Why March 24 Will Define BC's Fiscal Managers

British Columbians who care about the province's finances -- and, really, doesn't that include all of us? -- should circle March 24 on their calendars. That's because what occurs by that date will be worth millions of dollars to provincial taxpayers.

The nub of the issue is this:

The Campbell government merely needs to carry through on a single, simple clause in a contract it has signed with the federal government in order to trigger an extra half billion dollars in payments from the feds to hard-hit provincial coffers this year.

But so far it seems the Campbell government does not intend to follow through. And if it doesn't, the premier and his finance minister can expect some hard questions directed their way come March 25. Questions like:

Why are the taxpayers now being made to pay interest on hundreds of millions of dollars in debt that could have been avoided?

Is it because we are being forced to pick up the bill for the B.C. Liberal party's political strategy to win in 2014?

Assuming I have your interest, then, what follows is the explanation for why March 24 is such an important date for the B.C. taxpayer -- and possibly for the political future of the B.C. Liberals.

A contract in black and white

At issue on March 24 is the tabling of a bill to repeal B.C.'s social service (sales) tax. This legislation would make way for the new federal-provincial Harmonized Sales Tax (HST), which comes into effect in less than four months on July 1.

Negotiated last summer, the deal between Ottawa and Victoria requires the federal government to pay B.C. $1.599 billion in "transitional assistance." A schedule of the timing of those federal payments was included in the contract signed by both parties. [see pp. 45 and 46 at this link.]

According to the contract, Ottawa must give B.C. the first $750 million installment of those transition monies "within seven days of the tabling by the province of legislation to wind-down the Provincial Sales Tax (PST) of the province."

The second payment of $374 million is due "on the first business day following the implementation date," and the final $475 million installment will be paid exactly one year later.

In effect, British Columbia should get $750 million this spring, within a week of moving to repeal the provincial sales tax, $374 million on July 2, and $475 million on the same date in the next calendar year.

Pretty clear, right? If Victoria moves expeditiously to repeal the provincial sales tax by bringing in legislation before March 24 (which is seven days before the end of the fiscal period), B.C. will get a $750 million payment in the current fiscal year just ending (2009/10). This payment will be followed by transfers of $374 million and $475 million (in 2010/11 and 2011/12, respectively).

A mysterious intent to delay

However, as was reported in The Tyee last Tuesday by both Andrew MacLeod and this writer, the Campbell Liberals want to delay acceptance of those federal monies. This delay is wanted even though the provincial government expects a $2.8 billion deficit in the current fiscal year (which ends on March 31), and sees a $1.7 billion shortfall in the next fiscal period.

According to last Tuesday's budget and fiscal plan [see p. 12 at this link], B.C. wants to record just $250 million in federal transition monies this year (down from the contracted $750 million), and then $769 million and $580 million over the next two years.

The apparent reason the Campbell Liberals want to postpone those federal monies is that, as was outlined last summer on The Tyee, they want to deliberately create a massive post-election deficit -- a deficit which will gradually be whittled down to a balanced or surplus budget in advance of the next general election, which is scheduled for 2013.

The Campbell Liberals, therefore, believe that the federal HST monies are not required now, less than a year after the last general election. They are required later, closer to the next electoral contest. It's a political calculation, not a fiscal decision, that is motivating Victoria to seek to delay Ottawa's transition funding.

Get ready to pay unnecessary interest charges

There are at least three problems with that strategy. First, as The Tyee reported last week, because Victoria is currently recording sizeable fiscal deficits, British Columbians will be hit by unnecessary interest costs on the monies borrowed to cover the loss of the deferred HST transfers.

Consequently, the BC Liberals may be forced to explain why they're throwing away taxpayer monies on unnecessary interest charges, while at the same time cutting funding for such things as literacy programs, libraries, scholarships, the arts and sports programs. They are also capping transfers for health and education.

Second, there is that pesky contract Ottawa and Victoria signed last summer. We know that in the past the Campbell Liberals have shown little hesitation in ripping up contracts -- notably with Bill 29 in 2002, which abrogated a collective agreement between the province and the Health Employees' Union -- so they could deny union members the monies that were due to them.

Who knew that, despite the Liberal party's lack of respect for legal obligations, they now would attempt to do the same to themselves (or, more accurately, to B.C. taxpayers)?

Simply, the deal exists and the payment schedule is as clear as can be.

And, third, the B.C. government uses accrual accounting [see p. 45 at this link] to record revenues and expenditures. With the Ottawa-Victoria contract duly signed by both parties, the province's Comptroller General will have little choice but to record the federal transfers at the time they were intended (or expected) to be received, regardless of whether the Campbell Liberals actually accept them or not.

Why the wait, Minister Hansen?

There is one thing to remember: Finance Minister Colin Hansen could wait to table the legislation repealing B.C.'s sales tax until after March 24. That way, the seven-day period during which Ottawa has to give Victoria $750 million in HST transition monies could be pushed from 2009/10 to the following fiscal period, 2010/11.

And that means B.C. may not get any of the transition monies in current fiscal period -- not even the $250 million proposed in Hansen's latest budget.

The finance minister and his staff have had at least seven months to draft the required legislation. But whether or not he'll table such a bill in the legislature before March 24 remains to be seen.

So, circle that date on your calendar. It's worth millions of dollars to British Columbians.