Tuesday, March 13, 2007

Victor Boudreau's big day

Folks, today is budget day. I will post more when the budget actually comes out this afternoon at 2.

The Liberals have taken great pains to stress that it will be balanced so I suspect it will be, unless they are completely crazy.

It will be interesting to see what, if any, new ideas are in there re: Self-Sufficiency or if they will be holding off on that until the Task Force final report comes out in April - which would mean major changes have to wait until the next budget in 2008. Speaking of which, Eugene at To Be Announced has a cute post about the proposal to sell bonds for economic development guaranteed by NB Liquor Corp.

I'll start updating shortly after 2 when the budget documents are released...

UPDATE 1

You can find all of the budget documents here.

UPDATE 2

There is a surlpus of $37.1 million. Huge economic growth last year thanks in large part to high zinc prices pushed the value of mineral production up 63.8 per cent to a record $1.5 billion. This is how they overcame to the forecast $300 million deficit by Grant Thorton in December along with cutting the HST rebate and cutting administrative costs.

New funding for five departments:

  • Health gets $127 million more (+6.6%)
  • Education gets $47 million more (+5.7%)
  • Family & Community Services gets $67.4 million (+8.4%) + a 3% increase to welfare rates
  • Elizabeth Weir's Efficiency NB get $15.3 million more (+234%)
  • Population Growth gets $1.8 million more (+167%)


TAXES GOING UP

Bracket 1 goes up to 10.12% from 9.68%
Bracket 2 goes up to 15.48% from 14.82%
Bracket 3 goes up to 16.80% from 16.52%
Bracket 4 goes up to 17.95% from 17.84%

Click here for the current rates and the unchanged cut-offs. All New Brunswickers pay bracket 1, then if you make more than $33,450 you start paying bracket 2 on the income above and beyond that number and so on.

(edit, I must be dyslexic, if you read this over the course of a few minutes before I corrected my error, I had read the numbers backwards)

UPDATE 3

The tax increase is not all bad and may be negatived by other actions of the government. Our taxes remain the lowest in Atlantic Canada and the bracket rates are being re-indexed, eliminating the bracket creep brought in by the Tories a few years ago which allowed them to raise taxes without technically raising taxes and preventing New Brunswickers from seeing their real income from going down as tax rates will adjust with inflation thus relieving in the tax cycle what New Brunswickers lose through the course of the year thanks to higher cost of living.

Corporate taxes are raised marginally. The coroporate tax cut of 2006 will be a one year affair, as for the 2007 tax year it will return to 2005 levels. However the previous Lord corporate tax cuts are still in effect giving New Brunswick the fourth lowest corporate tax in Canada.

The small business tax is also going up marginally. I am not too upset about the first two tax increases, but this is a bad idea.

UPDATE 4

The province is following the federal government's lead and axing the program that allows foreigners to send in their receipts and get the sales tax that they paid while here back. I have no problem with this.

UPDATE 5

Spinks should be happy, a form of income splitting is coming. New Brunswick is following Ottawa's lead and allowing pension income to be split.

14 comments:

Spinks said...

Okay income splitting good. I concur.

Raising taxes...bad, bad, bad, bad. Wisely they did this in their first year but man, add that to HST rebate...GONE, property taxes through the roof...AGAIN...rumours of another massive power hike...well suffice it to say the middle class in this province gets hit yet again...and as per usual the politicians don't care. I suspect we'll all take it lying down again (what else can you do), but man, this is AWFUL! Okay doctor, I feel better now...until I get the bill!

Anonymous said...

Yes. These Liberals were going to be different. A new government that would do the right things to finally get NB moving. They scoured the world for the best ideas. They promised: this time it will be different. Yes. Raising taxes. Different. And most certainly must be the reason behind the amazing growth of Singapore, Ireland, Portugal. Color me doubtful.

Let's see. Provincial Liberals to Federal government: Give us more money. How different is that?

Provincial Liberals to NB citizens.Higher taxes, more regulation,payoffs to our client groups. How Liberal is that?

It's unfortunate that with so much good happening in Saint John and Canada that NB'ers put such an obviously incompetent crew in charge.

New Brunswickers rightfully expected a positive change in governance. What they got was more of the same old, same old. Shame on us for being so,so gullible. I guess mobility remains an NB must.

Coneast

Robert Jones said...

It's going to take a while to digest the budget, separate fact from fiction and then cross reference everything with what was promised in the campaign.

But don't forget the Liberal's basic campaign assertion was that all election promises had been costed and were affordable without tax increases.

The budget papers show revenues this year are $235 million higher than expected and yet there's still not enough money to meet next year's commitments. That has to be looked at pretty closely, including the shaky assertions that Grant Thornton discovered hidden costs during its financial review. It didn't.

Finally, although I know it meets the technical definition, I don't think you can seriously call this a balanced budget since it will increase the provincial debt next year by $356 million.

Last fall the Auditor General expressed concern with the way Volpe over used the word 'balanced' when talking about financial statements that drove up the debt.

New Brunswick has not had a budgeted increase in the debt this high in more than a decade.

Anonymous said...

Why exactly is debt going up? Is that because of interest rates or is it a numbers game?

To Spinks, with income splitting you have to keep in mind that some in the middle class will be saving some taxes-just not you.

Muddy River Tory said...

People are actually amazed that the NB Liberals are not following through on their so called promises. Gimme a break. This is only a start. 3 more years of this crap. The voters of Moncton East should hang their heads in shame for voting Collins in as the newest MLA. Gawd.

Eugene said...

This is non-accountant's take but debt is up because they have to account for the TCH. It's costing about half a billion to twin the Valley. That is paid with debt hence the higher debt level. But because it is an asset we only see the yearly depreciation on the income statement, hence a small surplus.

Overall impact is if the actuals equal the budget, we're about $320 million in the hole albeit with a new highway.

Brian Cormier said...

I hate tax increases as much as much as the next guy, but remember: This is the government's first budget. This is the one people will hate. Very predictable. Any (majority) government's first budget is the one where they cut stuff. I suspect that subsequent budgets will be much more voter-friendly and that people will have short memories. It's a common cycle.

Anonymous said...

Thats a good take above, about the TCH. Not sure about it though, but it seems reasonable. On the Statement of Change in Net Debt the big change is labelled as "Acquisition of Tangible Capital Assets". This more than DOUBLED from last year, from 350 million to almost 800 million.

From the explanatory notes there is this:

"As part of the process of implementing tangible capital asset accounting, Government was required to establish a value for all of the tangible capital assets owned by the Province as of March 31, 2004. A value has been established for these assets and they will be amortized over their remaining useful lives."

"As a result, the estimated amortization expense in
2007-2008 of $250.4 million includes amortization expense on the value of the tangible
capital assets existing on March 31, 2004, as well as investments made since that date.

As a result of a change in accounting guidelines during the 2006-2007 fiscal year, Government is required to recognize the gross cost of a Tangible Capital Asset (including any Federal
contribution) when establishing the amortization expense. The Federal contribution is recognized over the life of the asset as a Deferred Capital Contribution, which offsets the increased amortization expense."


For those with no experience in accounting, like me, the government site that announced it in 2003 made the change from accounting for capital assets (hospitals, schools) in the year they were built to amortizing them over their useful life.

My question is, when are they PAYING for them. It seems to me that it is more 'accountable' to state how much money you actually have and owe. It seems that they pay to build a hospital, then say "well, now we ACCOUNT for it over the 30 years we have it". However, you still have $3 million less in the budget in the year you pay for it, UNLESS you've borrowed the money to pay for it in the first place and are just paying it back.

However, thats not how they typically do it, so there are some real questions about the 'value' that the government has assigned to these assets and how long they are amortized for.

It's true that more governments are doing this, mostly because accountants are sick of learning two different accounting procedures, one for private, and one for public institutions.

However, anybody remotely familiar with Enron, Nortel, etc., knows the kind of fancy footwork companies are capable of when amortizing assets. So just because 'everybody else is doing it', doesn't necessarily mean its more 'accountable'. Like any system, the devil is in the details.

Anonymous said...

To finish that thought, what capital assets were acquired, and from who?

Anonymous said...

OK, from some more looking it seems that fella above was onto something. In the budget, in case people don't have the time or inclination, there are three sections-

1. Total Capital Expenditures
2. Capital Expenditures to be Expensed
3. Investment in Tangible Capital Expenditures

For last year, most departments stayed pretty close, the environment dropped by 400G, health dropped 400G, the regional development corporation saw 2 million dropped in investment in tangible capital expenditures.

However, transportation saw an increase of 500 million in both total capital expenditures, and total investment in capital expenditures.

What exacty that MEANS I don't know. They 'acquired' the TCH from the feds? Anybody?

nbpolitico said...

Anon - it means they built a lot of highway between Fredericton and Grand Falls... new portions of TCH opened from Long's Creek to Woodstock.

Anonymous said...

Yes, but if it is now 'amortized' over its lifespan, wouldn't the capital cost be LESS? There was a lot of highway work done the year before as well, but it didn't result in DOUBLING the capital asset cost.

nbpolitico said...

I don't believe you can count it as an asset until the work is complete. I am not an accountant, but this is budgeted under national guidelines set by the Public Sector Accounting Board. This isn't accounted just on the fly by the whim of some managers in the Department of Finance nor of the minister.

PSAB is an arm of the Canadian Chartered Accountants Association. You will find their website and details on how, when and why these things are booked at http://www.cica.ca//index.cfm/ci_id/225/la_id/1.htm

Anonymous said...

I have no doubt its not a 'whim' but that doesn't mean anything in the long term. To account for it, the CICA has these relevant terms:


fair value
net book value
residual value
service potential
useful life

Any and every one of those is a subjective term to a government.

However, let me see if I have this straight. The 'new' highway, which has been paid for, is being accounted for differently than previous highways (otherwise there wouldn't be such an increase)

Since construction is complete, it adds to the debt the province owes, but it doesn't result in a deficit because the cost of it is being 'amortized' over its useful life. Is this right?