A provincial budget that started with an expected deficit of $112 million instead turned into an $84-million surplus, according to audited financial statements for the 2021-22 fiscal year released Monday by the P.E.I. government.
The $196-million turnaround in the province's bottom line came largely on the strength of tax revenues that came in much higher than budgeted, including an additional $98 million in personal income taxes — 23 per cent higher than anticipated.
In February 2022 the province adjusted its budget forecast for the 2021-2022 fiscal year, at that time projecting a deficit of $26.5 million. But after the close of the fiscal year on March 31, the province said it received an additional $79.5 million in revenues through the Canada Revenue Agency, which collects income taxes for P.E.I.
The improvement in the province's fiscal position showcases "the strong fiscal and economic position that we have worked hard with local businesses and communities to regain following the initial impacts of COVID-19," said Finance Minister Mark McLane in a news release issued Monday.
Spring budgets consistently pessimistic
P.E.I. has regularly been posting audited financials that performed much better than government had originally projected in its budgeting, going back to the term of Wade MacLauchlan as premier.
In the fiscal year 2020-2021, the first full year of the COVID-19 pandemic, the province posted a $5.6 million deficit. The budget in the spring of 2020 projected a deficit of $172 million.
UPEI economist Jim Sentance has been critical of the province's budgeting, saying revenue forecasts are overly cautious. This effectively hides the province's fiscal capacity and its ability to either spend more on programs or lower taxes.
"We have a lot of public things that have been chronically underfunded and could use a top up to deal with recent cost increases," he said in response to the latest surplus announcement.
The Canadian Taxpayers' Federation would also like to see the government with a better plan.
"Originally this is taxpayers' money, so you're simply returning the money where it came from. I would applaud the King government for doing that," said Jay Goldberg, the federation's interim Atlantic director.
"I do think, however, that we need to have a clear long-term strategy about lowering tax rates."
Help against inflation
Just two hours after announcing the budget surplus, the province followed up with a package of inflationary support payments.
There will be up to $500 for individuals earning up to $100,000, or $1,000 for households and single parents, to be issued in January 2023 through the Canada Revenue Agency.
The province said those payments would reach most Islanders and come with a $58-million price tag. That money won't come from the $84-million surplus in last year's budget, but rather from finances in the current fiscal year, which began April 1.
Despite the surplus, once capital spending was taken into account, the province's net debt increased at the end of the last fiscal by $9.5 million, topping $2.3 billion.
Overall provincial tax revenues for the last fiscal, including income taxes, HST and corporate tax revenue, came in $186 million over budget, reaching $1.33 billion.
Federal transfers from Ottawa were up $32 million over budget, topping $1 billion.
Program spending for the year came in $72 million over budget, with the departments of finance, transportation and education accounting for most of the increase.
The biggest budget spending line for the province — money for health care — came in $6.4 million over budget, an increase of less than one per cent.