Newfoundland and Labrador is awash in cash from oil and mining profits, but a big-spending election budget will increase net debt as future deficits are forecast.
Surprise spikes in offshore oil production and mineral shipments turned an expected deficit into a whopping $485-million surplus last year.
The budget tabled Tuesday by the Tory government also projects a $59-million surplus for this fiscal year.
But the $7.3-billion spending plan will add almost $460-million to net debt, bringing total debt to about $8.7-billion.
And Finance Minister Tom Marshall is estimating a slip into the red with deficits of $496-million and $309-million predicted in 2012-13 and 2013-14, respectively, as yearly payments from the 1985 Atlantic Accord run out.
Cash from the joint offshore program with Ottawa will put about $536-million in provincial coffers this fiscal year. Another surplus of $47-million isn't forecast until 2014-15.
Mr. Marshall defended the budget as a balanced approach as the Tory government prepares for an election set for Oct. 11.
It includes more health spending, grants and tax credits for child care, and a plan to cut the 8-per-cent provincial tax from every home-energy bill with rebates.
"We have revenues," Mr. Marshall told a news conference. "We're not trying to make a profit. We are paying down direct debt. We are investing in infrastructure. People need long-term-care facilities. They need hospitals. We need roads, we need ferries. We have to deal with that while we have the opportunity.
"We also have people who need help. They're on fixed incomes and we have to help them."
Mr. Marshall had originally forecast a $194-million deficit last year, but higher offshore oil production and booming mineral exports, especially iron ore, helped pour an extra $68- million into the provincial treasury.
The $34-million home-energy rebate plan would shave provincial taxes of 8 per cent off every residential electricity and heating bill across the province. It could also mute criticism that the province's plan to build a $6.2-billion hydroelectric megaproject in Labrador could hike energy bills in the short term.
While provincial unemployment dropped by 1.1 percentage points to 14.4 per cent, it is still among the highest in the country.
It's the first budget for Premier Kathy Dunderdale, who took over after Danny Williams retired from politics in December. Mr. Marshall said Ms. Dunderdale has made her mark with more spending to create child-care spaces and bolster programs and services for seniors and people living with disabilities.
Business leaders and economic watchers, however, have urged the province to whittle a net debt that has fallen in terms of percentage of gross domestic product but remains high when measured per person.
Those same people also support tax cuts, Mr. Marshall said. The new budget will eliminate payroll taxes for about 800 businesses, on top of other cuts that see taxpayers shell out about half a billion dollars less than they did four years ago, he added.
Mr. Marshall said the province is in an enviable fiscal position and it's time to give something back to the people who foot the bills.