Newfoundland and Labrador will trim government jobs and cut the size of the premier's cabinet in a $7.6-billion budget tabled Tuesday as the province faces a deficit of $563.8 million in the 2013-14 fiscal year.
The deficit is on top of a shortfall of almost $431 million for this fiscal year as net debt grows almost $1 billion to $9.5 billion next year.
The numbers are better than recent warnings that the province was facing cumulative deficits that could total almost $4 billion as world economic troubles cut demand for the province's oil and minerals.
Instead, the province is forecasting a deficit of $650.5 million in 2014-15, for a total of just over $1.2 billion in the next two fiscal years.
Increased oil production, cost-cutting and a higher-than-expected sales tax refund from Ottawa helped reduce the shortfall.
The province is trimming about 1,200 government jobs through layoffs and cutting vacant positions, and has approved another 200 early retirements.
The budget does not raise personal or corporate income taxes and predicts a return to surplus of just over $230 million by 2015-16.
"It's a tough situation," Finance Minister Jerome Kennedy said of the job cuts. "It's not one that I particularly like, it's not one that any of us like. But it's something that we have to do in order to ensure that we can reduce the deficits and return to surplus in three years."
Opposition critics have accused the majority Progressive Conservative government of poor planning and reckless spending.
"We've made great investments in the past," Kennedy told a news conference. "We've rebuilt the province, for lack of a better term, and the economy is strong. But, unfortunately, we've reached a point where our revenues don't equal our expenditures."
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