Deficits will soon be gone—but debt-loads vary widely
THE PROVINCIAL RECORD
Deficits will soon be gone—but debt-loads vary widely
British Columbia: Buffeted by the Asian crisis and downturns in the forestry and mining sectors, the province is saddled with a 1998-1999 deficit of $95 million. Yet its net public debt of $22.8 billion remains the second-lowest in Canada in relation to the size of its economy. On Jan. 1, 1999, Premier Glen Clark’s NDP government will lower personal income tax rates to 49.5 per cent of basic federal tax from 50.5 per cent. And it predicts that it will balance its books in 1999-2000. “Finance Minister Joy MacPhail deserves credit for introducing some selected tax cuts,” noted Jock Finlayson, vice-president of the Business Council of British Columbia. “But the hard reality is that the budget will do little to stimulate British Columbia’s sputtering economy in 1998.”
With the exception of Nova Scotia, every province has tabled its 19981999 budget. Maclean’s Contributing Editor Mary Janigan summarizes each government’s assessment of its prospects:
Alberta: Even though oil and gas prices have dropped from 1997 levels, Albertans have scarcely noticed: their economy is thriving. The deficit disappeared in the mid-1990s. The size of the provincial debt of $14 billion in relation to the size of the economy is the lowest in Canada. Personal income tax rates dropped to 44 per cent last January from 45.5 per cent of basic federal tax. As Treasurer Stockwell Day proudly proclaimed:
“The only way taxes will go in Alberta is down.”
Saskatchewan: Although the province was perilously close to bankruptcy in the early 1990s, it has become a blue-ribbon fiscal success story.
For the fifth consecutive year, the books are in the black. On July 1, the personal income tax rate will drop to 48 per cent of basic federal tax from 50 per cent. And over the next four years, the province expects to put $700 million towards its outstanding $8.9-billion debt, bringing it down to 31 per cent of GDP. Remarked Finance Minister Eric Cline: ‘Together, we turned the province’s fortunes around.”
Manitoba: In 1995, Manitoba tabled its first balanced budget in 22 years—and the province is reaping the benefits. On July 1, personal income tax rates will fall from 52 per cent of basic federal tax to 51 per cent; on Jan. 1, 1999, they will drop another percentage point. The 1998-1999 surplus is an estimated $23 million. And Finance Minister Eric Stefanson is putting $150 million towards the debt, lowering it to $6.6 billion or 22 per cent of GDP in 1998-1999.
Ontario: Two years ago, amid great controversy, Finance Minister Ernie Eves implemented the first stage of a 30-per-cent cut in provincial taxes, even though the 1995-1996 deficit was $8.8 billion. The final stage of that cut occurs on July 1, paring personal income tax rates to 40.5 per cent of basic federal tax. This year’s deficit is an estimated $4.2 billion—and, officially, the books will not balance until 2000-2001. But Eves’s gamble may pay off: debt of $110 billion has stabilized at just over 30 per cent of GDP— and the red ink may disappear a year ahead of schedule.
Quebec: In a determined effort, the province has pared its deficit from almost $6 billion in the mid-1990s to an estimated $1.1 billion in 1998-1999. The books are expected to balance in 1999-2000. But public debt levels—$82 billion for 1998-1999— remain relatively high at more than 43 per cent of GDP. As a result, Finance Minister Bernard Landry trimmed only $500 million from the household tax burden in 1998. But, he noted, “the government is undertaking, once it has eliminated the deficit, to ensure that most of its leeway is used to reduce the tax burden.”
New BniUSWSThe province is understandably proud of its fourth consecutive balanced budget: the estimated 1998-1999 surplus is $18.5 million. Net debt of $5.4 billion is declining to 32 per cent of GDP over 1998-1999. And Finance Minister Edmond Blanchard reduced personal income tax rates from 63 per cent of basic federal tax to 61 per cent—with a further reduction to 57.5 per cent scheduled on Jan. 1,1999. “There is no question of the government’s resolve to live within its means,” he added.
Nova Scotia: Premier Russell MacLellan declined to table a budget before the March 24 election. Now, as the leader of a fragile minority government, he may be hard-pressed to fulfil his campaign promise to balance the books for a second year. Tie 1997-1998 surplus is forecast to be a slim $1 million—which represents a significant improvement on the hefty $617-million deficit the Liberals inherited when they took office in 1993. But debt levels are high: 43 per cent of GDP, or $8.6 billion. And personal income tax rates are 57.5 per cent of basic federal tax. If the budget is not balanced when it is tabled in June, MacLellan’s Liberals could face defeat in the legislature—and the NDP could form the government for the first time in provincial history.
PrillCe Edward Island: The province’s deficit has fallen steeply since the mid-1990s to an estimated $3.4 million in 1998-1999, and it is expected to disappear next year. But debt of $1 billion remains high: 36 per cent of GDP. As a result, Treasurer Patricia Mella was forced to put the best possible spin on the fact that she did not touch the province’s income tax rate of 61 per cent: “I am pleased to report that this budget does not contain any tax increases.”
Newfoundland: The estimated 1998-1999 deficit is $10 million and the province confidently expects to balance its books in the following year. The debt is $4.8 billion, 44 per cent of GDP, down from a breathtaking high of 55 per cent in the mid-1990s. But personal income tax rates remain a whopping 69 per cent of basic federal tax— because benefits from such resource projects as the nickel deposit at Voisey’s Bay will not have a significant effect on revenues for several years. As Finance Minister Paul Dicks glumly noted: “We recognize that Newfoundland and Labrador is one of the highest taxed jurisdictions in North America. This must change.”
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