March 30, 2004 HOUSE OF ASSEMBLY

PROCEEDINGS Vol. XLV No. 7

The House met at 2:00 p.m.

MR. SPEAKER (Hodder): Order, please!

The hon. the Minister of Finance and President of Treasury Board.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: Mr. Speaker, I move, seconded by the Premier, that this

House approves in general the budgetary policy of the Government.

MR. SPEAKER: The motion is that this House approves in general the

budgetary policy of the Government.

The hon. the Minister of Finance and President of Treasury Board.

MR. SULLIVAN: Thank you, Mr. Speaker.

Introduction

It is my privilege today to present the first Budget of this government under

the leadership of Premier Danny Williams.

Prior to and during the election, we outlined a number of commitments to the

people of Newfoundland and Labrador. I would like to focus today on three major

commitments:

First, to balance the Budget on a cash basis in four years and restore sound

fiscal management;

Second, to expand the economy and create jobs; and

Third, to ensure that our health and education systems meet the needs of

Newfoundlanders and Labradorians and are sustainable into the future.

We will deliver on these commitments. It will not all happen in this Budget

year or the next, but we will get there.

When we came into office less than five months ago, our government fully

expected to find a serious fiscal situation for 2004-2005; but the more

fundamental, and unexpected, problem was the magnitude of the deficits projected

for the coming years, which would cause the debt to grow to a level that would

compromise the fiscal integrity of the Province.

It became clear very quickly that the deficit could not be eliminated by

revenue growth alone, as stated in the 2003 Budget Speech, and that a period of

restraint would have to be endured to turn the deficit momentum around. Mr.

Speaker, no responsible government can ignore the stark arithmetic.

It was equally clear that we would have to refocus government to deliver

enduring public services at lower costs. To be sustainable, government will have

to become more affordable.

The people of Newfoundland and Labrador understand that we have reached this

critical point in our history as a province of Canada and that government must

act now to put its fiscal house in order.

We also know that government cannot do this on its own. It will take a

cooperative effort by government, the entire public service, communities,

business and citizens generally to deal effectively with our financial

challenges, to preserve the fiscal room to deliver high-quality community and

social services, and to maintain a competitive environment for economic growth

and job creation.

Mr. Speaker, this Budget I am presenting today lays out our plan to get the

job done. The plan is reasonable, responsible, and realistic, and demonstrates

this government's commitment to serve the needs of the people by providing

good government.

SOME HON. MEMBERS: Hear, hear!

Clear Priorities

MR. SULLIVAN: Mr. Speaker, Newfoundlanders and Labradorians want

government to spend their money in ways that make sense to them and mirror their

values. To do that, government's deficit reduction plan must be guided by

their priorities.

First, they want us to focus on reducing costs by doing things better, not by

raising income taxes or by cutting services that they need and that reflect

their core values.

Second, they want to make sure we continue to have strong economic growth and

job creation.

Third, they want people treated fairly and equitably.

Fourth, they want decisions made openly and performance results reported

accountably in accordance with measurable standards.

And fifth, they want to make sure the legacy we leave our children is fiscal

stability and sustainability, not an unmanageable burden of debt.

With these priorities of Newfoundlanders and Labradorians as our guide, we

have produced a budget strategy that will pull the Provinces's finances back

from the brink and protect the future of Newfoundland and Labrador.

SOME HON. MEMBERS: Hear, hear!

Our Opportunity

MR. SULLIVAN: Mr. Speaker, in recent years, government has created a

serious problem with money management. It has not been a good steward of the

taxes that Newfoundlanders and Labradorians pay every year for the services they

need and value. We can and will do better, much better. That is what our plan is

all about.

The good news is that our economic fundamentals are strong. We have a good

base upon which we can build as we endeavour to secure a better future for

ourselves and our children. The economy is expanding, becoming more diversified

and competitive, and creating more jobs every year. Newfoundlanders and

Labradorians want to keep it that way, and so does the government.

We see tremendous new opportunities emerging in the years ahead in our

resource sectors, such as agrifoods, aquaculture, mining, energy, oil and gas.

We see tremendous new opportunities in information technology, research and

development, the environment, tourism and culture.

We see tremendous new opportunities for growth and job creation in the small

business sector, a vital generator of economic activity in our communities.

Clearly, the development opportunities before us are substantial.

Our Challenge

Mr. Speaker, the people of the Province have always known that our rich

natural and human resources can be a magnet for economic opportunity, but they

have also felt something was not right. They knew, intuitively, that government's

financial course was unsustainable and that this was a huge hindrance to

economic growth. Yet, the previous government was reassuring them that all was

well.

Today we know differently.

In November, the new government commissioned an independent assessment of the

Province's finances by the chartered accounting firm of PricewaterhouseCoopers.

Their report, which was released to the people of the Province in January,

revealed that the fiscal outlook for the next four years - 2004-05 to 2007-08 -

was much worse than anyone outside government expected or imagined.

The report showed that we faced an average cash deficit over the next four

years of more than $660 million a year and an average accrual deficit of almost

$1.1 billion a year. By 2007-08, the cash deficit would exceed $700 million a

year with no relief in sight.

Let me put this in historical context. The cash deficit exceeded $300 million

only twice in our history, and has never exceeded $350 million. For each of the

next four years, we were looking at cash deficits twice the size of the biggest

deficit in our history.

Left unchecked, the net debt of the Province would reach $15.8 billion by

2007-08. When compared to our $6 billion debt in 1992-93, this would represent

an increase in net debt of 163 per cent. By 2007-08, the higher debt load would

cost the Province an additional $150 million in interest payments every year.

Mr. Speaker, the government finds itself in this position largely for four

reasons: One, a long-term pattern of consistently spending more than the

government could afford; Two, a reliance on one-time money to fund ongoing

programs; Three, spiraling health costs that are growing at more than double the

rate of growth in government revenues; and, Four, unilateral changes in federal

transfers, which reduced the federal government's share of the cost of health,

education, social services and equalization.

PricewaterhouseCoopers, using the same figures the previous government had in

their possession before they left office, estimated a cash deficit of $602

million and an accrual deficit of $989 million for the coming year.

Mr. Speaker, this is what we have inherited.

It represents an enormous challenge, but we are absolutely committed to

getting our financial house in order.

The year ahead, 2004-05, is the first year of our four-year plan. The actions

we take in this Budget will reduce the deficit projected in the

PricewaterhouseCoopers report by 40 per cent, from $602 million to $362 million.

The accrual deficit will fall from $989 million projected to $840 million.

Despite our best efforts, the cash deficit for 2004-05 will still be the

largest in the history of this Province.

In the following years, the full impact of the government's restructuring

strategy and program renewal will kick in, and we will move, progressively, to a

zero cash deficit by 2007-08.

Restoring Fiscal Health

Mr. Speaker, we must bring the deficit progressively and strategically lower

each year in order to protect the Province's credit rating. While our economic

prospects remain strong, this alone will not insulate government from having to

maintain a responsible fiscal position. The consequences of a rating decline

would be higher interest rates, reduced access to capital markets and increased

exposure to foreign exchange fluctuations. For example, if our credit rating

fell below investment grade this year, and our borrowing rate increased in the

range of 2 to 3 per cent, it would cost us anywhere from $200 million to $300

million in additional interest payments cumulatively to 2007-08, money that we

could not raise except by cutting public services. The sense of urgency has been

communicated to us by our fiscal agents. It is far better that we address the

situation now on our own terms than let others dictate severe measures later.

We face an historic challenge, and the actions we take must be equal to that

challenge. We entered the 2003 election campaign with a commitment to eliminate

the cash deficit by 2007-08 and to put the accrual deficit on a steady downward

trend. Mr. Speaker, we will honour these commitments. Their achievement will be

the responsibility of this government. In March 2007, this government will

present the people of this Province with a budget that is balanced on a cash

basis and that will be sustainable into the future.

To eliminate the cash deficit and rein in the accrual deficit, the Province

needs two things: spending control and stronger economic growth. Our plan will

accomplish both.

Mr. Speaker, our plan begins the process of restoring fiscal integrity in

2004-2005. It initiates measures now that will contribute to a deficit reduction

strategy over the next four years. It puts in place a program renewal initiative

to be completed before the next budget that will go beyond seeking more

efficiencies and should be a catalyst for change by re-focusing government

programs and services to also be more relevant, effective and citizen-centred.

By delivering on our commitment to present multi-year fiscal plans, the

government has given the people of the Province a clearer picture of the

Province's true fiscal outlook and the flexibility we have to act on people's

priorities.

Our efforts to reduce the cash deficit have not been easy. We have had to

make some very difficult decisions; and we have more difficult decisions to

make.

Mr. Speaker, in developing our fiscal plan, we applied four general

principles.

First, given our already-high rates of taxation and the need to preserve

competitiveness in our economy, we avoided increases in personal income tax,

sales tax, and business and payroll taxes.

Second, given the importance of economic growth, we emphasized strategic

spending in areas that will boost economic development.

Third, given the importance of protecting the vulnerable in society, we

avoided expenditure reductions in areas of critical social services and added

new strategic expenditures.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: Fourth, we emphasized the importance of seizing

efficiencies by reducing administrative and overhead costs while protecting

front-line services.

Mr. Speaker, the path we are taking is a tough course, but it is the right

course.

Spending restraint and some very limited revenue measures will eliminate the

cash deficit by 2007-2008.

We are on target for a zero cash deficit on 2007-2008 because of the tough

deficit control decisions we are taking, starting this year.

We have started at the top. Government has reduced the number of ministries

and the number of executive positions.

We will delay opening The Rooms for one year for a savings of $2 million.

We will cancel work on the West Coast Exhibition Centre in Corner Brook for

an estimated savings of $4.8 million.

We are cancelling several health projects, namely the extension to the Grand

Falls-Windsor hospital, the James Paton Hospital redevelopment in Gander, and

the health centre at Grand Bank.

We are cancelling the new elementary school for L'Anse au Loup and

postponing work at Herdman Collegiate in Corner Brook, Leary's Brook Junior

High in St. John's, and Mobile Central High in Mobile.

We have asked Memorial University and the College of the North Atlantic to

each identify $2 million in expenditure reductions this year.

We have asked the Newfoundland and Labrador Liquor Corporation to identify $5

million in savings over the next four years. We have also asked the Corporation

to produce another $6 million in revenue to government this year.

We will decommission and close the Salmonier Correctional Institution, which

would require major repairs to remain open, and close a unit at the Newfoundland

and Labrador Youth Centre at Whitbourne that is not needed because of a decline

in the number of residents at the facility.

Mr. Speaker, with the major changes in the delivery of income support over

the past few years, much of the existing service delivery network, originally

designed in the 1960s, has become outdated. Transportation systems have improved

since then, and advances in communications and computer technology have opened

up new ways of doing business. Instead of clients having to visit an office to

have their needs met, they may use mail-in applications. Soon, the use of

telephone technology will allow clients to access the Income Support Program

from their own homes. Payments to clients will be made more efficiently from a

new client automated payment system. These advances will enable government to

consolidate and close twenty Human Resources, Labour and Employment offices

across the Province for the next six months. With these changes, it will be

possible to place a greater emphasis on enhancing the delivery of employment and

career services.

We will reduce Municipal Operating Grants by $5 million over three years

beginning with a $2.1 million reduction on the first of January 2005. In year

one, only fourteen municipalities will be affected. Municipalities with smaller

revenue bases will not be affected.

We will eliminate winter and summer cabin road maintenance for a saving of

$800,000.

We will cancel the "We're Doing It Right Here" campaign for a

saving of $500,000.

We will implement a range of fee increases with a view to cost-recovery.

Among the fee increases announced today, I would like to draw attention to

motor vehicle registrations. It is widely acknowledged that we face a

significant challenge in the Province to invest adequately in public

infrastructure. The PricewaterhouseCoopers report pointed out that 35 per cent

of our paved roads are more than twenty years old and it costs ten times more to

reconstruct a road than to carry out regular maintenance. It has been past

practice to delay regular maintenance, like re-paving, to save money in the

short term. However, all this neglect does is create much bigger expenditures

later. No money could be found within the existing budget to invest in

preventative maintenance. Yet it makes much more sense to spend one dollar now

if it will save us ten dollars later. The logical place to look for money for

roads was from vehicle owners and drivers or fuel taxes. We chose to raise the

necessary funds through vehicle registrations. This allows us to allocate an

additional $7 million in this budget to the provincial roads program, increasing

the total funding allocation by 30 per cent from, $23 million to $30 million.

This incremental investment is particularly important at this time since the

money the Province has received under the Roads for Rail Agreement since 1988 is

exhausted.

There are no increases in the rates of personal income tax or corporate

income tax in this budget.

The only contribution to deficit reduction from the tax system will come from

the taxation of tobacco, a discretionary spending item. The burden smokers place

on the health care system is well known, as is the impact high rates of taxation

have on encouraging people to quit smoking and discouraging young people from

starting. The way tobacco is marketed has necessitated a realignment of how we

tax tobacco. The tax rate on fine-cut tobacco is much lower than on manufactured

cigarettes given the actual quantity of tobacco now utilized in a home-rolled

versus a manufactured cigarette. This creates what amounts to a tax loophole

that we are starting to close today. Effective midnight tonight, the tax rate

per gram on fine-cut tobacco will increase from fifteen cents to twenty cents.

The tax rate for each manufactured cigarette will increase from fifteen cents to

sixteen cents. These rate increases will raise an additional $11.3 million a

year.

These are just some of the measures we are taking this year in order to

protect the Province from the consequences of the spiraling deficit.

Mr. Speaker, an inevitable result of any significant fiscal restraint

exercise is some impact on jobs. Almost two-thirds of government's

discretionary expenditures are salaries. There will be fewer positions in the

public sector as a consequence of the measures in this Budget. We have taken

extraordinary measures and incurred significant costs to protect jobs. Our

fiscal advisors have warned us that significant measures would be needed this

year to protect our fiscal position from grave damage. Because the deficit is so

great and because wages constitute such a large portion of annual spending, this

year's budgetary measures will necessitate a workforce adjustment.

Out of the entire public service of 32,000 employees, the number of

bargaining unit positions impacted is about 400, or slightly more than 1 per

cent. Every effort will be made to offset the impact on employees through

attrition. It is estimated that 1,500 positions will become vacant this year

through retirement and natural turnover. We will work diligently with

departments, boards and agencies to reduce the number of actual layoffs and to

help displaced employees find alternate employment.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: Over the next four years to achieve our deficit targets and

to keep our commitment to no massive layoffs, we estimate there will be 4,000

fewer positions throughout the public service. With over 6,000 positions

estimated to become vacant over the next four years through retirement and

normal attrition, we will make every attempt we can to have an orderly reduction

in the size of the public service. It is our intention to minimize the number of

layoffs in any downsizing. Obviously, some people who retire will have to be

replaced as their positions involve contributing to a public service that must

be maintained. Retirements and attrition do provide the opportunity, however, to

replace employees who are leaving of their own choice with employees who are

displaced elsewhere. Programs are being put in place to manage this matching

exercise so displaced employees will have the opportunity for re-employment

elsewhere in the public service.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We are committed to working with our unions to ensure a

successful outcome.

Affordable Government

Mr. Speaker, as significant as these deficit reduction measures are, they are

only a part of what we must do to achieve fiscal health. Our fiscal problem is

structural, and our remedies must be structural as well. That is why we must

make permanent changes in how government works. Our objective is to provide

efficient, modern services to the people of Newfoundland and Labrador at costs

they can afford. That is the key to enduring fiscal health and sustainable

public services.

We will establish a process of program renewal in order to re-focus programs

and better prioritize where additional investment and enhanced services may be

needed. Program renewal is not about doing less, although cost efficiencies must

be achieved. It is about deciding what needs to be done and doing it better.

Program renewal gives us the opportunity to focus government expenditures to

strengthen the services that people value the most. It also provides the

opportunity to free up funds to invest in economic development initiatives that

will increase opportunities and revenues. Each department of government will

undertake an examination of its mandate and operations, including all the

boards, agencies, commissions and Crown corporations that report to it. The

program renewal process will promote cooperation throughout government, greater

innovation, linkages between social and economic programs, and meaningful

consultation with stakeholders. It will ensure that programs and services are

more relevant, effective and citizen-centred. A special committee of ministers

will consider program renewal proposals throughout the fall and report to

Cabinet in time for next year's budget. While program renewal will be an

open-ended and constructive process, we will remain on target to reduce the cash

deficit in 2005-2006 and 2006-2007 and eliminate it by 2007-2008.

One of the issues that will be examined in the program renewal exercise is

the way that we administer the regional delivery of services. Health, education,

income support, human resources and many other programs reach out to every

region of the Province in order to ensure access to government services. We need

to ask whether there are cross-sectoral opportunities for better or more

efficient service delivery. Can we provide better access to government services

through the application of technology? Can we improve access by using existing

facilities as places to obtain multiple government services rather than as

single-purpose facilities, which are too often the norm? Innovative thinking in

government service delivery will become a regular feature of this government's

approach.

To enable the people of the Province to better assess the government's

performance in achieving its fiscal targets and program objectives on a

go-forward basis, we will bring to the Legislature a transparency and

accountability bill and enact legislation to increase public access to

information.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: This shift towards greater transparency and accountability

will enable the government to identify and address problems before they worsen.

Securing Social Programs

In the face of fiscal challenges, our government is particularly cognizant of

the need to protect valuable social programs. Strong social programs not only

meet the needs of the most vulnerable people in our society, but they also

provide jobs, promote investment and strengthen our economy. We remain committed

to respecting the five principles of the Canada Health Act, revitalizing our

education system, and reducing the rate of child poverty to the lowest in the

country. These commitments are significant cost drivers. We will not achieve

them unless we can better manage the growth in costs and expectations.

Health

Mr. Speaker, the first priority for the people of this Province, and indeed

the entire country, is to have access to quality health care. People want to

know that health care services will be available when they need them. As a

provincial government, we have an obligation to make sure health care is well

managed and efficient so that the best possible services are provided for the

funds available. Right across the country, there is a recognition that our

health care system requires reform in order to remain sustainable.

To strike the right balance between quality health care and an efficient,

sustainable system, the provincial government is adopting a health strategy

consisting of four parts.

First, an integrated, efficient and smaller governance structure will be

adopted. Research shows that integrated governance which joins community health

services with acute health care services can produce the best overall approach

to health care delivery. Therefore, during the course of 2004-2005, the

Department of Health and Community Services will oversee a process of board

integration. The time is appropriate and we are now positioned to have fewer

governing authorities to provide totally integrated services in defined regions

of the Province.

Second, a fair and equitable approach to locating health services will be

established. Rural communities need assured access to well-resourced primary

health care centres within a reasonable driving distance from their homes.

People will benefit from the clustering of physicians and other care providers

in strategic locations because it will improve recruitment and retention which

means stability and continuity of service. Provincial criteria for locating

specialty services will also be devised.

Third, the Province will develop a skill mix framework to ensure that the

right mixture of health care professionals is available in health care

facilities to deliver high-quality and effective services. It will also ensure

that each health care professional is working in a job that utilizes the highest

level of skill for which he or she has been trained. This framework will take

into account the skill mix standards and experiences in other jurisdictions.

Fourth, a "best practices" culture will be developed throughout the

health and community services system to continuously evaluate all areas of

clinical and support services to improve effectiveness and efficiency. Building

upon and learning from our experiences and what works best in other

jurisdictions must become part of a culture of improvement.

Together, these measures will ensure the health system of the future

maintains both quality and access. They will also ensure that the health system

is managed within the funds available from government without placing the

financial stability of the Province at risk.

Mr. Speaker, several specific health initiative in this year's Budget will

enhance the quality of care available to many.

We will provide $4.3 million this year to implement seven primary health care

projects and allow expansion for the development of additional primary health

care networks.

We will implement year five of the Personal Care Home Strategy in order to

increase personal care home rates for those who provide care to our seniors.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We will provide $200,000 to establish the new Ministerial

Advisory Council and Division of Aging and Seniors within the Department of

Health and Community Services.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We want to ensure that the needs and concerns of seniors

are properly understood and addressed.

We will provide an $8.6 million increase in the provincial drug program.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: This includes an allocation of $800,000 to cover a new

chemotherapy drug, Gleevec, to help fight cancer.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We will establish a new Chief Nurse position within the

Department of Health and Community Services.

We will provide another $500,000 a year to place additional social workers in

Labrador.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: And, having heard the recommendations of the Reid-Power

inquiry, we will make an additional allocation of $1 million in support of

community mental health services.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We are pleased to be able to start to address this widely

acknowledged area of need in our health system.

Education

Mr. Speaker, public education is another of government's most important

responsibilities.

We began by consolidating two departments, bringing responsibility for the K

to 12 system and the post-secondary education system back together. The K to 12

system has seen a steady decline in enrolments, a trend that is expected to

continue in the foreseeable future. Since 1996, educational reform has seen the

number of schools in the Province reduced by 29 per cent. Student enrolment has

declined in the same period by 23 per cent and is forecast to decline into the

foreseeable future. Yet the number of teachers has been reduced by only 17 per

cent.

After extensive stakeholder consultations, the Sparkes-Williams report

recommended a teacher allocation formula that takes into account many factors,

including the challenges faced by many small rural schools. The full

implementation of the Sparkes-Williams report has already been deferred for

several years. We will continue to defer full implementation until the

commencement of the September 2005 school year to allow school boards time to

incorporate the adjustments into their staffing plans.

Under the Sparkes-Williams formula, 365 teaching positions would be

eliminated this year. However, we have opted to spread the impact over two

years. Instead of the number of teaching units declining this year by 365, 256

units will be removed, leaving 109 additional teachers in the classroom for

another year.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: To ensure that students in all areas of the Province have

the best possible access to specialized teachers and subjects, funding will be

increased for distance education teachers and the number of courses offered

online. Even after the adjustments for declining enrolment we will continue to

have the best teacher-pupil ratio in the country this year.

From an employment perspective, we anticipate that more than enough teachers

will retire this year and next so that no teacher layoffs should be required to

meet the Sparkes-Williams targets.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: Though pupil enrolment numbers have been declining, the

number of school board districts and administration staff has remained constant.

We will reduce the number of school boards by September of this year from eleven

to five, for an anticipated savings of about $6 million annually.

Our government will make strategic investments this year in educational

infrastructure. Some $22 million will be available for major capital

construction projects to improve existing schools and construct new facilities.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: Our commitment to education extends from early childhood to

postsecondary schooling. We will provide funding this year for the creation

of a Ministerial Council on Early Childhood Learning to foster comprehensive

programs across all government departments and agencies that focus on the

learning needs of children and their families.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: At the university and college level, the government has

already announced a White Paper on Post-Secondary Education to examine such

this year to allow the White Paper to proceed.

The government has also continued the freeze on tuition fees at Memorial

University and the College of the North Atlantic.

SOME HON. MEMBERS: Hear, hear!

Help for Those Who Need it Most

MR. SULLIVAN: Mr. Speaker, our social policy initiatives will assist the

most vulnerable people in our society.

As of January 2005, we will implement a low-income personal income tax

reduction program. The program will provide up to $460 a year to those who are

eligible. That is nearly $40 a month. We estimate that up to 30,000 of the

Province's taxpayers could receive a full or partial reduction under this new

measure and realize $5.3 million in tax savings for these people.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: For the most part, this will put more money back in the

hands of the low-income working people, students and seniors, some of the most

financially disadvantaged people in our society.

We will also begin automatically indexing both the Newfoundland and Labrador

Child Benefit and Seniors' Benefit to the Consumer Price Index commencing in

2004, for a combined increase in both benefits of $400,000.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: This will further increase our financial support for

low-income families with children and for seniors.

The government will provide a benefit enhancement for people eligible for the

Mother Baby Nutrition Supplement. Eligible mothers of newborn babies will be

given $90 at the time of the birth of their child to address the additional

costs at this critical period.

The Departments of Health and Community Services and Education will partner

on a $250,000 "Healthy Children - Healthy Schools" program to ensure

that the school environment is conducive to healthy learning.

We will provide $500,000 for the Kids Eat Smart Foundation.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: Government will provide an extra $1.6 million in 2004-2005

to further enhance the Child Care Services Subsidy Program.

To assist persons with disabilities to enter the workforce, we will provide

an additional $400,000 for supported employment.

We are providing an additional $100,000 to address gambling addiction, with

particular focus on video lottery terminals, or VLTs.

We are committing $212 million for core income support programs to assist

28,500 cases throughout our Province.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: In recognition of the special challenges that women face in

our society, we will be increasing funding for the Women's Advisory Council

and for seven Women's Centres located throughout the Province.

SOME HON. MEMBERS: Hear, hear!

Policing and Justice

MR. SULLIVAN: Mr. Speaker, to better protect people, as outlined in our

Throne Speech, we are providing more officers for the Royal Newfoundland

Constabulary and the Royal Canadian Mounted Police.

We will enter into a three-year commitment to train seventy-five new RNC

officers at Memorial University.

We will provide $2.25 million by 2007-2008 to hire forty-five new RNC

officers.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We are also providing funding for an additional four RCMP

officers in Labrador.

On top of this, both the RNC and the RCMP will receive additional funding for

new equipment and training totalling approximately $1.5 million. Some of this

equipment and training was recommended by the Reid-Power inquiry.

We are providing an additional $300,000 to the RNC for the purchase of new

vehicles. The total allocation for 2004-2005 will be in excess of $600,000.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: And in Labrador, we will provide $2 million for the Supreme

Court in Happy Valley-Goose Bay.

These are just some of the positive social policy initiatives with which we

will be proceeding in the year ahead.

Investing in Our Future

In challenging fiscal times, restoring fiscal health is a necessary and an

urgent means of protecting core social services. We recognize the fundamental

link between economic and social policy. On the one hand, social programs

produce jobs, generate economic activity and attract investors. On the other

hand, sound economic policies get businesses growing, get people working and

generate revenues we need to place our social programs on a more secure footing.

It is critical that we get our social and economic strategies working hand in

hand.

Mr. Speaker, that is why we are committed to building a sustainable,

diversified economy in which people and communities throughout the Province can

prosper and social programs can thrive. To get there, the government's

approach to economic growth and recovery will be aggressive on many fronts and

tied together by an innovation strategy.

We will strengthen the fundamentals, such as access to capital, access to

well-qualified workers, and access to technology that businesses need to stay

competitive.

We will invest in sectoral strategies that promote growth in tourism,

culture, our renewable resource sector and our extractive resource sector, where

local firms can build on local employment and industrial benefits to become more

competitive globally.

We will support these sectoral strategies with policies that improve our

business environment and brand Newfoundland and Labrador as a place of thriving

entrepreneurship and economic potential. We will ensure a competitive tax

environment, a competitive regulatory system, and an efficient government sector

that supports business opportunity.

And we will relentlessly pursue business investment from outside the

Province, targeting opportunities in a strategic fashion, and selling

Newfoundland and Labrador as a good place to do business.

Leadership on business growth will come from the top. We are dedicating $1

million to establish a new Department of Business, led by the Premier to play a

leading role in attracting new business and investment to the Province.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We will establish a Newfoundland and Labrador Office of

Federal-Provincial Relations in Ottawa to give the Province a stronger presence

there and to focus attention on our concerns about equalization, transfers,

resource benefits, and the numerous other issues that affect our people and our

economy.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: The new approach is about seizing control of our own

destiny. To that end, we will proceed with strategic investments in various

sectors of the economy to stimulate growth and job creation.

In fisheries, we are moving quickly to implement the recommendations of the

Dunne report to strengthen our fish processing sector by allocating $1.25

million to these initiatives in this budget.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: The cost will be fully offset by the industry. We will also

provide $1 million to preserve the Province's contribution to fisheries and

aquaculture development.

In the agrifoods sector, we will provide our share of funding for year two of

the Agricultural Policy Framework Agreement. We will also provide $500,000 for

land development in order to allow farmers to lease land that is not currently

being used for agricultural purposes.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: And, in order to develop Labrador's agrifoods potential,

the government will soon finalize its Northern Agrifoods Development Strategy.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: In the energy sector, we will allocate $80,000 to being

preparing a much needed comprehensive energy plan for the Province.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: In the forestry sector, we will invest $7.3 million in a

silviculture program to help promote sustainable development of our forest

resources.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We will also maintain funding for the resource roads

program, which provides access to timber stands to provide fibre for our paper

mills and logs for the sawmilling industry.

To protect our environment, we will undertake to clean up the old military

site at St. Anthony.

To promote year-round tourism, we will add $1 million to the annual tourism

marketing budget -

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: - and increase that sum each year until our marketing

effort matches that of the Maritime provinces.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: To promote our cultural industries, we will provide

$825,000 to complement Ottawa's $1.5 million to grow this sector.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We are also providing $150,000 this year for the French

Heritage Celebrations and a $250,000 grant for the Heritage Foundation of

Newfoundland and Labrador to continue its valuable work.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We will also provide $200,000 this year for the Music

Industry Association of Newfoundland and Labrador.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: In recognition of the key role innovation must play in

building a stronger economy, we are allocating $200,000 for the development of a

comprehensive innovation strategy. We will also invest in broadband internet

infrastructure in rural areas.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: This will better serve our communities in rural

Newfoundland and Labrador to make them more attractive to investors.

In view of the importance of transportation infrastructure, we will provide

an additional $7 million to bring the Provincial Roads Program to $30 million.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We will also provide $24 million to complete Phase II and

commence Phase III of the Trans-Labrador Highway. We will provide $15.1 million

for the Strategic Highway Investment Program, targeting the Trans-Canada

Highway.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: These investments will promote economic growth

opportunities that can create new jobs and new revenues.

We will also invest $1.5 million in capital improvements to Island ferry

terminals and $750,000 for maintenance and upgrades of ferry terminals in

Labrador. Regarding the vessels themselves, we will provide $2.4 million for the

ferry vessel refit program.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: To improve the safety of our highways, we are providing

$430,000 for year one of a three-year Road Weather Information System to assist

winter maintenance crews by more precisely predicting when and where to apply

sand and salt.

Mr. Speaker, many of these initiatives will target rural areas, where the

need for new opportunities is greatest.

Let me focus in particular on an important initiative that we are undertaking

this year to draw our social and economic agendas together. We are allocating

$1.7 million in this Budget for the establishment of a Rural Secretariat, a

focal point in bringing government and community leaders together to enhance

rural social and economic development.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: The Secretariat's overriding goal is to strengthen our

rural communities and develop strong regions. The $1.7 million will be focused

on promoting longer-term, sustainable development activities.

Our government's efforts to stimulate the economy are sound, though

relatively modest at this stage. However, we will build on these initiatives as

we create the fiscal room to better support the priorities of Newfoundlanders

and Labradorians.

Conclusion

Mr. Speaker, our government entered office in November with a vision and a

plan to put government on a sound financial footing, protect our social

programs, strengthen our economy and create new jobs.

What we discovered was a financial crisis much worse than we had been led to

expect.

But the financial crisis has not thrown us off course. Quite to the contrary,

it has strengthened our resolve to clean up the mess and put Newfoundland and

Labrador on a secure path towards real growth and self-reliance.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: More than anything, this financial crisis demonstrates why

the new approach is long overdue. If we had continued down that path, we would

have jeopardized our financial integrity, undermined the social programs on

which our people rely, and bequeathed to our children an unmanageable level of

public debt. How could any responsible government allow that to happen?

Rather, we have taken decisive action to solve this crisis, not overnight,

but progressively over time. We have brought forward a balanced, responsible,

realistic and sustainable plan to get us there. The new approach protects social

programs without compromising our fiscal integrity. The new approach invests in

golden opportunities to grow our economy, attract new investment, create new

jobs and generate new revenues that will pay for stronger social programs in

years to come.

Our focus is on protecting the future of Newfoundland and Labrador, and

nothing we do this year will compromise that. In fact, we will be able to look

our children and our grandchildren in the eye and tell them we made the best

choices in difficult times.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We did it to protect all Newfoundlanders and Labradorians,

and their Province is stronger because we did.

Ours is a two-pronged approach: protecting people and social programs while

advancing opportunites for new growth. As the Premier stated in his State of the

Province address in January, we, as a government, are prepared to take

initiatives to create new investment, new opportunities and new jobs in

Newfoundland and Labrador. We are investing in economic development and job

creation, despite our fiscal circumstances, because job growth means revenue

growth, and that in turn means more money for health care and education.

We promised a new approach, and we are delivering on that promise.

We promised to protect the most vulnerable people in our society - our

seniors, children, students, the disabled, the unemployed and the working poor -

and we are delivering on that promise.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We promised to put our social programs on a secure,

sustainable footing so they will be there when people need them, and we are

delivering on that promise.

We promised to invest in infrastructure and new opportunities for

diversification, and we are delivering on that promise.

We promised good government, transparency and accountability, and we are

delivering on that promise.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We promised to get the Province's fiscal house in order

to protect our people and their social programs from serious threats, and we are

delivering on that promise.

SOME HON. MEMBERS: Hear, hear!

MR. SULLIVAN: We are taming the fiscal tiger while, at the same time we

are preparing to unleash an economic tiger that will bring prosperity and

opportunity to communities and people throughout Newfoundland and Labrador.

This year's budget is a foundation for optimism. It is the foundation for

hope.

We have set our sights high and would settle for nothing less than the best

that can be achieved through hard work and an unshakeable belief in ourselves.

That is the new attitude - the new approach - and that is what is going to turn

opportunity into prosperity for Newfoundland and Labrador.

I move that the debate be adjourned.

SOME HON. MEMBERS: Hear, hear!

MR. SPEAKER: The motion is that the debate be adjourned. You have heard

the question.

All those in favour.

SOME HON. MEMBERS: Aye.

MR. SPEAKER: All those against.

Motion carried.

The hon. the Minister of Finance and President of Treasury Board.

MR. SULLIVAN: Mr. Speaker, I wish to inform the House that I have

received a message from His Honour the Lieutenant-Governor.

MR. SPEAKER: All rise.

The following message is addressed to the hon. the Minister of Finance, dated

25 March 2004:

"As the Lieutenant-Governor of the Province of Newfoundland and

Labrador, I transmit Estimates of sums required for the public service of the

Province for the year ending 31 March 2005, in the aggregate of $3,704,240,200,

and in accordance with the provisions of Sections 54 and 90 of the

Constitutional Act, 1867, I recommend these Estimates to the House of

Assembly."

Signed _______________________________

Edward Roberts, Lieutenant-Governor

The hon. the Minister of Finance and President of Treasury Board.

MR. SULLIVAN: Thank you, Mr. Speaker.

I move that the Message, together with the Estimates, be referred to a

Committee of Supply.

It is moved and seconded the Message from His Honour the Lieutenant-Governor,

together with the Estimates, be referred to a Committee of Supply and that I do

now leave the Chair.

All those in favour.

SOME HON. MEMBERS: Aye.

MR. SPEAKER: All those against.

Motion carried.

Committee of the Whole

CHAIR(Fitzgerald): Order, please!

We should now take a few moments to distribute the budgetary documents to all

hon. members.

CHAIR: The hon. the Government House Leader.

MR. E. BYRNE: Thank you, Mr. Chairman.

Mr. Chairperson, I move the Committee rise, report progress and ask leave to

sit again.

CHAIR: The motion is that the Committee rise, report progress and ask

leave to sit again.

All those in favour?

SOME HON. MEMBERS: Aye.

CHAIR: Against?

Motion Carried.

On motion, that the Committee rise, report progress and ask leave to sit

again, Mr. Speaker returned to the Chair.

MR. SPEAKER (Hodder): The hon. the Member for Bonavista South and Deputy

Speaker.

MR. FITZGERALD: Thank you, Mr. Speaker.

Mr. Speaker, the Committee of Supply have considered the matters to them

referred, have made some progress and ask leave to sit again.

MR. SPEAKER: The Chairperson of the Committee of Supply reports that the

Committee has considered the matters to them referred, have made some progress

and ask leave to sit again.

When shall the Committee have leave to sit again?

AN HON. MEMBER: Tomorrow.

MR. SPEAKER: On tomorrow.

On motion, report received and adopted, Committee ordered to sit again on

tomorrow.

Notices of Motion

MR. SPEAKER: The hon. the Minister of Finance; President of Treasury

Board.

MR. SULLIVAN: Thank you, Mr. Speaker.

I give notice that I will on tomorrow move that the House resolve itself into

a Committee of the Whole to discuss certain resolutions respecting the

imposition of taxes on tobacco, Bill 13.

MR. SPEAKER: The hon. the Premier.

PREMIER WILLIAMS: Mr. Speaker, I give notice that on tomorrow I will move

the following Private Members' Resolution:

WHEREAS the main purpose of the Atlantic Accord for Newfoundland and

Labrador, according to paragraph 2(c), is to become the principal beneficiary of

the oil and gas resources off its shores; and

WHEREAS that condition has not been met;

acknowledge and honour its obligation under the Atlantic Accord to ensure

Newfoundland and Labrador is the principal beneficiary of the oil and gas

resources off its shores; and

BE IT FURTHER RESOLVED that this hon. House call upon the Government of

Canada, specifically, to allow Newfoundland and Labrador to receive 100 per cent

of the provincial revenues from oil and gas off its shores.

SOME HON. MEMBERS: Hear, hear!

MR. SPEAKER: The hon. the Government House Leader.

MR. E. BYRNE: Thank you, Mr. Speaker.

I move that the remaining Orders of the Day do stand deferred and that this

House on its rising do now adjourn.

MR. SPEAKER: It has been moved and seconded that this House do now

adjourn.

Is it the pleasure of the House to adopt the motion?

All those in favour?

SOME HON. MEMBERS: Aye.

MR. SPEAKER: All those against?

This House now stands adjourned until tomorrow at 2:00 of the clock in the

afternoon, when we shall debate the resolution put forward by the hon. the

Premier.

On motion, the House at its rising adjourned until tomorrow, Wednesday, at

2:00 p.m.