CHARLOTTETOWN -- The Prince Edward Island government punished smokers with a major price hike on cigarettes Wednesday as it introduced a provincial budget that remained in the red for the second consecutive year.
The 2008-09 budget forecasts a deficit of almost $35 million in the coming year, a slight improvement over last year's deficit of almost $37 million. The back-to-back deficits - unusual in Canada these days - will boost the net debt in Canada's smallest province to an all-time high of $1.4 billion.
It means that every man, woman and child living in the "Garden of the Gulf" owes roughly $10,140.
Treasurer Wes Sheridan said deficit financing was necessary to ensure the province could improve health care, education and social services.
He said he is hoping to slay the deficit over the next two years.
"Would we like to see the books balanced and start to take down our overall debt - no question about it," he said.
"But right now we're adjusting for some of the problems we inherited (from the previous administration). There are a lot of stagnant ideas out there and problems that linger and we have to address them before we go after the debt."
The Liberals, under Premier Robert Ghiz, have been in office for just under a year.
Conservative finance critic Jim Bagnall, one of only three opposition members in the Liberal-dominated legislature, managed to delay the budget by one day by dragging out his response to the throne speech on Tuesday.
Bagnall said he was protesting the lack of assistance for farmers and other primary industries in the province.
"I'm disappointed and upset over rural P.E.I. being excluded and primary industries not getting the attention they deserve," Bagnall said after he listened to the budget speech.
Business representatives were also unhappy with the continued reliance on deficit financing.
"We have to keep in mind that the mantra of this administration has been tax fairness for Islanders and there is absolutely nothing fair about asking tomorrow's taxpayers to foot the bill for today's decisions," said Erin McCrath-Gaudet of the Canadian Federation of Independent Business.
To help improve revenue flow, the Liberal government is raising the cost of a carton of cigarettes by $5, boosting the price to $80.75.
The increase, which goes into effect Thursday, will add about 60 cents to the cost of a single carton of smokes.
Prices vary on the Island, ranging from $8 to $12 for a single pack.
Sheridan said the increase brings P.E.I. in line with the Atlantic average. But, in fact, just across the Confederation Bridge, a carton of cigarettes sells for $68.37, setting the stage for possible smuggling.
A carton is also cheaper in Nova Scotia at $79.15.
Sheridan said measures will be taken to prevent the illegal sale of cigarettes.
"If anyone tries bringing cigarettes across in mass amounts, trying to sell them in the open market, we'll get you," he said.
The cigarette increase, which will add about $3.5 million to provincial coffers, was the only new revenue measure in the budget.
The Ghiz government is continuing with a gradual reduction in the small business corporate tax. The tax will be reduced by 1.1 per cent this year and a further 1.1 per cent next year.
The cuts will reduce the tax rate to one per cent by 2010.
As well, the government is increasing its investment in health care by almost $22 million. In education, it will give first-year, post-secondary students a grant of up to $2,000 to help defray rising tuition costs.
Highlights of the Prince Edward Island budget presented Wednesday:
- 2008-09 budget forecasts $1.35 billion in revenues and $1.38 billion in expenditures, with deficit of $35 million.
- Net debt projected to reach all-time high of $1.4 billion in 2009, meaning every man, woman and child on P.E.I. will owe about $10,140.
- Price of carton of cigarettes increases by $5 per carton to $80.75. Increase on single package is about 60 cents. Government says the increase will earn $3.5 million, which will be spent mainly on education and health care.
- Small business corporate tax reduced by 1.1 per cent this year and a further 1.1 per cent next year.
- Every first-year, P.E.I. student entering provincially funded post secondary institution to attain a degree or diploma will receive grant of up to $2,000. Measure will cost government $2 million.