'This is scary': Opposition sounds alarm over forecast that P.E.I. deficit will set a record

CBC

11-04-2025

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Opposition MLAs say they are concerned about Prince Edward Island's newest budget, which includes the largest deficit in the province's history.
Rob Lantz's Progressive Conservative government tabled the 2025-26 operating budget on Thursday, projecting a $183.9-million deficit.
The previous record deficit was in 2020-2021, the first year of the COVID-19 pandemic, when the province recorded a $172.7 million deficit.
"This is scary... It is the largest deficit ever recorded in the province of Prince Edward Island, and we're going through some very, very challenging times right now with the unpredictability what's happened south of the border," said Opposition leader Hal Perry.
Budget includes some good spending: Liberals
The budget was released at a time of growing global instability, including political tensions and trade conflicts, with U.S. president Donald Trump launching a trade war against Canada and many other countries around the world.
Perry said there are some good expenditures in the budget, including a $32-million Tariff and Trade Contingency Fund. The fund is designed to help businesses and workers affected by tariffs, support trade relationships, and help Island companies develop new markets beyond the U.S.
1st P.E.I. budget in the Rob Lantz era promises money for tariff action and tax relief
22 hours ago
Duration 4:30
He also welcomed some additional spending on health care. The expenditure for Health P.E.I. is set to grow from $971.8 million to nearly $1.1 billion.
"There is some that I could give them a pat on the back for," Perry said.
"But for the majority of it, I'm concerned about the spending and overspending of this government and their inability to manage and to implement plans that are actually going to benefit Islanders instead of just spending and throwing taxpayer dollars away."
He pointed to several things he believes the province shouldn't have spent money on, including a multimillion-dollar sponsorship deal with the National Hockey League aimed at attracting U.S. and Canadian visitors to Prince Edward Island.
Perry also said there needs to be less spending on agency nurses, sometimes referred to as travel nurses, to temporarily supplement health services with staff shortages.
Greens call budget a 'disappointment'
Green Party MLA Peter Bevan-Baker called the budget a "disappointment," saying the province hasn't made wise investments and has been wasteful and inefficient in its spending. Islanders are now seeing the results of that, he added.
"We find ourselves at a time of global insecurity and instability, economically, with a very vulnerable economy provincially," Bevan-Baker told reporters.
"And I don't think it is an overstatement to say that if you're looking at net debt-to-GDP ratios, which are going to be pushing 40 per cent in the next two or three years, that is a crisis."
According to government figures, the province's net debt-to-GDP ratio is projected to be 32.6 per cent for the current budget year and is expected to rise to 35.9 per cent by 2027-28.
P.E.I.'s net debt, which is the cumulative amount of money that the province owes, was projected to hit $3 billion at the end of the last fiscal year. With three more projected years of deficit spending, that number is forecasted to climb to $4.2 billion, ain increase of 39 per cent in just three years.
Bevan-Baker also questioned the government's decision to introduce a range of tax cuts for corporations, small businesses and Islanders who pay income taxes.
"Is that a responsible thing to do at a time where we are going to have to spend money in areas where Islanders are going to need supports, perhaps more than they ever have, that we're going to knowingly and willingly reduce the amount of income that this government is going to get from those areas?" the MLA said.
Tax cuts the right way to go, says federation
Devin Drover, Atlantic director and general counsel with the Canadian Taxpayers Federation, said the province is responding to what Islanders asked for during pre-budget consultations.
"Affordability and high taxes are top of mind for Islanders," he said. "I think we're seeing an honest effort by the provincial government right now to address affordability by cutting taxes."
Finance Minister Jill Burridge said the range of tax reforms, which includes raising the small business tax threshold by $100,000 to $600,000, will save Island businesses $9.3 million.
P.E.I. has two types of tax rates for businesses: the small business tax, which is one of the lowest small business tax rates in Canada at 1 per cent, and the corporate tax rate.
"Now businesses within the province can earn an extra $100,000 before they get jumped up to that much higher corporate tax rate," Drover said.
The budget also includes lowering the corporate income tax rate by 1 per cent to 15 per cent.
On the personal income tax side, the basic personal exemption is immediately rising to $14,650 for 2025, and to $15,000 in January of 2026. All five tax brackets will also increase by 1.8 per cent next year.
"It's essentially just more income that Islanders won't have to pay tax on, or as they earn more, lower taxes across the board, said Drover. "So, you know, I think these changes are a positive first step to help families who are feeling the pinch from inflation and rising living costs."
But he said the record deficit remains a major issue.
"Spending is up nearly $300 million from last year. And if you look at interest payments in the province, it's about $169 million every year. That's about $947 per Islander just going to interest payments," he said.