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Record Deficit a Big Surprise, Say BC Liberals

During May's election Hansen learned revenues were hundreds of millions of dollars lower, but lacked a 'crystal ball'.

By Andrew MacLeod, 2 Sep 2009, TheTyee.ca

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Off by factor of five: Premier Campbell and Finance Minister Hansen presenting last February's fiscal update.

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British Columbia Finance Minister Colin Hansen is projecting a record deficit of $2.8 billion, according to a budget update he presented today. It's a figure five times larger than the $495 million projected in February and insisted upon by Premier Gordon Campbell during the election campaign.

While Hansen said the re-write was necessary because of the deteriorating global economy and the unexpected severity of the recession in B.C., observers said as early as February that the government's numbers were unrealistic.

"This downturn we've seen in the last 12 months is hopefully a once in a lifetime experience," said Hansen. "Hopefully we are through it, but I don't think anybody has that crystal ball."

In March, 2008, the Tyee reported there were signs an economic slump was coming to B.C. but the government appeared to be doing little to prepare. In February the Tyee's Will McMartin called Hansen's budget "toxic fudge" as it overestimated revenues and underestimated expenses in several areas.

On budget day Green Party leader Jane Sterk predicted the real deficit would be much larger than Hansen said at the time. "I find it astounding the minister still says they didn't have an inkling the deficit would be this large, because we did call it back in February."

What Liberals knew when

Hansen himself managed to add to speculation that he knew more during the election about how bad the financial situation was when he told reporters that he knew during the election that revenues were tanking.

He said: "The first time that I ever had any indication from ministry of finance staff that our revenue projections might be taking a bigger hit than we anticipated was actually a casual conversation I had in the middle of the election where the deputy minister indicated to me, as an aside actually of a relatively brief discussion, that our revenues may be under pressure to the tune of about $200 or $300 million dollars from what we had previously anticipated."

Several hours later Hansen appeared alongside Campbell in a scrum in the premier's office.

Campbell said that when he insisted the deficit figure was firm, he believed it was true. "What I actually was doing was reporting on what I knew at the time," he said. "I was not frankly aware of what the impacts were in terms of revenues and I think frankly a lot of people weren't. There were a lot of projections, no question about it."

He said a week or so before the election he'd heard the revenues were dropping, but he thought the drop was manageable. "I'd also heard we could manage them within the budget framework we'd set."

"Anyone following the papers would know there were going to be pressures on revenues," Hansen said.

At the time he didn't worry, he added, because he knew the government was finding places to save money. "The first thing that popped into my head was that was still doable within the budget framework we'd set for ourselves."

Asked when exactly he had the conversation with deputy finance minister Graham Whitmarsh, Hansen said he didn't know. "I don't keep a diary."

"I don't buy it," said New Democratic Party leader Carole James. "First of all it's worrisome that a minister takes a comment in passing that revenue is dropping and he doesn't worry about it? He should be paying attention to those things on behalf of British Columbians."

Revenues kept dropping

Regardless, Hansen's post-election budget is a major revision from what he presented in February. It shows a drop of $1.2 billion in revenues and an $826 million rise in expenses.

February's budget overestimated the government's revenue in 2009-2010 from personal income taxes by $881 million, from corporate income taxes by $114 million, natural gas royalties by $492 million and other natural resources by $561 million.

It introduces a tax on the private sale of used vehicles which will raise $75 million in 2010-2011 and $101 million in 2011-2012. Medical Service Plan premium revenues are up $37 million since the February budget and are slated to increase by 18 percent over the next three years.

"We are moving to make sure the most critical services are protected," said Hansen. The increase in MSP premiums is "necessary to keep health spending sustainable," he said.

Liquor distribution branch revenue will go up thanks to increased markup. Prices will stay the same for alcohol at government liquor stores, despite the fact the budget reduces taxes on it.

Altogether the government has revised its revenue projections downwards by $1.2 billion.

'Prudence' added back in

At the same time, expenses are up $826 million from February's budget. The update includes an added $420 million more for income assistance over the next three years, $80 million this year for H1N1 flu preparation and $151 million to implement full-day kindergarten.

It also adds in a $250 million forecast allowance and an extra $115 million in contingency funding. The government's documents say including a forecast allowance is "prudent". In past years the allowance has been in the range of $750 million, but in February, when the global economy was particularly volatile, the government allowed nothing for it.

The deficit is reduced thanks to the $1.6 billion transition payment the federal government will pay to B.C. as part of the adoption of the HST. Of that, $750 million will be applied to this year's bottom line with the rest spread over the following two years.

The government also took the update as an opportunity to revise ministry budgets, upping the allocation from what was presented in February to Aboriginal Relations and Reconciliation by 35 percent, Forests and Range by 43 percent and Healthy Living and Sport by 23 percent.

Cuts since February include a 19 percent hit to the Environment Ministry, 19 percent to Small Business, Technology and Economic Development, 25 percent to Agriculture and Lands and 41 percent to finance.

Counting on a rebound

The budget documents show a projected decrease of 1,083 in the number of people working for the government over the next three years and make no allowance for possible wage increases. Most public sector unions have contracts that will expire in 2009-2010.

The budget documents also acknowledge that the province was already in recession in 2008. At the time government officials said B.C. was largely insulated from the global economic downturn.

"There's every indication we're seeing a bottoming out of this economic downturn," Hansen said today. There's still a possibility there'll be a "double dip" and the economy will worsen, but the assumption in the budget for future years is the GDP will grow. "It's going to be a slow, gradual recovery."

The update is based on the assumption that the real GDP will shrink by 2.9 percent in 2009, then grow by 1.9 percent in 2010 and 2.7 percent in each of 2011 and 2012.

Old economy vs. new economy

Cutting spending and introducing new taxes and higher fees is the wrong approach in a downturn, said B.C. Federation of Labour President Jim Sinclair. "It's killing jobs," he said. "It's going to cost you and me and the average British Columbian more to get by on."

He added, "I think British Columbians have a right to be angry today. They saw a budget that goes against what they need." The HST will transfer wealth from the pockets of average British Columbians to corporations, he said.

CUPE B.C. President Barry O'Neill said people keep saying the government made hard choices. "Bullshit. Those are the easiest choices you can make," he said. "It's all just take back, very small amounts from people who need those amounts."

The budget cut the new economy and reinvested in the old economy, said Will Horter, executive director of the Dogwood Initiative. "We knew the government was going to have to make hard choices," he said. "We have serious concerns about some of the choices they've made."

While the budget maintains the carbon tax, it also excuses home heating costs from the HST.

"Putting the tax exemptions on fuels rather than putting the tax exemption on renewable energy products shows you're going in the opposite direction from the carbon tax," said Tom Hackney from the B.C. Sustainable Energy Association. "Renewable energy should be exempt from the HST."

"It puts the lie to the claim they are protecting the environment," said Horter.

The reaction is a big change from February 2008 when environmentalists lauded the carbon tax. "Politics is about eternal vigilance," Horter said. "What have you done for me lately... This budget shows they haven't done much for the environment and future generations lately." [Tyee]

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria. Reach him here.

27 Comments:

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  • Chris Keam

    2 years ago

    It's a vision thing I guess

    ""There's every indication we're seeing a bottoming out of this economic downturn," Hansen said today."

    He couldn't see it coming, but he CAN see it going?

    Ain't buying it, with or without HST.

  • jwstewart

    2 years ago

    Nation wide !

    CBC Radio national news reported how the minister & premier apparently new before the election the deficit was going to be higher.

  • Isabella2

    2 years ago

    What they knew and when

    If the Finance Minister runs our budget financing based on a "casual" corridor remark by Graham Whitmarsh during the election campaign, if he was so unaffected by, or uncurious about a multi-million drop in revenues, if he truly did not brief the premier about it, then they are both collosally stupid, or colossally incompetent. Either way, the people deserve to have another election. Let the Liberals stand or fall on the reputation they have accumulated in less than 4 months since May 12th when all they could tell us was that BC was ahead of the economic curve and doing just fine. I know what I'd like to say about them, but it's not allowed.

  • Skywalker

    2 years ago

    "they are both collosally stupid, or colossally incompetent."

    I say neither. They are colossally dishonest. The end justifies the means.

  • Camero409

    2 years ago

    Record Deficit a Big Surprise, Say BC Liberals

    Sometimes you just want to roll your eyes in disbelief. Do they think the people of BC are this stupid? I think they do, otherwise why make this unbelievable statement? I don't believe they were surprised by the deficit, they are surprised by the contempt in which they are now held. Unless your from another planet and arrived yesterday, you know they are lying. Now is the time they believe, to try and soft sell the deficit and hope this all blows over before the next election. I for one have a long, long memory and will work my butt off to ensure this incompetent group of BSer's never see another day of public office beyond the next election.

    If they had any morals or ethics they would resign and fight a election based on their current record. Of course we know Gordo and his minions have neither.

  • MJK

    2 years ago

    So much for slogans

    BC - The Bust Place on Earth

  • Barryeng

    2 years ago

    Re; What they knew . . .

    More and more I am hearing people saying either they are stupid, or incompetent. I think that the incompetent part is now a given.

  • sunshine coast girl

    2 years ago

    The chickens are coming home to roost...

    And Hansen says the budget will "assume" that we are at the bottom of the downturn. You know what they say about people who "assume".

  • mary jane

    2 years ago

    didn't know

    Normal people have known for months that the money problems facing us all weren't going away soon. Any politician who was worth their salt would have stopped spending on the olympics. But we have idiots running bc. If the fiberals gave darn they would have stopped spending on dumb stuff lasst year so they could care for the people, thus making sure the people survived BUT NO not gordo he wants everyone to suffer thus they will work for next to nothing.....

  • mary jane

    2 years ago

    more not less

    With the growing number of unemployed we will need more - not less government emplyees to help those in need. the Studitiy is showing again

  • RickW

    2 years ago

    skywalker

    Quote:
    "they are both collosally stupid, or colossally incompetent."
    I say neither. They are colossally dishonest. The end justifies the means.

    The Libs are just playing with us. They know exactly what they are doing, and they's got nearly 4 years to play. The ONLY reason they restored (some) arts funding, is because they got stung the last time they "tore up contracts" and it didn't take any time at all for the arts groups to throw out the word "lawsuit".

    But the queston I have for you is: what is the "end" they have in mind, do ya think?

  • khed67

    2 years ago

    not incompetent

    This government is neither stupid nor incompetent. It is the electorate that is both. The government is entirely clear, focussed, and predictable in its actions:

    Step 1: Cut taxes, especially to corporations and the wealthy.
    The BC Liberals and their friends are all wealthy and tied to the corporate world.

    Step 2: Make up for the lost tax revenue by cutting spending on public programs, including "essential" services like education and health care.
    The same people who benefit from Step 1 can afford private education for their kids and private clinics for their health needs, especially with their decrease in taxes.

    Step 3: Privatize the public programs that suffer from the financial strain after criticizing their alleged inefficiencies.
    The beneficiaries of Step 1 now receive sweet deals from the government to run their new enterprises.

    Dishonest? Yes. Stupid? No way.

  • morechatter

    2 years ago

    Big Surprise to Government but No Surprise to anyone else

    Campbell is a perpetual fibber, I don't think the truth is in him and if it is its hidden away where no one can find it.
    Is this the type of behavior you want from a government a 4.5 billion dollar surprise as HST advance also added on to tab. Its on money that hasn't been taxed yet so its on borrowed dollars to. And this is what government is admitting to as I'm certain there are other surprises around the corner. I'm not surprised and its a certainty most contributers to Tyee aren't either. Apparently anyone of Tyee's contributers would have done a better job of managing the economy but then that is no surprise either.

  • crankypants

    2 years ago

    A look to the future

    If you think things are bad now, just wait until the HST kicks in next year. As people's discretionary spending gets further eroded by the new taxable items they will be paying the HST, they will have less to spend and that will impact countless retailers. This will lead to job losses and business closures which will extend the recession well into the future. It's not going to be pretty.

  • Skywalker

    2 years ago

    Rick W

    I think Gordon has always been enamored of the right wing Alberta type of democgraphic. Well maybe Alberta is too left even for him. You know the kind of place where corporations rule, there are no unions with any power and you pretty much get to do as you please. Like in the heyday of WAC Bennett. He's been peddled this stuff by his brother and the Fraser Institute and he likes the elitist nonsense that this kind of thinking dreams about. I don't think Campbell really cares about what kind of a society is needed in this day and age. He's a throwback to Reagan and Thatcher: a economic neanderthal bent on making himself a place after politics which he never achieved in the business world on his own before entering politics. Another true George W. doing the bidding of his masters.

  • ME2

    2 years ago

    Surprise, surprise.

    Yes indeed, Gordo, there IS a Santa Clause.

    His name is Harper.

  • snert

    2 years ago

    And therein lies the rub.

    "Record Deficit a Big Surprise, Say BC Liberals"

    Just one more reason to doubt this governments ability to do anything right.

  • lemonheart

    2 years ago

    Rhetoric

    Somewhere along the line during our lives growing up in Canada we've all chosen {...or have been brainwashed!} into thinking that the government is democratic and somehow supposed to serve the needs of people.

    This is view is totally delusional based on the sum of our experience.

    They only spend just enough socially to keep you all going to work and not rioting in the streets.....and nothing more. Shut and pay pay pay your taxes.

    98% of politicians are corporate snake oil sycophants who should really be shot. The whole thing is a bloody sham at best- always has been.

    The government lies. That is its main function.Lie to maintain the lie to maintain the illusion ti maintain control.

    So never mind who knew what- when - or where- It's all BS - drop the stupid belief that government actually cares about you - THEY DON"T! ......and stop being so godamn co-operative with these people.

  • mary jane

    2 years ago

    I bet

    Next time people are expected to vote I bet even if they are sold on the ndp they like many others will get their butts out there to assure we don't have a repeat of this crap. I won't be surprised if enough people living in lieberal ridings are out there soon doing the recall thing. I live in an ndp riding so I can. PLEASE someone get out there and start the process

  • Curt

    2 years ago

    This government must think

    This government must think we are all a bunch of stupid people. The majority of us new things were going downhill last year. All you had to do was watch what was going on south. We usually follow to some degree. So to say they didn't know, I say B--lsh--.

    Don't insult our intelligence!!

  • SharingIsGood

    2 years ago

    BC Libs mismanaging what is left

    The BC Liberals are showing us, once again, that the Olympics are not truly for BC citizens unless those citizens are willing to fork over lots of dough. The Olympics is not about supporting our youth to work to do their atheletic best. Proof of this comes in from reviewing one of their recent ill-conceived funding cuts.

    Campbell's crew talks out of both sides of its mouth. Thaey are cutting the total $130,000 of core funding for the very efficiently delivered (though volunteer efforts of teachers etc.)organizing of BC provincial high school sports etc. It seems international atheletes get a $7 Billion dollar BC Olympics, yet BC high school students are to have no funds for provincial tournaments/organization.
    http://www.vancouversun.com/sports/high+school+sports+grant+devastating+blow/1947688/story.html

    The BC Liberals take crucial funding away from grassroots activities that promote health and healthy lifestyles at the same time $2.6 million in funding for Olympic torch relay celebrations have been earmarked for MLA Kevin Kruger to hype the Olympics across BC communities.

    http://www.bclocalnews.com/bc_thompson_nicola/merrittherald/business/56668617.html

    Once again, Campbell Inc. shows the deep hypocracy within their policies. Campbell's funding priorities are not for BC people. Perhaps if the BC Libs don't want to curtail their Olympics celebrations, they can eliminate just one of their unheeded (and useless) backbenchers to fund the BC high school sports programs.

  • crankypants

    2 years ago

    Shocked???

    Don't kid yourself, the Liberals are not shocked by the size of the deficit. They are just shocked by the reaction of the electorate to the HST and the BS they spewed during the election. The surprise is that there are no whistle blowers coming forward to expose the deceit the Liberal party brought forward. Is it now a pre-requisite that all government employees rescind their morals to secure a job? Are the lemmings we elect so devoid of a backbone that they renounce their sould to be elected. It's no wonder that voter participation dwindles from election to election. Maybe it's time they listed the option of voting for "none of the above" on the ballots so that the voters could really voice their displeasure with the state of our political system.

  • Skywalker

    2 years ago

    According to David Schreck there is more..

    It turns out that back in March the Federal Finance Minister commented that a couple of provinces were considering harmonizing the GST and their PST. This was during the federal budget discussions. It has yet to be determined which couple of provinces were in these discussions. Check out David Schreck's latest column on his website. There will likely be more developments all proving that the Liberals lied (misrepresented) their way through the election.

    That is why they are "circling the wagons".

  • kjllarsen

    2 years ago

    I do not think that this

    I do not think that this government can really say anything other than it did to defend this horrific increase in the budget. Any group in power would do the same as far as I'm concerned.
    What frustrates me is the inability to change their arrogant behaviour. These jokers just continue to do whatever they want with total contempt for the wishes of the taxpayers and voters. This is politics at its worst. Power corrupts absolutely. Campbell's government has the support of big business and, so far, the major media and opinion leaders.
    There are compelling arguments both for and against the HST. All I have to do is decide which argument I like the best and go with that one. I wonder if the same economists that advised Hansen et al before the election are the same ones giving them advice now. I would say that bad advice like that normally gets one fired. In this case I would bet that Campbell has sent these folks a thankyou note because they were there as the scapegoat when the feathers hit the fan last week.
    Either way, this government can spew any retoric they want because they know they can.
    The trouble with us people that want our citizens to be cared for and given equal oportunities is that we cannot agree with each other on how to implement change in government.

  • sunshine coast girl

    2 years ago

    I wonder if Campbell is going to have Hansen fall on his sword..

    to cover his ass out of this mess? Keep the pressure on. I see them starting to crack. Fighthst.com

  • The Blackbird

    2 years ago

    How can Campbell have Hansen fall on his sword ...

    when that sword is stuck somewhere I can't mention here if I want this comment to remain approved.

  • ElGatoBlanco

    2 years ago

    "What we

    "What we need..............
    ..............is a bloody good revolution to bring BC out of the 19th century to the 21st"

    Death to the Liberal Scum. This is my first post on this website and i want to make it a memorable one. Revolution can and will come to Canada, in the form of a cresting wave. The Premier Gordon Campbell is responsible for the destruction of many lives, including my own. And the people will have their vengeance. HAIL TO THE PROPHECY!

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