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November 25, 2003
For immediate release

Fiscal Update for the Second Quarter FY2003/2004

Provincial Treasury

Provincial Treasurer Mitch Murphy today presented the results of the Second Quarter Fiscal Update for the current fiscal year to the Provincial Legislature. Minister Murphy reported that a recent adjustment in population estimates by Statistics Canada, along with increases in expenditures, will cause the province’s projected deficit to increase to $53.3 million for the 2003/2004 fiscal year.

The most recent Census results released by Statistics Canada reduced the province’s reported population by 2,900 people. Minister Murphy explained that provincial revenues have been negatively affected, as the population revisions impact the 2003/2004 entitlements for Equalization and the Canada Health and Social Transfer, as well as those of the three previous years. The result is a $6 million reduction in CHST over the four years, and a $44 million reduction in Equalization payments. At the time the original 2003/2004 budget was prepared, a reduction of $17.5 million was anticipated and budgeted, leaving $32.5 million as a shortfall. Of this amount, $15.8 relates to previous years, and is recorded as a decrease in the 2002/2003 Public Accounts, and the remaining $16.7 million reduces the current year’s forecasted revenues.

Minister Murphy reported that revenue from other sources is targeted to be on budget, with the exception of Health Tax on Tobacco, which is expected to be $3.7 million below budget.

The province’s expenditure forecast includes increases of $26.4 million in spending. Minister Murphy reported that the major increases are primarily in the areas of Health and Social Services of $5.8 million; school board funding of $1.2 million; and salaries and benefits of $8.5 million.

Addressing the province’s fiscal situation, Minister Murphy told the Legislature, “There are many challenges that face our government. Although our economy is doing well as evidenced by the growth in our gross domestic product and growth in employment, we are concerned about the pace of expenditures in our health budget and our priority to live within our means. Balancing our resources with expectations is fundamental to the overall stewardship of the province. With everyone’s help, we will continue to build on the investments made in the past.”

In closing, Minister Murphy noted that he will be hosting a series of pre-budget consultations over the next couple of weeks to obtain public input into next year’s budget. “I look forward to these pre-budget consultation meetings and welcome Islanders to attend these sessions. It is time to look at next year’s budget to ensure that this Government’s priorities are outlined and we are put back on track in balancing the budget for future years and get back to decreasing the provincial debt.”

Media Contact: Ruth Chandler
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