BC’s Pandemic Budget Increases Spending and Forecasts Big Deficits

The British Columbia budget presented today includes significant spending, big deficits and substantial wiggle room as the province looks ahead to a long-term recovery from the COVID-19 pandemic.

“Many people are still feeling the effects of the pandemic, and they will for some time,” said Finance Minister Selina Robinson. “This moment calls for action, and Budget 2021 delivers for the people of British Columbia.”

Overall, compared to fiscal 2020-21, the budget increases the province’s operating spending by $2.8 billion to bring it to $64.4 billion.

Among ministries, the biggest increase is $1.68 billion for health, which accounts for nearly 40 per cent share of the government’s operational budget.

There’s a $700-million bump for social development and poverty reduction, about 19 per cent, a figure that reflects increases to income and disability rates earlier this year as well as anticipated caseload growth.

There are also sizeable increases for K-12 and post-secondary education, as well as money earmarked to respond to the opioid crisis and for increased mental health and addictions services.

At the same time there’s a $2-billion drop in revenue, a big part of which is a drop in corporate income tax (down $1.4 billion) that’s partially offset by increased revenue from the carbon tax (up $300 million) and property tax (up $646 million).

There’s also a big drop in projected transfers from the federal government, mainly because of one-time pandemic-related support year that isn’t being repeated.

The bottom line is a projected deficit of $9.7 billion this year, with smaller but still large deficits to follow in the next two years. Including capital spending, by 2024 the province’s total debt is projected to grow to $127 billion, about double what it was a few years ago.

“We are in a pandemic, and there’s been extraordinary spending because of the pandemic,” Robinson said, noting that B.C. has relatively low debt levels compared to other provinces.

“Despite the increase, our debt burden remains manageable for a province of our size,” she said.

Also included in the deficit figures are large contingencies and forecast allowances — $5.25 billion in 2021-22 — that the budget documents note, “generally have resulted in government exceeding its budget targets.”

The best estimate from Finance Ministry officials is it will take seven to nine years before the province will be able to return to balanced budgets, Robinson said, pledging that the 2022 budget presented next year will include a detailed plan to get there.

“I must stress there is significant uncertainty,” she said.

Robinson said she welcomed the commitment to child care made in yesterday’s federal budget and that B.C.’s budget includes funding to increase wages in the sector and to double the number of families receiving child care for $10-a-day.

“Child care will continue to play a key role as our economy moves to recovery from the pandemic,” she said, noting the money particularly supports women.

The budget supports people to stay safe and healthy while building towards a return that’s innovative, inclusive and sustainable, Robinson said. “We have been through a great deal,” she said. “This year has shown me time and time again how much we care for one another.”

Asked about the lack of funding for paid sick days, Robinson said the province has been pressing the federal government to contribute. “I was disappointed the federal government chose not to do that,” she said, adding the discussion continues.

She also said that the government continues to work on election commitments to provide rebates for renters and to provide free prescription contraception.

BC Green Party Leader Sonia Furstenau, the MLA for Cowichan Valley, said in a press release that she welcomed investments in health care and supporting people and businesses through the pandemic, but had hoped to see a more ambitious agenda from the government.

“This is the time to recognize the pivotal moment we are in, when we can pair our recovery from COVID-19 with a transformative plan that ensures a green and just future for B.C.,” she said.

“Right now around the world, other jurisdictions are recognizing that reducing inequality, addressing climate change and building a clean economy are not just nice-to-haves, they are absolute imperatives. If we fail to reach for the limits of our potential now, we risk being left behind.”

Speaking in the legislature, BC Liberal finance critic Mike Bernier said the people of B.C. need more than “hollow announcements” from the government.

After recognizing the unpredictable challenges the pandemic has presented, he said, “this budget does not come close to meeting the needs of the people of B.C.”

He said the premier and the government have a pattern of making flashy announcements about promises, but fail to deliver on them.

Bernier told The Tyee that despite the large spending and added debt, the government lacks a plan for how to move forward.

“How disheartening it is that the government acknowledges their failure by saying it’s going to be almost a decade before we can get, and even consider getting, to balanced budgets again,” he said. “That’s way beyond obviously the scope of what’s needed. The pandemic will obviously be done faster than that, everybody’s assuming that.”

The problem is the NDP doesn’t know how to build the economy, Bernier said. “This budget doesn’t have a plan,” he said. “There’s nothing in place to instill confidence for investment, for job growth, to make people want to stay and grow and invest and build in British Columbia. That’s how you get to a balanced budget, by growing the economy.”

The province is digging itself into a hole by borrowing and going deeper into debt, said Bernier. “At some point somewhere some future generation unfortunately is getting stuck paying it back because this government does not know how to generate the revenues that are needed.”

The BC Nurses’ Union applauded the spending on a pandemic recovery plan that includes the vaccination program, increasing the supply of PPE, and maintaining the single-site order for long-term care and assisted living facilities.

“We expected to see more attention paid to the incredible strain that’s occurring right now on the health-care system, and those working within it,” president Christine Sorensen said in a press release. “Again, we see plans for new and upgraded health-care facilities, but no mention of how they plan to staff them in the short and long term.”

BCGEU president Stephanie Smith said in a statement that while there was much to support in the budget, especially compared to other provinces, it fell short in some areas. “Frankly, what’s missing are critical supports for the frontline workers that have gotten our province this far — like paid sick leave and mental health supports. Those are gaps that need to be filled for our province to come out of this pandemic.”

On the environmental side, Clean Energy Canada’s executive director Merran Smith had positive things to say about the added investment in the existing CleanBC climate plan, support for the clean tech sector, subsidies for zero-emission vehicles, and money for cleaner and healthier communities.

The Wilderness Committee welcomed the added boost for BC Parks, but said the investment in CleanBC is insufficient given the scale of climate change.

“This government made big promises on climate change and old-growth and if they aren’t willing to adequately fund those commitments, they shouldn’t have made them,” said Torrance Coste, the advocacy group’s national campaign director.

“The idea that the ‘paradigm shift’ this government has promised [on old-growth forests] doesn’t require additional funding is frankly delusional. This is a recipe to increase division and conflict over old-growth forests in this province.”

Iglika Ivanova, a senior economist and the public interest researcher at the B.C. office of the Canadian Centre for Policy Alternatives, said the B.C. response to the COVID-19 pandemic so far has been strong. “Out of all provincial governments, B.C. has stepped up the most,” she said.

Still the government has more to do on housing, child care, climate and environmental commitments, she said, adding that spending on those priorities could have been accelerated. It would also have been good to do more to address issues of gender and racial inequality that have been highlighted by the pandemic, she added.

“The budget is a surprisingly status quo budget,” she said.

Ivanova said that as the pandemic enters its third wave the need for paid sick leave is clear. “It was a political dance not to do that, so that I find very disappointing.”

The president of the B.C. Federation of Labour, Laird Cronk, said there were lots of good things included in the budget, including spending for health care, child care, affordable housing and infrastructure.

But he also focused on the need for paid sick leave and said it’s a gap the province needs to fill. “I do believe this will save lives,” he said.

Cronk pointed out as well that while there’s been lots of support for businesses, the government has balked at guaranteeing that workers will be able to return to their same jobs when sectors like tourism and hospitality recover.

“We’re still looking for the details on how workers share in that same success,” he said.

Paul Kershaw, a professor in the school of population and public health at the University of British Columbia and the founder of the Generation Squeeze advocacy group, said that despite the increased spending there are worrying signs in the budget.

“This isn’t quite the affordability or recovery budget that I was expecting or the Gen Squeezed team was expecting,” he said.

The NDP’s election platform promised $1.25 billion in new money for child care, but the budget only delivers less than one-sixth of that, he said.

There also appears to be a troubling new direction on housing, Kershaw said. “One of the real concerns is compared to previous budgets the 2021 budget is a little more celebratory about rising home prices again.

“I think when we have the budget talk about how the economy is robust because home prices have increased so much over the pandemic time, we risk actually eroding the earlier commitments this government has tried to improve housing affordability.”