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BC Budget: 'Is It Credible?'

Question posed by finance minister brings forth diverging opinions.

By Andrew MacLeod 20 Feb 2013 | TheTyee.ca

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

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Finance Minister Mike de Jong unveils 2013 budget: 'Governments have always sold property.'

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?"

While various friends of the government argued the budget is credible, many others said it is a deficit budget in disguise.

The budget as presented 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 for the province 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.

Wiggle room gone

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."

Spending contained, cut

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.

'Not a balanced budget': NDP

New Democratic Party finance critic Bruce Ralston called it "a classic pre-election budget by the BC Liberals, very reminiscent of 2009."

That year the government presented a budget with a $495-million deficit with no wiggle room that after the election quadrupled in size.

"Not a balanced budget and doesn't address the real needs of British Columbians," said Ralston.

The budget raised a couple taxes the NDP had also said it intended to raise if it forms government after the May 14 election. "I'm pleased the BC Liberals, despite their strong attacks on those ideas when they were first mooted, have adopted them," said Ralston.

The adoption of those tax increases will affect the NDP's platform, Ralston acknowledged, saying the party will need some time to analyze its options.

Asked whether the NDP would reduce or eliminate MSP premiums, Ralston said it would be difficult to do now that they bring in $2-billion a year, but steps could be made in that direction.

Unreliable numbers: Sterk

Iain Black, president and CEO of the Vancouver Board and Trade, sat on treasury board for four years as an MLA in the BC Liberal government. "You don't have any wiggle room anymore," he said. "That was not a budget that had any discretion in it."

That the surplus is pegged at just under $200 million is significant, he said. "Two hundred million is you're right on the line. That says there's no wiggle room. That $200-million number is basically a break even budget line."

Black said the numbers looked reasonable, as did Chamber of Commerce president John Winter (though Winter criticized the government for not doing anything to soften the $1.5-billion blow to businesses from returning from the HST to the PST).

"We think the numbers are unreliable as they were in 2009," said Green Party leader Jane Sterk. "I would not be surprised if it is not balanced. I personally believe there is an overstatement of resource revenue. I think it is based on very volatile world markets."

The government's priority was clearly to balance the budget, regardless of the consequences, she said. "They haven't done it in such a way that they are making sure the programs that are being preserved are in the interests of communities and families."

The government should be smarter about how it spends money, said BC Conservative leader John Cummins. He questioned how the government balance the budget. "They achieved that in the sense that if you look at the numbers, it's there… but they did it with the sale of assets."

Noting they also increased taxes, he said, "If you're trying to grow jobs in this province, if you want industry to invest, I don't think tax increases are the way to do it."

Tax cut legacy: Ivanova

Jim Sinclair, president of the of the BC Federation of Labour, said a hold should be put on selling assets until after the election.

"The people of British Columbia have given this government no mandate to balance books by selling assets," he said. "He's going to add over half a billion in sales to balance the budget. You can't sell your house to pay your chequebook off. That's what he's doing."

Jordan Bateman, B.C. director of the Canadian Taxpayers Federation, criticized the government for not taking decisive action on the carbon tax.

"Freezing the carbon tax is like the proverbial kissing your sister," he said. "It's a tie at best. By not increasing the carbon tax, they've angered the people on the left who want more carbon taxes. By not getting rid of it, they've angered people on the right by entrenching the system."

"Well, I'm disappointed," said Iglika Ivanova, an economist and researcher with the Canadian Centre for Policy Alternatives. "What we're seeing is a focus on short-term balancing the books over investment in long-term needs that we have. I think everyone's very well aware that we have pressing environmental and social needs that we're not meeting."

The budget included nothing for child poverty or climate change, both of which will lead to higher costs in the future, she said. "It just doesn't make sense from a longer term perspective to delay investment."

She said it's doubtful the budget is in surplus, given the relatively small forecast allowance and contingency, as well as the unsustainable sale of assets which she called "Selling your inheritance to cover today's bill."

The government has focused on tax cuts since 2001. "This is the tax cuts coming back," said Ivanova.

"This is the legacy of tax cuts, and we need to look at reversing it and increasing revenues."  [Tyee]

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