November 9, 2006
For immediate release
Provincial Treasurer Presents Second Quarter Update -- FY 2006/2007
Minister Murphy has also released “The Prince Edward Island Economy Progress Report 2006,” which showed, among other things, encouraging employment numbers for the Province.
“I am very pleased to report to Islanders that the Province's fiscal outlook is encouraging,” said Minister Murphy, while also emphasizing the importance of a stronger fiscal position for the Province.
“During the past three years, all of the indicators of fiscal health have shown improvement. The interest bite, the amount of money that goes to service the debt, remains steady at about 10%. Debt costs as a percentage of provincial expenditures continue to decline. Healthy government finances are the foundation of providing high quality public services, and enable us to introduce policies to enhance our business competitiveness,” said the Minister.
The Minister indicated that the Auditor General is completing his work on the Public Accounts for fiscal year 2005-06. “In the 2005-06 Budget, we were projecting a $22 million deficit, which we had reduced to $18 million after the third quarter, and I anticipate the final number will be even lower than in the third quarter,” said Minister Murphy.
The second quarter update for this fiscal year shows the Province tracking on budget, and it is anticipated that overall revenues will exceed budget by approximately $13.6 million. Equalization is up $5 million, federal trust funds are up $5 million and provincial own source revenues are up $3.6 million. Increases in sales tax, interest revenue and corporate taxes are offset by decreases in gasoline tax and tobacco tax.
Expenditures are also up $13.6 million. These costs are primarily attributed to increases in spending in provincial departments such as Health by $3 million, Social Services and Seniors by $1 million, and Agriculture, Fisheries and Aquaculture by $1 million. The Agriculture Insurance Corporation’s expenditures are up by $6.6 million.
“We will continue to ratchet the budget deficit number down in the second half of the fiscal year,” said the Minister.
Budget 2006-07 made major investments in Health, Education and Infrastructure. Spending in Health and Education increased by $20 million and $11 million, respectively.
“Our government continues to enhance the Province’s fiscal situation and future outlook, while simultaneously increasing program spending in those areas which are most important and relevant to Islanders. We continue to make significant investments in areas such as Health and Education, and we are also working hard to strengthen the economy by developing new industry, new export markets, and increased employment growth,” said Minister Murphy.
“We have, in support of small business, undertaken significant income tax reductions to stimulate this important sector of our economy. In 2005, we reduced the small business tax rate by 1%. This year we reduced the rate by another 1.1%, and we will continue to reduce the rate until it reaches a mere 1.0%,” said the Minister.
“When we get there, small Island businesses, representing the majority of our economic activity, will be the lowest taxed in the country,” said Minister Murphy. The threshold to qualify as a small business is increasing from $300,000 to $400,000 in 2007, as well.
“We believe these tax reductions for small businesses will produce extremely positive effects on employment, business investment and economic growth in the province,” said the Minister.
Minister Murphy emphasized the continued strength of the PEI economy in spite of adverse external pressures such as a higher Canadian dollar, weaker tourism and higher energy prices.
“Despite some significant negative economic pressures we currently face, our Island labour force is the largest it has ever been, and our unemployment rate is at its lowest level in 26 years. Farm receipts in 2006 have increased over already record levels in 2005, lobster landings are at an all time high, and the non-residential construction sector is flourishing. All of our industries are benefiting from the sound economic policies and a strong business investment climate, which we continue to work hard to provide in order to better our collective standard of living in PEI,’’ said Minister Murphy.
Minister Murphy noted that the Province has led many successful trade missions to help establish new export markets for existing Island businesses, and has also established an action plan to create a significant bio-science industry within the province.
“The key to the long-term prosperity of both our province and its citizens is to maintain a healthy economy. To do that, we must continue to develop new product and market opportunities for our existing businesses, and we must also diversify and develop new industries within the province which complement our existing ones. Bio-science is a prime candidate in this respect; it complements our existing primary industries and is rapidly creating new value in our economy. Government has a pivotal role to play in creating new industry, and we have seen great success in the growth of our fledgling aerospace industry for instance, which now employs over 800 full time and has annual sales worth approximately $275 million,” said the Minister.
Minister Murphy highlighted that a robust economy is essential for providing the provincial government with the revenue it needs to deliver on Islander’s priorities.
“We have concentrated on providing program spending in those areas that are most important to Islanders. We continue to invest heavily in areas such as Health, Education and Social Services, among others. For instance, total provincial spending on Education rose 37% between 1996 and 2006, from $168 million annually to $230 million. This is a significant and important investment in our current and future generations, and a priority that our government is proud to address. But the large investments we have made in Education, Health and other important areas have always created significant fiscal challenges for the Province. We have met these fiscal challenges head on, while at the same time continually improving the Province’s financial situation,” said the Minister.
“This is evidenced by the fact that, earlier this year, Moody’s Investors Service upgraded the Province’s credit rating for the second time in four years,” said Minister Murphy. Moody’s credit rating for the Province is currently an A1.
“The two documents I am releasing today clearly demonstrate that Prince Edward Island is headed in the right direction. Our provincial financial situation is healthy and continually improving, while our economy is growing and prospering. We have all worked hard to achieve these goals, and all Islanders will benefit,” said Minister Murphy.
The Province of Prince Edward Island Fiscal Update 2006/2007 and The Prince Edward Island Economy Progress Report 2006 can be found on the Prince Edward Island Government website: www.gov.pe.ca/photos/original/pt_fisc_upd_06.pdf and www.gov.pe.ca/photos/original/pt_progre_rep06.pdf