BC Ran a $1.4 Billion Deficit
StatsCan ties 2009 shortfall to rising expenses. Couldn't Libs see it coming?
Finance Minister Hansen: Different story.
New figures from Statistics Canada are raising questions about whether British Columbia's financial books are in as good shape as the province has so far claimed.
StatsCan, which uses a different accounting system than the province, figures B.C. ran a deficit of $1.44 billion in the fiscal year that ended March 31, 2009. That's significantly worse than the $50-million surplus the province budgeted.
And the imbalance appears to have more to do with growing government spending than it does with falling revenues.
While the province's year-end books are not yet in, Finance Minister Colin Hansen insisted last week that there will be at least a small surplus shown when the public accounts are released. "That is still my expectation," he said.
Hansen, in a cabinet meeting today, was unavailable by publishing time. Nor were ministry officials prepared to comment on the StatsCan figures.
"I think the public wants answers," said Bruce Ralston, the New Democratic Party's finance critic. "Given the level of public interest in the finances of the province in the current economic circumstances, they have an obligation to at least explain what their position is."
He added, "The publication of these figures in this form does give rise to certain obvious questions."
Accounting differences
A StatsCan official said in an e-mail that his agency and the B.C. government use different systems of accounting and treat capital expenditures differently.
StatsCan uses a Financial Management System that allows the agency to compare financial data across different jurisdictions. It uses a modified cash basis of accounting, he said. In such a system money is counted in the period when it is either received or spent. The FMS includes what provinces spend on capital.
B.C., on the other hand, uses an accrual system where revenue is recorded when it is earned and expenses are recorded when they are incurred, whether or not money has actually changed hands.
As StatsCan's newsletter puts it, "FMS statistics may not be in accord with figures published in government financial statements."
It is unclear, however, how much of the gap between StatsCan and the province's estimates is caused by the accounting differences. Nor is it clear why that gap would be three times wider than in recent years.
For the fiscal year that ended on March 31, 2008, the province's books show a surplus of $2.9 billion while StatsCan has it at $2.4 billion. There's a gap, but it is roughly $500 million -- well short of the nearly $1.5 billion difference-of-opinion on this year's results.
Similarly, in the 2006-2007 fiscal year, B.C. showed a $4-billion surplus while StatsCan had it at $3.6 billion, a difference of some $400 million.
And for the two years before that StatsCan's results worked to the province's favour with surplus figures that were $800 million higher each year than what the B.C. government calculated.
Whose Books?
The following are surplus and (deficit) figures for the past five fiscal years according to the B.C. government and to Statistics Canada:
2009:
BC government: $50 million (budgeted)
StatsCan: ($1.438 billion)
2008:
BC government: $2.866 billion
StatsCan: $2.363 billion
2007:
BC government: $4.056 billion
StatsCan: $3.578 billion
2006:
BC government: $3.060 billion
StatsCan: $3.869 billion
2005:
BC government: $2.575 billion
StatsCan: $3.369 billion
Higher expenses
The deficit B.C. ran last year, according to StatsCan's calculation, appears to have had more to do with ballooning expenses than with shrinking revenues.
Indeed, a detailed table provided by StatsCan shows B.C.'s revenues shrank to $41.8 billion in the most recent fiscal year from $42 billion a year earlier, a relatively small decline of $200 million at a time when the economy was turbulent.
Declining personal income taxes ($750 million lower) and corporate taxes ($200 million lower) were balanced by revenue gains in other areas.
Over the same period, however, provincial government spending ballooned to $43.2 billion from $39.6 billion. There were large increases in the amount spent on health ($1.26 billion), education ($1.1 billion) and social assistance ($588 million).
Altogether, that's a jump of $3.6 billion, or about nine per cent, in the last fiscal year before the election.
That increased spending may make sense, either as an effect of the falling economy or as an effort to stimulate it, but it is very different from the story Hansen has so far told. That story has instead focussed on how a volatile global economy has cut B.C.'s revenue.
Related Tyee stories:
- Ready for a Slump?
As BC's economy cools, how well are we prepared? - This Budget Is Toxic Fudge
BC's government is in denial about the economic realities we face. - Province's Economy Much Worse than We Were Told
New StatsCan numbers likely mean bigger budget deficit or spending cuts: experts.
![[Tyee]](http://thetyee.cachefly.net/ui/img/ico_fishie.png){kind=small}
OilbertaRedTory
16-06-2009
Bathtub Drownings
"Cutting the government in half in one generation is both an ambitious and reasonable goal. If we work hard we will accomplish this and more by 2025. Then the conservative movement can set a new goal. I have a recommendation: To cut government in half again by 2050."
Grover Norquist May 2000
Gary
17-06-2009
Managing the economy
Looks to me like "the only person who can manage our economy" can only do it if he can cook the books.
Interesting that the amount is almost exactly the same as what CN benefited from the giveaway of BC Rail.
Grumpy
17-06-2009
Oh.......another........
......made in BC fudge-it-budget, so what else is new.
Maybe we can have the Liberals tossed out for lying, just like that Whiterock councilor!
We all knew (underscore all) that the Liberals are the worst tax and spend government around. It's just the wealthy were on the receiving line of Gordo's tax cuts, while the burden of taxes fell on the poor, the elderly and children. One hell of a legacy to leave....eh!
PS, maybe Wally Awful is glad that he lost as I think very soon Gordo and his bunch of ne'er do wells will be taking the brunt of the publics ire.
dorothy
17-06-2009
WOW!
"..very soon Gordo and his bunch of ne'er do wells will be taking the brunt of the publics ire."
Like they did at the polls, eh? Or, are we going to throw shoes again? No wonder the rest of the country calls our fair province 'lotusland'. Dude, we just e-l-e-c-t-e-d this gang for another term!
Camero409
17-06-2009
LIbEralS
I must agree, we elected this mob, (I say mob because they are the closest we have to the mafia in BC) and we have to put up with them for 4 more years. We ALL knew this government was spending at a breathtakeing pace. Almost every project is coming in over budget. e.g. Convention center, golden ears bridge, pitt river bridge, the budget for port mann bridge (based on 2005 dollars), I could go on and on.
Let's try and remember this next election and tell your friends to GET OUT AND VOTE THEM OUT!
sunshine coast girl
17-06-2009
If they won by fraud and lies..
We need to take our Province back! Hansen needs to explain the difference.
realisticman
17-06-2009
This must STOP!
quote:
"Over the same period, however, provincial government spending ballooned to $43.2 billion from $39.6 billion. There were large increases in the amount spent on health ($1.26 billion), education ($1.1 billion) and social assistance ($588 million)."
"I think the public wants answers," said Bruce Ralston, the New Democratic Party's finance critic.
OK, where should the cuts start, or can some of these huge expenditures find more efficiency?
Frank
17-06-2009
Liberal math
And of course the economy wasn't as bad last year as it is this year.
Still, I doubt the Liberals will break their own deficit record which they set in their first year in office by giving tax cuts to their friends and raising user fees for everyone else.
And in the future we have billions upon billions of crushing P3 debt to pay back.
SharingIsGood
17-06-2009
CanWest Global
Just reviewed the main three BC CanWest papers and watched the 5:00 PM news. There was not a peep about this. This is big news. It is huge news! Nothing but silence. Between CanWest and the PAB we are lucky to learn any truth.
Thank you, Andrew MacLeod and The Tyee, democracy needs you.
sunshine coast girl
17-06-2009
Well, we'll see what happens....
Here is transcript of an email conversation that I had with Kirk LaPointe, Managing Editor, Vancouver Sun earlier today.
Which report are you mentioning?
Kirk LaPointe, Managing Editor, The Vancouver Sun.
Hi Kirk,
The StatsCan report that was just released showing the BC government ran a 1.44 billion dollar deficit in the year
ending March 2009. And that even if they quibble about the difference in bookkeeping, the fact is that StatsCan's
books results and our books results were similar in other years.
http://thetyee.ca/News/2009/06/17/BillionDeficit/
From: LaPointe, Kirk (Vancouver Sun)
Subject: Re: StatsCan
Thanks. We don't catch everything at first, so we're on it.
Kirk LaPointe, Managing Editor, The Vancouver Sun.
You're welcome. Thanks for responding. I look forward to the story.
SharingIsGood
18-06-2009
Luke's CanWest article
I followed the link to the Sun article that was finally published about this. The article sounds as though it were written by Luke, himself.
Just look at the title of the article:
"Diverging accounting rules lead to a budget GAAP" By Derrick Penner, Vancouver Sun June 17, 2009.
The title does not name the BC Liberals. The title makes it an article about accounting policies. I believe most people would just gloss over it without reading. Ifg and when they have finally read the article, I think that they would surmise that nothing is wrong with Hansen's projections. If Derrick Penner had interviewed the NDP finance critic about the , it doesn't show in the text. It should have be a 3-inch headline on the front page of all CanWest papers.
Palmer should be writing about it. Palmer should be daily hammering home information about the books being cooked - the BC Liberal P3s are expensive chickens gathering to come home to roost.
I would love to read an expose' on the true cost (with nothing hidden) of all Liberal privatizations and P3s when compared to public sector for same services. Environmental and legal costs must be included.
SIG
brg61
18-06-2009
Wider gap...
"Nor is it clear why that gap would be three times wider than in recent years"
I don't see a mystery here; the gap is wider this year because it's an election year.
The budget delivered by Colin Hansen was farcical. It ignored the reality of falling revenues in a severe downturn with exaggerated projections AND now we have the truth that he fails to report LAST years deficit at all. He turns a $1.44 billion shortfall into a $50 million surplus!!!!!
This guy would make Bernie Madoff blush.
Luke Skywalker
18-06-2009
Buccarroo Bay...
From a Will McMartin article in The Tyee:
http://thetyee.ca/Views/2005/09/26/BizBCLibs/
buccaneer bay
18-06-2009
How about 55 billion dollars in contractual..
In contractual debt........
That was the total for the end of 2007
God only knows what the total now is,here is craig Mcinnis`s take on it.....
http:www2.canada.com/vancouversun/columnists/story.html?id=be4c05c2-444b-4624-afbb-fb98ac8b799e
SharingIsGood
20-06-2009
Luke's obfuscations
The topic at hand: The BC Liberals have mismanaged the public purse, and mortgaged the our grandchildren's future - yet again; they have lied about it, yet again; they will do both, mismanage and lie, yet again, in the future.
How could we expect anything different?
Who profits from the BC Liberals' mismanagement?
A) The wealthy (very often foreign) investors buying BC resources at less than market value through unnecessary tax incentives. If the resources are raw (logs, ore, cattle, etc., so much the better (for the corporations, that is, as value need not be added within the province).
Please note in the following that the tax rate decreases as dividends are taxed at 1/3 the rate:
www.knv.com/resources/pdf/resource.../bc_corporate_tax_rate.pdf
"•Since 2001, the general corporate income tax rate has been reduced by 39 per cent.
•In 2001, B.C. eliminated the corporation capital tax on non-financial corporations and the tax will be phased out for financial institutions by 2010.... BC's current corporate tax rate is among the lowest in North America, the top marginal corporate income tax rate is 30.5 per cent [unless paid as dividends - then they are 1/3 less]."
http://www.gov.bc.ca/yourbc/tax_business/tb_business.html?src=/business/tb_business.html
B) Corporations (very often foreign-owned) providing services and products at a cost higher than if they were done by the public sector. After-all, they must be produced to government specs; but their primary goal is to provide profit for their stock-holders.
Privately held companies work to return profit and value to their share-holders. In good times or bad, privately held entities work their hardest to maximise profits to shareholders and corporate executives. When they begin to run out of capital because they have not managed their money well (having given profits to the already wealthy), they look for government handouts, or they leave.
When publicly held entities gain efficiencies, value is returned to the public either through reduced taxes or improved service. In bad times, well-run governments have saved surplus money from good times to continue the same level of service. These public entities do not go bankrupt and skip town.
G West
22-06-2009
By the way
The story in the halls of the government these days - relative to the final numbers for the economy - is that there's a fairly animated disagreement between the auditor general's figures and those of Hansen's pencil pushers.
In other words, stay tuned.