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BC Ran a $1.4 Billion Deficit

StatsCan ties 2009 shortfall to rising expenses. Couldn't Libs see it coming?

By Andrew MacLeod 17 Jun 2009 | TheTyee.ca

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria. You can reach him here.

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Finance Minister Hansen: Different story.

New figures from Statistics Canada are raising questions about whether British Columbia's financial books are in as good shape as the province has so far claimed.

StatsCan, which uses a different accounting system than the province, figures B.C. ran a deficit of $1.44 billion in the fiscal year that ended March 31, 2009. That's significantly worse than the $50-million surplus the province budgeted.

And the imbalance appears to have more to do with growing government spending than it does with falling revenues.

While the province's year-end books are not yet in, Finance Minister Colin Hansen insisted last week that there will be at least a small surplus shown when the public accounts are released. "That is still my expectation," he said.

Hansen, in a cabinet meeting today, was unavailable by publishing time. Nor were ministry officials prepared to comment on the StatsCan figures.

"I think the public wants answers," said Bruce Ralston, the New Democratic Party's finance critic. "Given the level of public interest in the finances of the province in the current economic circumstances, they have an obligation to at least explain what their position is."

He added, "The publication of these figures in this form does give rise to certain obvious questions."

Accounting differences

A StatsCan official said in an e-mail that his agency and the B.C. government use different systems of accounting and treat capital expenditures differently.

StatsCan uses a Financial Management System that allows the agency to compare financial data across different jurisdictions. It uses a modified cash basis of accounting, he said. In such a system money is counted in the period when it is either received or spent. The FMS includes what provinces spend on capital.

B.C., on the other hand, uses an accrual system where revenue is recorded when it is earned and expenses are recorded when they are incurred, whether or not money has actually changed hands.

As StatsCan's newsletter puts it, "FMS statistics may not be in accord with figures published in government financial statements."

It is unclear, however, how much of the gap between StatsCan and the province's estimates is caused by the accounting differences. Nor is it clear why that gap would be three times wider than in recent years.

For the fiscal year that ended on March 31, 2008, the province's books show a surplus of $2.9 billion while StatsCan has it at $2.4 billion. There's a gap, but it is roughly $500 million -- well short of the nearly $1.5 billion difference-of-opinion on this year's results.

Similarly, in the 2006-2007 fiscal year, B.C. showed a $4-billion surplus while StatsCan had it at $3.6 billion, a difference of some $400 million.

And for the two years before that StatsCan's results worked to the province's favour with surplus figures that were $800 million higher each year than what the B.C. government calculated.

Higher expenses

The deficit B.C. ran last year, according to StatsCan's calculation, appears to have had more to do with ballooning expenses than with shrinking revenues.

Indeed, a detailed table provided by StatsCan shows B.C.'s revenues shrank to $41.8 billion in the most recent fiscal year from $42 billion a year earlier, a relatively small decline of $200 million at a time when the economy was turbulent.

Declining personal income taxes ($750 million lower) and corporate taxes ($200 million lower) were balanced by revenue gains in other areas.

Over the same period, however, provincial government spending ballooned to $43.2 billion from $39.6 billion. There were large increases in the amount spent on health ($1.26 billion), education ($1.1 billion) and social assistance ($588 million).

Altogether, that's a jump of $3.6 billion, or about nine per cent, in the last fiscal year before the election.

That increased spending may make sense, either as an effect of the falling economy or as an effort to stimulate it, but it is very different from the story Hansen has so far told. That story has instead focussed on how a volatile global economy has cut B.C.'s revenue.

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