And despite its newfound oil wealth, Newfoundland is still losing residents as opposed to attracting them. "Even if the short term looks better," Professor Tomblin continued, "Compared to Alberta and British Columbia, where you're seeing large increases in immigration . . . I think in the long term, the problems here are going to be more substantive."
With files from CP
Long road back to black
Newfoundland and Labrador managed to post a surplus only three times it its history and even those weren't clear surpluses by today's accounting standards. The government has finally achieved what it has called its "perpetual crusade" to "catch up" with the rest of the country.
More energy in Newfoundland's revenue mix
Revised 2005-06 Estimate 2006-07
Personal income tax 16.4% 16.9%
Sales tax 12.4 12.9
Offshore royalties 9.6 13.5
Other sources 12.8 11
Equalization And offsets 24 20.4
Other federal sources 11.5 11.8
Clean slate
The province joined Confederation in 1949 with a balanced budget, no debt and an accumulated cash surplus of $40 million.
Financial crisis
Budgetary deficits ballooned out to 35% of revenues and 7% of GDP in the early 1970's. The deficit became a crisis when it hit a record $347 million in 1991.
Today's oil windfall
Offshore energy royalties are forecast at $663.4 million next year, a full 13.5% of annual revenue. The forecast is based on oil at $24 (U.S.) a barrel, under half of current prices.
'This province has been perceived as a province that's down and out. Well, not any more. We're not used to surpluses, but we better get used to it.'
____________________________
Newfoundland in black
Province books first definitive surplus on back of offshore oil revenue
JANE ARMSTRONG
From Friday's Globe and Mail
Canada's poorest province is projecting an unqualified budget surplus for the first time in history, thanks to new royalties and corporate taxes from Newfoundland and Labrador's thriving offshore oil industry.
This year alone, the province is expecting to reap $927-million in royalties and income taxes, giving it a $6.2-million surplus. The budget forecast is predicated on oil staying above $57 (U.S.) a barrel.
"I am pleased to report that for the first time in our history, the province is budgeting a surplus on a fully consolidated basis," Finance Minister Loyola Sullivan said in his budget speech.
"I think we have turned the corner," Mr. Sullivan said. "We have enormous potential."
The province has balanced its books prior to this budget, but in the past it didn't have to account for all of its liabilities. Newfoundland has an unfunded pension liability. Now, the province is pulling in money from three Grand banks oil projects and accounting for its pension commitments.
And in a display of optimism, the government announced that it will ban deficit financing. In the future, provincial budgets must be balanced, Mr. Sullivan said.
"We will not burden our grandchildren with the consequences of our own [actions]," Mr. Sullivan said.
Though flush now with oil money, the province has still has a staggering $11.9-billion (Canadian) debt, the highest per capita in the country, calculated at $23,000 per person.
Still, the first-ever surplus represents a dramatic turnaround for Newfoundland under the Conservative government of Premier Danny Williams.
Just two years ago, Mr. Williams faced a nearly $900-million deficit and was slashing programs and public sector jobs.
Last year's budget wasn't much better, with Mr. Sullivan predicting a crippling $492-million deficit for the province in 2005-06.
That projected deficit was also eradicated by new oil money, Mr. Sullivan said, adding that the province will end this current fiscal year with a $76.5-million surplus.
Mr. Williams, who took power in 2003, can take some credit for the province's ascent from deficit. Last year, the Premier negotiated a new deal with Ottawa -- the Atlantic Accord -- that allows Newfoundland to keep a greater proportion of its offshore oil royalties without losing them in clawbacks.
Newfoundland has directed most of the $2-billion it has received under the accord toward the unfunded pension liability for the province's teachers.
Finance officials said that deal was instrumental in putting Newfoundland in the black. "I think we started to turn the corner when we landed the deal," Mr. Sullivan said. "You can have an oil industry with significant revenues, but if you receive it on the one hand and lose it on the other hand, we're not much better off in the long term."
The $5.4-billion budget includes $350-million in new money for schools, health and the arts. The province has also increased social assistance rates and poured money into improving roads, bridges and ferries. It has no tax cuts but no hikes, either, except for an increase in cigarette levies.
At the same time, the province has slashed or eliminated user fees for a range of government services. It also reduced fees parents were required to pay for their children's school books and supplies.
Despite yesterday's rosy forecast, Newfoundland still faces considerable economic hurdles. The new jobs and money from the offshore oil boom is confined almost entirely to St. John's and has done little to improve rural Newfoundland, where the unemployment rate is stuck in the double-digits.
"Rural Newfoundland is still in decline," Memorial University political scientist Stephen Tomblin said. "I don't think they [the government] have been able to deal with the problems of rural Newfoundland and I think that's going to be the biggest problem."
And despite its newfound oil wealth, Newfoundland is still losing residents as opposed to attracting them. "Even if the short term looks better," Professor Tomblin continued, "Compared to Alberta and British Columbia, where you're seeing large increases in immigration . . . I think in the long term, the problems here are going to be more substantive."
With files from CP
Long road back to black
Newfoundland and Labrador managed to post a surplus only three times it its history and even those weren't clear surpluses by today's accounting standards. The government has finally achieved what it has called its "perpetual crusade" to "catch up" with the rest of the country.
More energy in Newfoundland's revenue mix
Revised 2005-06 Estimate 2006-07
Personal income tax 16.4% 16.9%
Sales tax 12.4 12.9
Offshore royalties 9.6 13.5
Other sources 12.8 11
Equalization And offsets 24 20.4
Other federal sources 11.5 11.8
Clean slate
The province joined Confederation in 1949 with a balanced budget, no debt and an accumulated cash surplus of $40 million.
Financial crisis
Budgetary deficits ballooned out to 35% of revenues and 7% of GDP in the early 1970's. The deficit became a crisis when it hit a record $347 million in 1991.
Today's oil windfall
Offshore energy royalties are forecast at $663.4 million next year, a full 13.5% of annual revenue. The forecast is based on oil at $24 (U.S.) a barrel, under half of current prices.
'This province has been perceived as a province that's down and out. Well, not any more. We're not used to surpluses, but we better get used to it.'