Finance minister Colin Hansen released British Columbia's First Quarterly Report showing a steep drop in government revenues from the forest industry, but an unexpected large increase to the overall projected surplus.

“The downturn we are seeing in the forest sector is unprecedented,” said Hansen.

Revenue from the sector is expected to drop 36 percent this year, “reflecting reduced stumpage rates and Crown harvest volumes,” the report said. It blamed the mountain pine beetle infestation, a weak U.S. housing market and the high Canadian dollar.

Hansen could not say when the last time was that harvest levels were so low. “Since 1993 it has never even come close to being that low.”

Government revenue from the sector is now forecast at $690 million for 2008-2009. That's down from $1.36 billion in 2004-2005 and is $262 million less than what was predicted in the February budget.

“The industry is in a tail spin,” said NDP finance critic Bruce Ralston. “The minister acknowledged some of the indicators are the worst they've been in a long long time His only response there is to push out a possible recovery to 2012. His response to people in B.C. is wait and see.”

The shortfall is more than balanced, however, by increased revenues from natural gas, corporate income tax and metals and minerals. The $50 million budget surplus predicted in February is now projected at $1 billion. Including the forecast allowance, the government could have be sitting on as much as $2 billion at the end of the fiscal year as it heads towards the May 12, 2009 election.

Asked if the government would consider tax cuts or sending rebate cheques, Hansen said, “We'll be looking at options to leave more money in people's pockets, which is certainly a priority for this government.”