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BC boasts budget surplus, but steep revenue declines

By Colleen Kimmett July 9, 2009 12:09 pm 10 comments

*story updated at 2:00 pm, July 9, 2009

VANCOUVER - British Columbia posted a $78 million budget surplus for 2008/2009, Finance Minister Colin Hansen announced today.

This is despite a drop in total revenue of $1.5 billion compared to last year. Personal income tax revenues dropped by $863 million; corporate tax revenues by $212 million; and social services tax revenues by $114 million.

Natural resource revenues increased, however, to $70 million, largely due to the natural gas sector. In 2008, land lease sales were going for $655 per acre in northeastern B.C., and the sale of six drilling licenses attracted bids of more than $67 million.

"Last year's economic environment required prudent fiscal management to maintain a balanced budget," stated Hansen in a press release. "The sharp revenue declines we experienced underscore the need for continued vigilance to ensure we can continue to deliver the vital services British Columbians depend on while keeping our program spending sustainable."

It remains to be seen how the province will sustain spending in the face of at least a $495-million deficit, but it will require tax hikes, spending cuts or a combination of both. At last month's cabinet swearing-in, Minister Hansen has previously insisted the deficit would not grow, but today told reporters that he is no longer confident that the province can meet that target.

The province will release its revised budget for this fiscal year in September.

Colleen Kimmett reports for The Tyee.

Filed in

Another Campbell lie

Powell river pe...
09-07-2009

In reading the story in the vancouver sun...
Hansens states there is no way they will reach 495 million dollar deficit this year,by a wide margin,Hansen is excuse making.
The story goes on to say(I will post the link below)that the BC debt grew last year by 3.4 billion dollars$-And the auditor general disagrees with Hansens numbers....

Can someone please explain how(Will McMartin)how we can have a surplus and add 3.4 billion to BC`s debt?
So under Campbell our BC debt has more than doubled.

http://www.vancouversun.com/business/records+million+surplus+fiscal+2008+that+will+change+next+year/1774787/story.html

Local residents express concern about drilling

RickW
09-07-2009

In an interview on CBC Radio's Almanac with a local organic farmer, concern was certainly expressed about the bombings. But concern was also expressed about the virtually unrestricted drilling.

The question was asked by the farmer why Alaska requires drillers to post $100,000 bond, but BC does not. Good question. But alas, no answer forthcoming from this government.

Now we know why:

Quote:
Natural resource revenues increased, however, to $70 million, largely due to the natural gas sector. In 2008, land lease sales were going for $655 per acre in northeastern B.C., and the sale of six drilling licenses attracted bids of more than $67 million.

Seems to be fast becoming BC's ONLY source of revenue...........
BTW, personal bankruptcies are up 58% in BC, compared to the national average of 34%.

@ Powell river

jimmy_laroux
09-07-2009

Quote:
Can someone please explain how(Will McMartin)how we can have a surplus and add 3.4 billion to BC`s debt?

Yeah, pretty ridiculous, isn't it? Accountants use the term "surplus" in a technical sense which is completely different from the literal, dictionary definition most non-accountants are familiar with. From page 23 of the public accounts:

Quote:
Capital expenditures are not included on the Consolidated Statement of Operations and have no effect on the current surplus. They reduce future surpluses in the form of amortization expense as the service potential of assets is used to deliver programs and services.

http://www.fin.gov.bc.ca/OCG/pa/08_09/PublicAccounts.pdf

Quote:
Capital investments are not included in the government’s annual surplus or deficit. In accordance with generally accepted accounting principles (GAAP)...

http://www.bcbudget.gov.bc.ca/2008/bfp/default.aspx?hash=24

Under GAAP, the current year's capital costs are not included in the calculation of the operating surplus (or debt, as the case may be).

Surplus

jimmy_laroux
09-07-2009

Quote:
British Columbia posted a $78 million budget surplus for 2008/2009...

From the Auditor General's report in the 08/09 Public Accounts,

Quote:
Had the summary financial statements been prepared in accordance with Canadian generally accepted accounting principles the surplus for the year would have been $8 million.

So the Finance Ministry's accounting was flawed, the surplus should have been $70 million less.

@Jimmy

Powell river pe...
09-07-2009

Question,what accounting did the ndp use,did they include or exclude capitol expenditures when it came to surpluses or deficits?
When they were in power in the 90s,was the island highway,millennium line,schools,hospitals included in their budget numbers?Their debt numbers....

I would like an answer tonight,cutting ledge tomorrow,need to make some noise.

@ Powell river

jimmy_laroux
10-07-2009

Quote:
Question,what accounting did the ndp use,did they include or exclude capitol expenditures when it came to surpluses or deficits?

I don't know what the differences between the accounting systems were. Certainly GAAP (the current system) is more transparent in many ways. But the Liberals have been building alot of infrastructure using P3s, whereas the NDP did not.

Using P3s allows the debt from capital projects to be hidden. What do I mean by hidden? I'll quote Marvin Shaffer, SFU economist professor:

Quote:
Let the private sector build the infrastructure we need and let the developers incur the debt. Letting the private developers incur the debt is key. The private sector has always built the infrastructure we need. The key difference with P3s is that the developers, not government, borrow the money needed to pay for the projects. The government just has to pay an annual fee to use whatever is built... The political appeal is enormous. Get more schools, hospitals and roads without more government debt.

Quote:
Of course, when things seem too good to be true, they generally are. And so it is with P3s. As critics stated at the outset and government auditors have confirmed, the private financing of schools, hospitals and roads adds to the government's overall debt just like traditional borrowing. It just changes the way in which the debt is repaid. Instead of debt service charges (interest and principal on debt), taxpayers have to pay an annual lease fee year in, year out over the life of the P3 contract. It's like leasing instead of financing the purchase of a car. You still have to pay for the car; it's just a question of how it is done.

http://thetyee.ca/Views/2005/10/26/hiddenhugecosts/

The NDP built the Island Highway, Millenium Line, hospitals, etc. the usual way: by borrowing from a bank to pay for construction. The Liberals built the Abbotsford Regional Hospital, the Kelowna Vernon Hospital, the Sea-to-Sky Highway, and many other projects using P3s. This debt is instead recorded as "contractual obligations" rather than good old-fashioned "debt", but it's all the same thing. Here is a list of the province's contractual obligations:

http://www.fin.gov.bc.ca/OCG/pa/08_09/Contractual_Obligations.pdf

The bulk of these projects or agreements were initiated by the Liberals.

Thanks Jimmy

Powell river pe...
10-07-2009

I know about all the P3s,and how expensive they are,as far as I know the NDP didn`t use GAAP--Also I believe everything they built(the NDP) was put on the balance sheet,I don`t believe the island highway,millenium line etc etc were amoratized over a gizzillion years,whatever they built got lumped onto the debt total.

Perhaps Will McMartin can clarify it a little better,I know the NDP did no P3s,and,like a credit card,or 300 hundred credit cards,after 60 billion in contractual debt,even if it`s over 30 years,it`s 2 billion a year payment,and like a credit card,if we keep doing P3s,the payments will rise to 3 billion,4 biilon,5 billion etc,eventualy it is unsustainable.........

Kinda like, "I will gladly pay you tuesday for a cheeseburger today"

Cheers

Growing debt

jimmy_laroux
10-07-2009

It's interesting that the Ministry of Finance predicted the total debt to rise to $37.487 billion in 08/09, but it rose instead to $38.014 billion. They were off by 500 million dollars.

Even with the bogus deficit predictions from the 2009 budget the Liberals still predicted the total debt to rise to $40 billion in 2009/2010, and $47 billion in 2011/2012. Now that some economists are predicting next year's deficit will be as high as $2 billion, we can expect the 2009/2010 total debt to rise by at least that much beyond what was predicted.

What, the predicted deficit is growing??

sunshine coast girl
10-07-2009

I'm shocked. I thought those guys were the best economic managers. What a disappointment. And the Premier sounded so confident and statesmanlike. Who saw that coming??

Dare we say it back to them

Skywalker
10-07-2009

It was fudged. A real fudgit budget. Now it must be proven not to be one in a court of law or the term stands!. I'm not shocked at all.

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