The McNeil government carried through on its promise Thursday to hold the line on spending in its 2015-2016 budget, eliminating an entire government department and cutting 320 full-time civil service positions.

Layoff notices went out Thursday to 109 government employees, the bulk — 75 — to employees of the Department of Economic and Rural Development and Tourism. That department has been eliminated and the creation of a new one — the Department of Business — was also announced.

A total of 163 notices have been sent out since February, including cuts at the Department of Natural Resources.

"We are restructuring and reducing the size of government. It was a hard budget to put together and there are measures in it that will not be popular," Finance Minister Diane Whalen said.

"The government will be smaller after today."

Julia Sable, a corporate strategist who worked for the Department of Economic and Rural Development and Tourism, was one of the employees laid off on Thursday. She said civil servants knew there were "hard things coming" but they did not suspect the cut would be so deep.

"I guess I wish there was more of a soft let-down and that they didn't have to do it in quite such an abrupt way, but maybe those were the tools that they had at their disposal," she told CBC News.

"Despite what people think about bureaucrats, most of us work pretty hard and we really care about our jobs so I think it's also just personally hard to let go of work that you care about."

Newly created Department of Business

Whalen said the new Business Department, headed up by Minister of Municipal Affairs and Service Nova Scotia Mark Furey, will focus on sectors that have high potential, especially in rural areas.

"The new department is much more streamlined. The focus is on creating conditions for economic growth, rather than direct business support," acting deputy minister Bernie Miller said Thursday.

Spending across all government departments will increase by at 0.7 per cent for 2015-2016.

Nova Scotia's projected budget deficit remains at $97 million.

Film industry tax credit slashed

The Liberals also took a high-profile swipe at the province's film community, eliminating much of the film industry tax credit. Only 25 per cent of the current 100 per cent refundable credit, which amounts to a subsidy, will remain.

It was one of the most generous film tax credits in the country, Whalen said.

"I know I will continue to hear about it," she added, referring to an industry backlash that hit the media when the Liberals spoke about the change last month.

She said a new $6-million fund to support the "creative economy," including film, animation, sound recording and publishing, will begin in 2016.​

The finance minister would not say how the government will keep labour costs in line with its spending restrictions.

While the Liberals imposed a three-year wage freeze for non-union civil servants earlier this week, Whalen refused to say how the government intends to approach contracts with unionized health, education and government workers. The province also is headed toward negotiations with Nova Scotia doctors.

"Previous labour settlements were just too generous and added significantly to our deficit," she said.

The 2015-2016 provincial budget also contains some tax increases.

Smokers were were hit with a big increase: two cents more per cigarette, two cents per gram of fine-cut tobacco and two cents per pre-portioned tobacco stick.