Province Of New Brunswick 18-K/A Annual report (foreign governments) (amended)

Department of

Finance

Third Quarter Report

2014-2015

Hon. Roger Melanson

Minister of Finance

February 2015

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2014-2015 Third Quarter Report

Published by:

Department of Finance

Government of New Brunswick

P.O. Box 6000

Fredericton, New Brunswick

E3B 5H1

Canada

Internet: www.gnb.ca/finance

February 2015

Translation:

Translation Bureau, Government Services

ISBN 978-1-4605-0498-7

Think Recycling!

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2014 Economic Update     ●The International Monetary Fund (IMF) is forecasting global economic growth of 3.3 per cent in 2014. This is unchanged from its forecast in the fall edition of its World Economic Outlook, but down from their original forecast.   ●U.S. real GDP increased at an annual rate of 5.0 per cent in the third quarter of 2014, building on the gain of 4.6 per cent in the second quarter. Weakness in Q1 has now largely been offset, and growth is back on par with beginning-of-the-year expectations. The IMF is projecting growth of 2.4 per cent for 2014.   ●      As of third quarter, Canadian real GDP is up 2.6 per cent over prior year levels. The slowing in global economic growth has delayed the expected pickup in exports and business investment.   ●      The Department of Finance projects real GDP growth of 1.1 per cent for 2014. This compares to the consensus among private sector forecasters of 1.0 per cent for 2014.   ●      Employment declined by 0.2 per cent in 2014 – the fifth decline in six years. Gains in full- time employment (+0.2%) were not sufficient to offset the decline in part-time employment (-2.1%). Minimal growth was observed in the services- producing sector (+0.3%), while an overall decline was observed in the goods-producing sector (-2.1%).   ●      Exports (-9.6%) and manufacturing (-6.3%) were impacted by maintenance activity at the Saint John Refinery, as well as by a sharp decline in the price of refined oil products.   ●      Average weekly earnings are up 3.0 per cent on a year-to-date basis - above the national growth rate of 2.7 per cent.   ●      Consumer spending continues to show improvement, with retail trade up 3.6 per cent on a year-to-date basis.   ●     Consumer inflation in the province averaged 1.5 per cent for 2014 - below the national growth rate of 2.0 per cent.
 

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2014-2015 Fiscal Update

Based on third quarter information, there is a projected deficit of $255.4 million for 2014- 2015. This is an improvement of $135.7 million compared to the budget deficit of $391.1 million. The improvement is mainly due to $155.5 million in one-time or extraordinary revenue that will not recur.

Net debt is projected to increase $377.1 million year-over-year, a decrease of $153.6 million from the budget estimate of $530.7 million.

Revenue:

Revenue is $218.3 million higher than budget, including $155.5 million in one-time revenue that will not recur. The major variances include:

· Harmonized Sales Tax is projected to increase $93.3 million from budget due to positive prior-year adjustments including increases to the national revenue pool, on which HST payments are based.

· Conditional Grants are up $61.1 million mainly due to federal recoveries for Disaster Financial Assistance and one-time funding for New Brunswick related to joining the Cooperative Capital Markets Regulatory System.

· Return on Investment is up $39.3 million primarily as a result of higher projected net income for NB Power. NB Power’s net income increased mainly due to the transition to a shared risk pension plan and investment gains on funds invested for future nuclear decommissioning and used fuel management. This was partially offset by costs related to post-tropical storm Arthur and a longer than expected planned maintenance outage at the Point Lepreau Nuclear Station.

· Metallic Minerals Tax revenue is higher by $16.9 million due to tax audits.

· Special Operating Agency revenue is up $16.4 million mostly due to the new Canada/New Brunswick Federal Gas Tax Fund.

· Personal Income Tax is higher by $12.0 million attributable to an anticipated positive prior- year adjustment related to the 2013 taxation year.

· Provincial Real Property Tax revenue is anticipated to be lower by $15.3 million due to changes in the assessment base, partially offset by the impact of the provincial property tax for New Brunswick businesses returning to the 2012 rate, effective for the 2015 taxation year.

· Corporate Income Tax is lower by $13.1 million attributable to an anticipated negative prior-year adjustment related to the 2013 taxation year.

· Tobacco Tax is down an estimated $10.7 million as a result of lower sales.

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Expense:

Total expenses are projected to be $82.5 million higher than budget. It should be noted, however, that there are more than $60 million of increased expenses which are fully offset by additional revenues.

The major variances include the following:

· Education and Early Childhood Development ($32.7 million over): Mainly due to a projected over-expenditure in the Elementary and Secondary Education program as a result of planned improvement and reduction initiatives not being implemented.

· General Government ($6.0 million under): Primarily due to lower than budgeted provision for losses, partially offset by increased expenditures by consolidated entities.

· Health ($34.1 million under): Mainly due to projected under-expenditures in pharmaceutical programs. This is partially offset by a projected over-expenditure in the Medicare program.

· Invest NB ($9.1 million under): Lower than anticipated demand under the Strategic Assistance Program.

· Public Safety ($28.4 million over): Primarily due to Disaster Financial Assistance funding in relation to the spring 2014 flooding and post-tropical storm Arthur. This is partially offset by additional federal revenue.

· Social Development ($5.0 million over): Due to lower than anticipated social assistance caseload decline, implementation delays in achieving efficiencies, and higher than anticipated funding for nursing homes. This is partially offset by a projected under- expenditure related to delays in the Affordable Rental Housing Program.

· Transportation and Infrastructure ($8.7 million over): Primarily due to various cost pressures including Winter Maintenance and increased repairs required under the Summer Maintenance program due to the difficult winter in the prior year.

· Capital Account expense ($27.9 million over): Higher than budgeted capital work to be expensed rather than amortized, including significant weather-related events such as the spring 2014 flooding and post-tropical storm Arthur.

· Special Operating Agencies ($14.7 million over): Projected increased expenditures in various Special Operating Agencies, including the new Canada / New Brunswick Federal Gas Tax Fund. These are fully offset by increased revenue and therefore have no impact on the deficit.

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COMPARATIVE STATEMENT OF SURPLUS OR DEFICIT

Thousands

$

	Year Ending March 31									Variance
	2015			2015			2015			from
	Estimate			2nd Quarter			3rd Quarter			Estimate
Revenue
Ordinary Account		7,677,344			7,741,152			7,876,890			199,546
Capital Account		56,311			55,235			54,927			(1,384	)
Special Purpose Account		62,007			61,791			65,711			3,704
Special Operating Agencies (net)		44,727			60,705			61,162			16,435
Sinking Fund Earnings		195,700			195,700			195,700			0
Total Revenue		8,036,089			8,114,583			8,254,390			218,301
Expense
Ordinary Account		7,894,060			7,947,787			7,930,553			36,493
Capital Account		41,926			48,144			69,829			27,903
Special Purpose Account		69,656			70,235			70,373			717
Special Operating Agencies (net)		32,448			34,917			47,150			14,702
Amortization of Tangible Capital Assets		389,124			390,670			391,837			2,713
Total Expense		8,427,214			8,491,753			8,509,742			82,528
Surplus (Deficit)		(391,125	)		(377,170	)		(255,352	)		135,773

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COMPARATIVE STATEMENT OF ORDINARY ACCOUNT REVENUE BY SOURCE

Thousands

$

	Year Ending March 31						Variance
	2015		2015		2015		from
	Estimate		2nd Quarter		3rd Quarter		Estimate
Taxes
Personal Income Tax		1,508,000		1,508,000		1,520,000		12,000
Corporate Income Tax		251,000		240,200		237,900		(13,100	)
Metallic Minerals Tax		0		6,300		16,866		16,866
Provincial Real Property Tax		481,300		460,000		466,000		(15,300	)
Harmonized Sales Tax		1,146,500		1,135,100		1,239,800		93,300
Gasoline and Motive Fuels Tax		240,000		240,000		240,000		0
Tobacco Tax		150,700		141,500		140,000		(10,700	)
Pari-Mutuel Tax		600		600		600		0
Insurance Premium Tax		47,205		51,954		51,954		4,749
Real Property Transfer Tax		13,000		12,000		12,000		(1,000	)
Large Corporation Capital Tax		0		0		1,300		1,300
Financial Corporation Capital Tax		27,000		27,000		27,000		0
Sub-total: Taxes		3,865,305		3,822,654		3,953,420		88,115
Return on Investment		253,994		282,933		293,343		39,349
Licences and Permits		138,843		138,390		138,469		(374	)
Sale of Goods and Services		291,607		288,397		296,041		4,434
Lottery and Gaming Revenues		145,730		147,227		141,213		(4,517	)
Royalties		94,255		98,655		92,980		(1,275	)
Fines and Penalties		8,164		8,070		8,088		(76	)
Miscellaneous		48,315		53,261		57,143		8,828
TOTAL: OWN SOURCE REVENUE		4,846,213		4,839,587		4,980,697		134,484
Unconditional Grants – Canada
Fiscal Equalization Payments		1,665,950		1,665,950		1,665,950		0
Canada Health Transfer		682,400		686,700		686,700		4,300
Canada Social Transfer		267,500		267,500		267,200		(300	)
Wait Times Reduction Transfer		0		0		0		0
Other		1,866		1,866		1,866		0
Sub-total: Unconditional Grants – Canada		2,617,716		2,622,016		2,621,716		4,000
Conditional Grants – Canada		213,415		279,549		274,477		61,062
TOTAL: GRANTS FROM CANADA		2,831,131		2,901,565		2,896,193		65,062
TOTAL: GROSS ORDINARY REVENUE		7,677,344		7,741,152		7,876,890		199,546

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COMPARATIVE STATEMENT OF ORDINARY ACCOUNT EXPENSE

Thousands

$

	Year Ending March 31
	2015			2015			2015			Variance
DEPARTMENT	Estimate			2nd Quarter			3rd Quarter			from Estimate
													$		%
Agriculture, Aquaculture and Fisheries		36,564			37,564			36,484			(80	)		-0.2	%
Economic Development		98,039			98,039			113,389			15,350			15.7	%
Education and Early Childhood Development		1,085,771			1,123,432			1,118,457			32,686			3.0	%
Efficiency New Brunswick		8,699			11,699			12,199			3,500			40.2	%
Energy and Mines		9,130			9,130			8,630			(500	)		-5.5	%
Environment and Local Government		136,903			136,001			136,853			(50	)		0.0	%
Executive Council Office		17,247			17,247			17,097			(150	)		-0.9	%
Finance		17,967			17,917			17,567			(400	)		-2.2	%
General Government		801,776			794,491			795,803			(5,973	)		-0.7	%
Government Services		54,961			59,010			59,010			4,049			7.4	%
Health		2,588,308			2,559,464			2,554,230			(34,078	)		-1.3	%
Healthy and Inclusive Communities		18,537			18,037			17,837			(700	)		-3.8	%
Human Resources		3,514			3,489			3,464			(50	)		-1.4	%
Invest NB		17,638			17,638			8,513			(9,125	)		-51.7	%
Justice		42,699			42,619			42,449			(250	)		-0.6	%
Legislative Assembly		30,001			31,921			31,260			1,259			4.2	%
Natural Resources		101,096			102,096			100,596			(500	)		-0.5	%
Office of the Attorney General		18,178			18,558			18,378			200			1.1	%
Office of the Premier		1,628			1,628			1,628			0			0.0	%
Post-Secondary Education, Training and Labour		593,812			595,755			596,266			2,454			0.4	%
Public Safety		145,468			173,710			173,865			28,397			19.5	%
Service of the Public Debt		685,000			685,000			680,000			(5,000	)		-0.7	%
Social Development		1,092,059			1,100,359			1,097,089			5,030			0.5	%
Tourism, Heritage and Culture		41,218			41,053			41,113			(105	)		-0.3	%
Transportation and Infrastructure		273,447			283,072			282,141			8,694			3.2	%
Subtotal		7,919,660			7,978,929			7,964,318			44,658			0.6	%
Tangible Capital Assets and Interaccount
Transactions		(25,600	)		(31,142	)		(33,765	)		(8,165	)		31.9	%
ORDINARY ACCOUNT EXPENSE		7,894,060			7,947,787			7,930,553			36,493			0.5	%

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COMPARATIVE STATEMENT OF CHANGE IN NET DEBT

Thousands

$

	Year Ending March 31									Variance
	2015			2015			2015			from
	Estimate			2nd Quarter			3rd Quarter			Estimate
Surplus (Deficit)		(391,125	)		(377,170	)		(255,352	)		135,773
Acquisition of Tangible Capital Assets		(528,705	)		(525,929	)		(513,591	)		15,114
Amortization of Tangible Capital Assets		389,124			390,670			391,837			2,713
(Increase) Decrease in Net Debt		(530,706	)		(512,429	)		(377,106	)		153,600

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