RICH MAN, POOR MAN; Surplus: Finance minister defends tax
hike even though the province took in an extra $236M
New Brunswick Telegraph-Journal
Sat 29 Sep 2007
Page:
A1
Section: News;News
Byline: DANIEL MCHARDIE TELEGRAPH-JOURNAL

Finance Minister Victor Boudreau is defending a
controversial decision by the Liberal government to raise taxes this year even
after learning the province reaped a $236-million surplus.

The province released its 2006-07 audited financial statements on Friday, and
the massive surplus was a stark contrast to the gloomy financial picture
Boudreau painted shortly after the Liberals came to power in October.

"There is no question there is a bit of luck here, but I think we proved to
be good fiscal managers," Boudreau said. "It is not how a year begins that is
important, it is how the year ends. We were there for the second half of the
year. We made decisions that weren't always the most popular decisions, but were
decisions we felt were in the best interest of the province of New Brunswick."

The financial statement reviewed by Auditor General Mike Ferguson began under
the former Conservative government and concluded under Boudreau and Shawn
Graham's Liberals.

The Department of Finance commissioned Grant Thornton to review the books in
late 2006, a gambit often employed by new governments to offer a fresh opinion
of the financial state of the province. The consultant returned in December with
a dismal outlook, forecasting a $17.6-million deficit and a $156.7-million
increase in net debt in 2006-07.

Now that the audited statement shows a $236-million surplus and a $136-
million decrease in net debt, Boudreau is defending his department's forecasting
skills, pointing to a C.D. Howe Institute report that gave New Brunswick top marks for
its ability to budget for revenue and expenses.

That Grant Thornton report also warned that the province was heading for a
projected $300- to $416-million deficit in 2007-08, which spurred the Liberals
onto raising personal, corporate and small business taxes in the March budget.

Such wild fluctuations prompted Conservative MLA Bruce Fitch to use the
financial statements to accuse the Liberals of raising taxes unjustifiably.

"They said we need to raise the taxes, we need to go to the public and
increase their taxes because of this $400-million deficit," Fitch said. "That is
why they're rolling it out on a Friday afternoon, it's because it's an
embarrassment to them."

The surplus in one fiscal year must be put against the debt and cannot be
brought forward to balance off any potential shortfalls in a future year.
Driving up the surplus was the $112.2 million produced by the Metallic Minerals
Tax, thanks to the soaring price of zinc, $109.6 million in income taxes
reflecting previous underpayments by the federal government and NB Power
exceeding its financial expectations.

Boudreau said the Liberals took immediate measures to staunch the financial
problems in the previous fiscal year, but said the decision to raise taxes was
to offset the worrying challenges on the horizon.

With the latest debt payment, the province now has a net debt of $6.5 billion
compared to $6.7 billion in 2002.

The province's four-year cumulative surplus is $597 million, which is tracked
by the Fiscal Responsibility and Balanced Budget Act that requires the
government to keep the books balanced over that period.

Another major force behind the province's strong year was a $64.7 million
improvement in net income recorded by the New Brunswick Electric Finance Corp.,
the provincial body that oversees NB Power's finances.

NB Power also released its financial statements for 2006-07 on Friday showing
the group of companies posted a $21-million surplus in 2006-07. The company said
the strong financial results were guided by unanticipated revenues generated by
their nuclear, thermal and hydro power stations.

Daniel Theriault, the public intervener in NB Power's rate increase hearing
before the Energy and Utilities Board, said he wants to see those financial
statements broken down further to give a clearer picture of the utility's books.
But Theriault said these numbers won't bolster the utility's case for a 6.4 per
cent rate hike a year after getting an eight per cent jolt in rates.

"From an optics point of view it is not very good for NB Power," Theriault
said.

© 2007 Telegraph-Journal (New Brunswick)

Idnumber: 200709290065
Length: 669 words