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BC's small surplus depends on asset sales and optimism

The British Columbia government is budgeting a razor thin surplus based on optimistic assumptions, tax increases and the one-time sale of government assets.

"The question is not whether or not the government is tabling a balanced budget," Finance Minister Mike de Jong told reporters. "The question is... how the government is balancing the budget. Is it credible? Will it withstand scrutiny?"

The budget includes a $197 million surplus for 2013-2014, a significant reversal from the $1.2 billion deficit projected for the current fiscal year. The total operational budget is roughly $44 billion.

Minister de Jong attributed the reversal to economic growth, reduced growth in spending, increased taxes and the sale of property and assets.

There are many places, however, where assumptions are made to keep the budget in surplus.

For example, the budget includes a $200 million forecast allowance, meant to guard against economic volatility. That's the same amount as last year, but significantly less than the $750 million allowance included in the 2008 budget.

Put another way, if the forecast allowance were the same as in 2008, the bottom line would show a $350-million deficit.

Another line item used to deal with unforeseen changes, contingencies, has been budgeted at $225 million, a reduction of $75 million or 25 per cent from last year.

The sale of government assets will raise $475 million. They include things like parking lots, vacant lots and former schools in various parts of the province.

"Governments have always sold property," said de Jong. "You would expect that of an organization this large... Admittedly what we've done is pulled them together."

The budget shows no income from such asset sales for last year, however. Without the sales, which de Jong said represent about two per cent of the government's holdings, the budget would be $275 million in the hole.

Asked if the government could balance the budget without selling those properties, de Jong said, "They are helpful, but so are the other measures we've taken."

A big deal was made of trimming the estimate on natural gas revenue by $60 million in response to a review by economist Tim O'Neill. But even with that change, the budget anticipates natural gas revenues to double from $144 million this year to $282 million next year.

The budget also includes an added $61 million from "other energy and minerals," $75 million from forestry and $22 million from "other natural resource" revenue. Crown corporations are expected to contribute $55 million more than they did last year.

Personal income taxes are budgeted to contribute an added $341 million and Medical Services Plan premiums an added $109 million. Health and social transfers from the federal government are expected to grow by $308 million.

The budget includes what de Jong called a "temporary" increase in income tax for people who earn more than $150,000, which will raise $412 million in the two years it stands. It also accelerates a one per cent increase to bring corporate income tax to 11 per cent, a $2 a carton hike in tobacco taxes and a phasing out of the industrial school property tax credit for light industry.

On the spending side, health is projected to increase by 3.3 per cent and education by 1.75 per cent.

The ministry of community, sport and cultural development will see a cut of $126.7 million, which amounts to 41 per cent of its budget. Energy, mines and natural gas will see a $25-million cut.

A $105-million cut to the ministry of forests, lands and natural resource operations includes a $35.3 million cut to "resource stewardship," which includes things like silviculture, timber supply planning, inventory and research.

The "innovative clean energy special account" will be cut from $14.97 million to $5.03 million.

The current year's spending on fighting forest fires, and it has been a relatively light year for fires, is $134 million. Next year, the government projects, that will drop to $63 million.

The emergency preparedness budget will drop from $54 million to $15 million.

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria. Find him on Twitter or reach him here.

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