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Provincial surplus shrinking with worsening financial outlook

British Columbia's financial position has deteriorated since February's provincial budget presentation, though a surplus is still expected, according to an update Finance Minister Mike de Jong released today.

Reduced estimates for economic growth and more people leaving for other provinces were among the explanations for the worsening bottom line.

The surplus for 2013-2014 is now projected at $153 million, down from $197 million in February, on a total budget of $43.9 billion. "I won't profess to be entirely comfortable, but the numbers are what they are," de Jong said. "No argument from me that what we're talking about is a balancing act that requires attention to details."

Meeting the revised surplus figure includes drawing down $50 million of the $200 million forecast allowance and the assumption the government will be able to find another $30 million in savings.

The needed savings are a small part of the province's total budget, said de Jong. "It's not really that easy, but it is achievable."

No one area would be targetted, he said, but he gave the Pacific Carbon Trust as an example of somewhere the government might be able to find some savings while still achieving it's environmental goals and addressing issues the Auditor General raised earlier this year.

The government decreased its estimate of real GDP growth for the province to 1.4 percent, down 0.2 percent from February's assumption. The drop is smaller than the one projected by the province's economic forecast council, which lowered its GDP projection from 2.1 percent to 1.6 percent.

Tax revenues projections are down in part due to "a weaker outlook for personal income, wages and salaries, employment, corporate profits, consumer expenditures and BC housing starts."

Transfers from the federal government are dropping because B.C. has been losing population share to other provinces. As the budget document puts it, "Statistics Canada has recently provided its preliminary 2011 Census net undercount estimates, which show BC has a lower population share of the national total than projected in the February 2013 budget, resulting in reduced entitlements over the fiscal plan period."

Revenue projections increased thanks to an increase in the outlook for natural gas prices, but expectations for revenue from coal and forestry have dropped.

Compared to February, the government is taking $33 million out of Jobs, Tourism and Skills Training, $9 million out of Agriculture, $9 million out of Advanced Education, which is now also responsible for Innovation and Technology, and $2 million out of Community, Sport and Cultural Development.

The finance ministry budget is up by $20 million and Transportation and Infrastructure is up by $9 million.

The names of some ministries have changed since February. At that time Energy, Mines and Natural Gas had a budget of $425 million. The update gives $24 million to Energy and Mines and $372 million to Natural Gas Development, leaving it $39 million short of February's plan.

With three weeks until the public accounts for last fiscal year, 2012-2013, de Jong said they will show that year's deficit has grown from the original estimate by $172 million to $1.15 billion. Part of the larger deficit is the failure to sell the Little Mountain property in Vancouver last year, but that sale is expected to complete in 2013-2014 for some $300 million.

The province's total debt will rise to $62.5 billion by the end of the fiscal year, and is projected to grow to $69.8 billion by the end of 2015-2016. That includes $631 million more in debt accumulation than was expected in February.

"We continue to build and there's a borrowing component to that and that adds to the debt," said de Jong, who added that running surpluses allows the province to begin paying that down.

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

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