The Fiscal Update 2001-2002 reflects the analysis of the Economic Progress Report, released last week, which reported more modest growth projections for both the country and the province in light of the tragic events of September 11. The minister told the Legislature, "The Budget assumptions appeared correct in the first half of 2001, and thus we could realistically have expected to achieve the projected budget surplus this year. Unfortunately, these expectations have been overtaken by a worsening global economic outlook."

Minister Mella stated that any fiscal restrictions would honour existing contractual arrangements with provincial employees. "Moreover, we are well aware that cost cutting in itself can be recessionary and the decisions we make should be such that they do not slow economic progress for our province."

The Fiscal Update announced a revised deficit projection of $37 million for 2001-2002, as compared to the surplus of $1.6 million that was forecast in the Provincial Budget.

The new deficit figure reflects cost control measures of $11.1 million that the Province has implemented in recent weeks. The in-year budgetary savings have been realized through new fiscal management controls which include a hiring recess across all government departments, deferral of new capital and technology projects, the absorption of program contingency funds and reductions in grants to various departments in government.

The provincial revenue forecast has been reduced by $26.2 million to $934.5 million, largely related to a decline in the forecast of federal Equalization transfers. Expenditure pressures in the first two quarters of 2001-2002 increased program spending above budget forecasts. Minister Mella stated, "The major increase to our expenditures has occurred in the health sector. Health care costs exceeded budget by $5.6 million which, along with the increases in health-related salaries and benefits of $3.4 million, account for most of the expenditure increase."

In closing, the minister expressed her continued commitment to the Government's established policy agenda and mandate. "We have had a change in our focus but I want to emphasize that our policies are sound and we maintain our overall purposes for quality health care and education, sustainable economic development and job creation and support for our traditional industries and communities."