NL Budget 2022: The More Things Change, The More They Stay the Same

Budget 2022 features a reduced deficit and Health Authority amalgamation—against a backdrop of rising costs of living and an oil-focused ‘energy transition’.

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While the Furey Liberals announced on Thursday that “CHANGE is in the air”, Budget 2022 deliberately avoids rocking the boat—while largely continuing the austerity program of the last eight years. It is a direct sequel to last year’s budget, if not quite a carbon copy.

Aside from a few marginal efforts to address the rising cost of living in the province, the biggest program change is the proposed amalgamation of the four Regional Health Authorities into a single agency over the next 12 to 18 months—a recommendation proposed by last year’s Premier’s Economic Recovery Team, and more recently the Health Accord. And in a move that blindsided both Memorial University and the Newfoundland and Labrador Medical Association, the province announced plans to combine medicine, nursing, and pharmacy education into a single faculty.

Other Greene Report recommendations also made their way into the budget, like the review of provincial assets (recently completed by Rothschild & Co.) and streamlining the application, assessment, and reporting processes for funding service delivery by non-profit organizations in the community sector. PERT influence could also be seen in the province’s new emphasis on an oil-centric energy transition.

New Energy on the Horizon?

It wasn’t the direct subject of many budgetary measures, but the future of the fossil fuel industry in Newfoundland and Labrador loomed large. Although government officials were jubilant in the wake of the federal Liberals formally approving Bay du Nord the night before, there were indications that oil and gas was already becoming less central to the provincial economy.

Oil and gas revenues are expected to account for just 10 percent of provincial revenues in 2022-2023, down from a high of 32 percent in 2011-2012. Oil and gas extraction represented 13.7 percent of provincial GDP in 2020, and 1.4 percent of employment in 2021.

Although the forecasted price of oil in this year’s budget is set at $86 per barrel, overall production is expected to decline 12.4 percent to 82.3 million barrels this year—due in part to planned shutdowns and maintenance at the White Rose and Hebron sites. Cenovus Energy is also presently deliberating over the future of the West White Rose expansion, stalled since 2020. Industry, Energy, and Technology Minister Andrew Parsons told reporters Thursday the government is in regular discussion with the company, and that it remains “very much a live conversation.”

Coady said growth in the mining sector played a major role in reducing the deficit, touting increased iron ore production in Labrador West and Tesla’s recent nickel supply deal with Vale as signs of a booming sector. Mining accounted for 9.4 percent of 2020 GDP, and 2.4 percent of 2021 employment. (Support activities for mining and oil extraction accounted for 0.9 percent of GDP and 1 percent of employment.)

Industry, Energy, and Technology Minister Andrew Parsons (left). Photo by Brian Carey.

The weeks leading up to the 2022 budget also saw a number of major shifts in the energy sector. The Newfoundland and Labrador Offshore Oil and Gas Industry Association was rebranded as EnergyNL and its mandate was expanded to include renewable energy sources. Meanwhile, the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) was rebranded as the Canada-Newfoundland and Labrador Offshore Energy Board (C-NLOEB), pending changes to the Atlantic Accord that Parsons anticipates will be ready for the fall legislative session.

Earlier this week the province also announced it will lift a controversial longstanding moratorium on wind power development projects, both on- and offshore. Parsons told reporters Thursday that policy work around wind development will still be required, particularly around Crown land development and establishing a request for proposals process. He said his department has received significant interest in wind power since the moratorium was lifted, and that this move was motivated in part because industrial power demands far exceeded provincial electricity grid capacity, even factoring in Muskrat Falls. (There is no firm timeline for the completion of the Muskrat Falls project or decommissioning Holyrood, however.)

Despite this apparent pivoting towards renewable energy—and warnings from UN Secretary-General António Guterres that “investing in new fossil fuel infrastructure is moral and economic madness”—Parsons stressed that the province remained committed to future oil and gas development offshore.

“We’re not giving up on this industry,” the Minister declared. “Not by a long shot.”

Economic Recovery Leads to Firmer Provincial Finances

The budget’s big highlight this year is a significantly lower deficit in 2021-22 than originally forecast—$400 million instead of $826 million—due in large part to higher oil royalties, strong commodity prices driving higher corporate tax revenues from the mining sector, and increased consumer spending as pandemic restrictions are lifted and the economy reopens. Higher inflation has also meant higher prices for goods and services, which in turn means higher sales tax revenue.

Despite geopolitical and supply chain chaos on the world stage, provincial economic indicators are relatively strong. Real Gross Domestic Production is up 3.5 percent as the province continues to rebound from the historic lows of the Covid crash. Household income is up 3.6 percent, though increased wages and salaries were offset by a decline in federal pandemic-related transfer payments. Notably, retail sales were up 10.6 percent as the economy reopened, particularly in the service and hospitality sectors. The province also saw a population increase of 2,800 between April 1, 2021 and January 1, 2022, almost entirely due to in-migration from elsewhere in Canada and internationally.

Spending is anticipated to rise slightly in 2022-23, primarily due to delayed infrastructure projects in the health and education sectors. But core spending outside these areas has remained more or less constant since 2014, despite rising inflation—which analysts have argued constitutes an austerity program.

The province is also registering about $774 million in federally funded programming—like the $320 million oil and gas recovery fund—but this has no impact on the deficit. Overall, federal money is financing more than 20 percent of all gross expenditures in the budget.

The government is also announcing three new tax credits: a 10 percent manufacturing and processing investment tax credit, a 20 percent green technology tax credit, and the All Spend Film and Video Production Tax Credit for a maximum of $10 million per project—which would apply to large projects, like Disney’s Peter Pan & Wendy production from last summer.

Growing the Province Amid Higher Costs of Living

Affordable living features prominently in the budget, though opposition members and stakeholders say it misses the mark.

In the name of making living here more affordable—at least for some people—the government is eliminating a 15 percent tax on home insurance for one year. It’s also halving registration fees for passenger vehicles, light duty trucks and taxis for one year. There will also be no provincial tax or fee increases.

Finance Minister Siobhan Coady said the one-year fee cuts could be further extended next year, but can’t say definitively.

The Liberals’ $22.2 million five-point plan—first announced in March—will include 10 percent increases for both the Income Supplement and Seniors’ Benefit programs, rebates for consumers who purchase or lease all-electric or hybrid vehicles, and a $5000 rebate for converting homes from oil heat to electricity.

Asked about the impact of inflation on these benefits, Coady told reporters the 10 percent increase in income support funding is “substantial.” She also said the government is engaged in discussions around delivering a Basic Income program.

Finance Minister Siobhan Coady delivers the budget speech in the House of Assembly. Photo by Brian Carey,

The province also intends to make investments in growing the population through supporting young families and encouraging immigration. The Provincial-Federal Action Plan, which includes $46 million in federal support, will bring child care fees down to $10/day by 2023. There will be an additional $3 million to increase enrolment capacity in post-secondary Early Childhood Education programs.

There’s also a half-million dollar boost for the Prenatal Infant Nutrition Supplement (formerly called the Mother Baby Nutrition Supplement) that will give those expecting a child an additional $50 per month—up from $100 to $150.

In St. John’s, youth-in-care and those enrolled in youth programs will now be eligible for the Metrobus/GoBus pass program, which is also being extended to include seniors receiving the Guaranteed Income Supplement. (However, St. John’s Ward 4 Councillor Ian Froude tweeted that “there is no agreement with the City of St John’s on the funding for the program” and “the decision in yesterday’s provincial budget leaves a $300,000+ hole in the public transit budget.”)

As part of its immigration strategy, the province has budgeted $5.8 million to help foster inclusion and diversity, entice newcomers to come here, and match employers with workers. The province has also set aside $1 million to help Ukrainians who are coming to NL.

Memorial University Faces Further Cuts, But K-12 Gets a Boost

Education is also getting a few bumps in the K-12 sector, while Memorial University is seeing further cutbacks. Currently, the government spends $971 million in K-12 education, while post-secondary gets $387 million.

With 2021 marking the province’s first increase in K-12 student enrolment in a half century, the province is allocating an additional $3.1 million to help meet the education system’s needs.

Coady also announced plans to build new schools in Cartwright, Portugal Cove-St. Philip’s, and St. John’s, as well as the redevelopment of Dorset Collegiate on Pilley’s Island. The new Francophone school that’s taking over the former School for the Deaf in St. John’s will receive $6.6 million.

Memorial University’s core operating grant from the government is $305.1 million, though it is getting an additional $54.3 million for the Faculty of Medicine. That’s a net decrease of $274,900 to the operating grant.

Last year the Liberals announced it would be cutting $68.4 million from Memorial’s budget over five years and this year’s drop is a reduction of $13.6 million.

Earlier this week, Coady and Education Minister Tom Osborne announced an auditor general review of the university’s books, the outcome of which could determine whether the university receives greater autonomy. 

Memorial is also getting a one-time payout of $6 million to assist with the transition from the two-decade tuition freeze, which ends this fall. Furey’s government is also investing $18.6 million in student aid—including for the new tuition relief grant—which Osborne calls the most generous in the country.

Memorial University president Dr. Vianne Timmons describes Budget 2022 as “tough” for the university.

“But we knew it would be,” she said. “Government had indicated that we would be experiencing cuts and so we were aware of it.”

Memorial University Students Union Director of External Affairs, Communications, and Research Hilary Hennessey said she is disappointed more isn’t being done to make education affordable for students.

“We are disheartened to hear that once again the provincial government is putting the debt on to the backs of students within this province,” she says. “This has been a very hard year for students at Marine [Institute], Memorial, and [College of the North Atlantic].”

The College of the North Atlantic will maintain its $66.5 million operating grant, with an additional $2.6 million for a new film production program.

Budget 2022 materials. Photo by Elizabeth Whitten.

One Health Authority to Rule Them All

There are big and drastic changes to how healthcare is delivered—and taught—coming to the province.

Healthcare represents the largest set of expenditures for the province by far, with a whopping $3.6 billion—38 percent of the budget—going to the healthcare sector.

In an effort to tackle the longstanding issues around access to family physicians, the province is bankrolling two pilot projects aimed at attracting new medical graduates to family practice, to the tune of $1 million. $500,000 is being set aside to create a provincial health professional recruitment and retention office, and the province is otherwise allocating $14 million to improve access to primary care.

The Liberals are taking guidance from the Health Accord NL, a 10-year road map to transform the province’s health care system that recommended amalgamating the four regional health care authorities—the same conclusion reached by the Premier’s Economic Recovery Team report last year.

Health Minister and Gander MHA John Haggie says the move is being made in order to improve back-end functions and streamlining, and should not directly impact front-line work.

“For me as an MHA from off the Avalon, the key from a governance point of view is that there is direct, meaningful and consistent contact between communities and local advisory councils—directly between them and the decision makers—to make sure that community flavour doesn’t get lost,” he told reporters Thursday.

Neither Haggie nor Coady could provide estimates for costs or job losses associated with the amalgamation. Haggie said the process could take between 12 and 18 months—adding he doesn’t expect an upfront cost for it and doesn’t anticipate much pushback from the health authorities or the public at large.

Newfoundland and Labrador Medical Association (NLMA) President Susan MacDonald says while many knew the amalgamation may be coming, she hasn’t been told how it will work. From a physician’s perspective, she says, MacDonald doesn’t see anything in the plan that would alleviate or stem the crisis. “And we are definitely in a healthcare crisis,” she says.

The NLMA is skeptical that the Liberals’ plans are enough to stem the outflow of physicians from the province.

“I don’t think those incentives, those programs, are going to turn the tide,” MacDonald said. “We need a solution today. We’re hearing about resignations every week and nobody is coming into those jobs.”

MacDonald says virtual care won’t fix those gaps.

Government Announces Surprise Health Faculty Merger at MUNL

Health is also getting a shakeup at the education level, with medicine, nursing and pharmacy being merged into a “comprehensive health faculty” at Memorial University, Osborne said. Presently, the Eastern and Western Health authorities have their own nursing schools. The Liberals are also investing $3 million to add 25 percent more nursing seats at Memorial.

Timmons and MacDonald say they were blindsided by the move.

“It was the first time I’d heard about the amalgamation of the training programs,” MacDonald told The Independent. “Again, how is that going to work? The devil is always in the details.” But she didn’t dismiss the idea outright. In fact, she trained in a similar system and says there are benefits to students being trained alongside their future colleagues. But whether this amalgamation will do that, she doesn’t know.

Timmons said Memorial University wasn’t consulted on the faculty merger, adding it “is the autonomy of the university to determine its schools and faculties, so that is clearly something that is very important to the senate and the university.” According to the Memorial University Act, the power to create, erase or make changes to faculties is in the hands of the university senate and Board of Regents.

Education Minister Tom Osborne in conversation with Memorial University President Dr. Vianne Timmons. Photo by Brian Carey.

A Budget With Something for Everybody?

Progressive Conservative Finance Critic Tony Wakeham calls the budget disappointing, pointing to the absence of relief for gas and home heating fuel.

The Stephenville-Port au Port MHA also takes issue with the Liberals’ tax regime, arguing the province’s personal and corporate tax rates will drive business and residents away.

“It’s fine to say we’ve reduced our deficit,” Wakeham said. “But at what cost? Who’s paying for that?” he said, adding the deficit “might have gone down because [the Liberals have] had the benefit of extra revenue [but] the actual people who are actually paying the bills—their costs have gone up.”

Interim NDP leader Jim Dinn says the budget’s lack of accounting for inflation amounts to a subtle form of service cuts.

“If you have the same dollars provided for a department, that means you’re only going to be able to do less, you’re not going to be able to do the same number of projects or the same quality,” the St. John’s Centre MHA told The Independent. “It’s not a cut, but it is a cut.”

Similarly, representatives of both capital and labour gave mixed reviews of the budget—for differing reasons.

Newfoundland and Labrador Employers’ Council Executive Director Richard Alexander told The Independent that the budget is promising, but he remains concerned about the provincial debt. 

“We’re spending more right now on interest on the province’s credit card than we are on education and social services combined,” Alexander said. “Until we get that under control it’s very difficult for the province.”

Meanwhile, Newfoundland and Labrador Federation of Labour President Mary Shortall told The Independent that while there were “little tidbits and some extra money for people who really need it, what’s worse is what’s not been mentioned and the things yet to come”—citing looming public sector bargaining, implementation of the Health Accord, the contents of the Rothschild report, and the minimum wage review yet to be presented to government.

“There’s no crisis in the deficit and debt right now, but there’s still a crisis in unemployment, a crisis in health care, a crisis in inequality—including wage inequality—and a climate crisis,” she said. “So all those things that have been part of the public discourse seem to not be there.”

With files from Justin Brake.

Follow Drew, Elizabeth, and Justin on Twitter.

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