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Little wiggle room in Hansen's 2009 BC budget

Finance minister Colin Hansen today presented a budget he said is aimed at maintaining services to the public while reducing spending within the government.

The budget includes deficits of $495 million for the 2009-2010 fiscal year and $245 million for 2010-2011.

It maintains spending on health and education, adds $2 billion for infrastructure projects to be cost-shared with the federal government and makes cuts across many of the government's core functions.

“[This was] probably the most challenging budget process the ministry of finance has been through in anybody's memory,” Hansen said presenting the budget this morning. Global economics are volatile, he said, but the province is well placed for recovery. “I have every confidence B.C. will come through these economic challenges and be even stronger in the years ahead.”

Yesterday Hansen said this year's budget would include new levels of prudence, but that was not entirely in evidence today.

The government based its projections on a forecast of negative 0.9 percent growth in Gross Domestic Product—they are planning for a serious recession. It goes beyond the zero percent growth that the province's panel of 12 independent economic advisers on average predicted in January.

“This is considerably more prudence than we've built into our forecast than any of my predecessors have in the past few years,” Hansen said.

Except that the budget drops the forecast allowance from past years. Last year, for example, then finance minister Carole Taylor kept a $750 million forecast allowance, meant to hedge against volatility in the economy. This year, as economists scale back their predictions virtually daily, Hansen has not only reduced the forecast allowance, he's eliminated it.

“I think the forecast allowance is a misunderstood technique,” said John Winter, president of the B.C. Chamber of Commerce. “When your'e going into deficit spending, I don't think the forecast allowance means very much.”

There is also a contingency of $385 million in the budget, roughly one percent of spending, similar to last year's $375 million.

“In any system there's contingencies and prudency that's not necessarily obvious,” said Mia Maki, the chair of the Certified Management Accountants. The government is ambitious in what it thinks it will get from personal income tax, she said. “Yes, there is some risk in the budget . . . It looks like there's adequate contingencies.”

Green Party leader Jane Sterk isn't so sure. “We're predicting the deficit will be in the neighbourhood of $1.5 billion,” she said at the budget lock-up in Victoria. The government is overestimating revenues while underestimating expenses, she said. “It's a political budget . . . It's designed to create the illusion of our ability to escape reality.”

“You could almost describe it as the 'if' budget,” said Bruce Carter, president of the Greater Victoria Chamber of Commerce. If all the assumptions hold, the province will come out well in two years. That will only be known in hindsight, he said.

With an election set for May 12, and Hansen acknowledging yesterday that a re-elected Liberal government would bring forward a revised budget in the fall, expect to hear about how the situation was way, way worse than anyone could have known.

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

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