A significant factor in how the provinces were rated was the effort to lower both debt and tax burdens. Alberta and Manitoba were the leaders in this area, as Alberta has very low tax rates and the lowest debt burden, while Manitoba's debt burden is the second-lowest in the country.

"Provincial governments are heeding the call for lower tax burdens by Canadians and have continued to cut personal income tax rates in their 1999 budgets," says Burleton. So far, seven provincial governments have released budgets, and for the second year in a row, a majority of provinces are expected to achieve balanced budgets and reduce debt.

Four provinces -- Alberta, Quebec, New Brunswick and Prince Edward Island -- announced reductions in their personal income tax burdens in this year's budgets, while Saskatchewan reduced its provincial sales tax rate. With an election just around the corner in Ontario, tax reduction is already on the campaign platform.

This will come as a relief to both business owners and consumers alike, as reduced debt will enable more effective use of tax dollars, of which a significant portion is currently directed to pay interest on debt. Here's a look at what the TD economists had to say about each province individually.

Prospects Excellent

Alberta "In recent years, the Alberta government has been successful on all key fiscal fronts -- achieving budget surpluses, reducing debt and providing tax relief -- and the province now boasts the lowest provincial debt and personal tax burdens in the country," notes Burleton. In spite of the slump in crude oil prices in 1998, the province bettered its surplus target for the sixth year in a row in fiscal 1998-99, and announced plans to overhaul its income tax system and lower the PIT burden. "The fact that Alberta enjoys the highest bond rating among the provinces validates the success of its government's fiscal policies," he adds.

Manitoba "Manitoba -- which has strict debt-retirement legislation backed up by a Fiscal Stabilization Fund -- is in good shape to balance its budget for a fifth year in a row this year and to further reduce its already-low debt-to-GDP ratio," says Burleton. Last year, the province's bond rating was raised by two major rating agencies. Up to top

Prospects Good

Ontario Although the Ontario government has not yet eliminated its deficit, the province has led the way in cuts to personal income tax rates, with more on the way in its upcoming 1999 budget. "The outlook for robust growth in the Ontario economy over the next two years should help the province to move into the black by next year," notes Burleton.

Saskatchewan "The Saskatchewan government, which faced a bleak fiscal future only seven years ago, has achieved the most impressive improvement in its fiscal position among the provinces in recent years," says Burleton. The government has repaid $1.5 billion in net public debt since fiscal 1995-96, and has reduced its basic PIT rate and retail sales tax rate. Both last year and this year, the province was rewarded with upgrades in its credit rating.

New Brunswick "New Brunswick's government has been the only province to beat its official budget targets in each of the past seven years and one of only three provinces whose debt-to-GDP ratio now stands at below its 1989 level," notes Burleton. In spite of its healthy fiscal showing, the government -- which opted to scale back its previously-announced cut to the basic personal income tax rate in this year's budget -- has trailed several other provinces in terms of providing tax relief and still has relatively high PIT rates. Up to top

Prospects Fair

Quebec In its 1999 budget, the Quebec government announced that it had balanced its budget in fiscal 1998-99 for the first time in 40 years -- and its prudent budget plan suggests that the province will run substantial surpluses over the next few years. "However," says Burleton, "the 1999 Quebec budget included very little tax relief and no medium-term plan to reduce the province's high debt burden."

Nova Scotia The Nova Scotia government is likely to announce that its budget balance fell back into the red in fiscal 1998-99 in its upcoming budget primarily because of the weakness in the Canadian dollar, which raised the cost of servicing its foreign-currency debt. "Although the province continues to shoulder one of the highest debt burdens among the provinces, it has made considerable progress in cutting its debt-to-GDP ratio since the mid-1990's," notes Burleton.

P.E.I. "The government of Prince Edward Island balanced its budget for the first time in three years in fiscal 1998-99," says Burleton. The P.E.I. government is making progress both in cutting taxes and reducing the debt burden.

Newfoundland The Newfoundland government, which has had to contend with anemic economic growth during most of the 1990's, is projecting a deficit and an increase in its debt-to-GDP ratio in fiscal 1999- 2000. However, "improving prospects for the provincial economy, led by a booming offshore oil industry, will help the government to improve its fiscal position in the medium term," says Burleton. Last year, the province received an upgrade to its credit rating.

B.C. In its 1999 budget, the government of British Columbia opted to boost spending and to post significant budget deficits over the next few years in an effort to stimulate its ailing economy. "As a result, British Columbia's fiscal position will deteriorate relative to that of the other provinces, its debt burden will rise markedly, and B.C. will have little room to cut its high tax burden," says Burleton. Following the release of this year's budget, the province's bond rating was lowered by two credit rating agencies. Up to top

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