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Will McMartin Shoots Down Squawking Gaggle of Campbell Praisers

A 'great' premier whose fiscal skill made BC 'great' for business? The facts say no.

Will McMartin 8 Nov

Tyee contributing editor Will McMartin is a veteran political advisor and analyst. Read his previous columns here.

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Gordon Campbell takes premier's oath of office, June 2001.

Is it ironic, or just plain weird, that while only nine per cent of British Columbians currently hold a positive view of Gordon Campbell, close to 100 per cent of the mainstream media remain deeply infatuated with our soon-to-be ex-premier?

Consider the editorial published in the Globe and Mail on Nov. 4, one day after the deeply unpopular premier announced that he was quitting politics. "Gordon Campbell," the Globe bleated, "will be judged as one of the great premiers of British Columbia."

Seriously? By whom? The great unwashed certainly don't hold that view, and no political historian could claim with a straight face that Campbell's accomplishments in office compare favourably to those of such provincial giants as W.A.C. Bennett, John Hart, or Richard McBride (or even Duff Pattullo or John Oliver).

Heck, even Dave Barrett (in just three and a half years) left a more substantive legislative catalogue than did Campbell (over 10 years), had a better surplus-deficit record and left a smaller taxpayer-supported-debt-to-GDP ratio (seven per cent compared to Campbell's 17 per cent).

Maybe the Globe editorialists, headquartered as they are in distant Toronto, just don't know much about B.C., our politics, or our history.

Yet, on the same day as the Globe head-scratcher appeared in print, a Vancouver Sun editorial gushed that Campbell was "one of B.C.'s great leaders." And the Sun's opinion leaders actually reside in this province. Hmmm.

Less surprising was the morning-after-resignation paean by CKNW radio talk-show host Bill Good. Reciting a list of the premier's alleged feats, Good had the gumption to include the Vancouver Trade and Convention Centre, which was built without a business plan and at a cost $346 million higher than B.C. taxpayers had been promised. (Original budget: $495 million. Final bill: $841.2 million.)

Remarkable. Truly, Gordon Campbell must be one of the "great" ones.

Praise, but no proof

A closer look at the encomia for Campbell from the media elites reveals that their minority view is based almost entirely on his fiscal record.

The Sun praised Campbell's "sound fiscal management," and claimed that his efforts made British Columbia "a better place to live and work." The paper also stated that he had convinced investors that B.C. was "a great place to do business." No empirical evidence was offered to support any of these assertions.

The Globe took a similar path, but made the bizarre claim that Campbell had "transformed the province's finances." Again, not a jot nor a tittle of empirical proof was provided.

As for Good, he repeated the hoary myth that Campbell "took over a province that had achieved 'have-not' status under the NDP" and then restored it to greatness.

It actually is shocking how loathe are the mainstream media to undertake even a minimal amount of research -- especially when so much of B.C.'s fiscal information is readily available online or in public libraries. Would it have been so very difficult for the Globe, Sun or Good to spend even a few minutes analyzing Campbell's fiscal accomplishments before declaring that he belongs in the pantheon of B.C. "greats"?

Apparently, it is. And so The Tyee will boldly go where the mainstream media elites refuse to venture, and conduct an objective examination of B.C.'s fiscal performance from the spring of 2001, when Gordon Campbell became our province's 34th premier, to the spring of 2011, when he'll be replaced as leader of the BC Liberal party.

Where the facts reside

We'll primarily use two documents: the 2010 British Columbia Financial and Economic Review (70th edition), and the Campbell government's Budget and Fiscal Plan 2010/11 - 2012/13. Both are published by the Ministry of Finance.

The starting point for our analysis is March 31, 2001, the date that marked the end of the 2000/01 fiscal year. (Campbell's BC Liberals won election to government on May 16, 2001, and he was sworn in as premier on June 5.)

The end point is March 31, 2011 -- the end of the current fiscal year. (It is expected that the BC Liberal party will choose Campbell's successor some time in the spring of 2011.)

Now, some of our more-astute readers -- that is, those who don't work in the mainstream media -- will note that two important developments have taken place since the 2010/11 budget was published.

First, the province announced on Sept. 14 (in the first quarterly report for the year) that Ottawa had advised that corporate income tax receipts were going to be much higher than originally forecast. Corporate income tax revenues now are expected to hit $1.521 billion in fiscal 2010/11, an increase of $674 million over the budgeted number of $847 million.

Second, on Oct. 27, Campbell made a televised address to the province and announced a 15 per cent cut to personal income tax rates. The tax cut will cost the provincial treasury $568 million (or about 85 per cent of the windfall corporate income tax receipts) in the current fiscal year.

We'll start by looking at Victoria's revenues over the last 10 years, then review expenditures, deficits and debt, and conclude by examining B.C. as a "have-not" province.

Revenues grew slightly, but declined as proportion of BC's economy

The 2000/01 fiscal year ended with Victoria collecting tax revenues of $14.3 billion, while the 2010/11 budget calls for tax receipts of $17.4 billion (since boosted to $18.1 billion in the first quarterly report). The composition of taxation revenue changed considerably over the 10-year period.

Two of the biggest sources of tax receipts -- personal-income tax and corporate-income tax -- were surprisingly flat over the decade, given population growth of about 500,000 and inflation. The reason? The many and on-going tax cuts unveiled by Campbell since 2001.

PIT revenues slipped from $5.963 billion to $5.861 billion, while corporate-income tax revenues dropped from just over $1 billion to $847 million for the current year. (Again, the first quarterly report boosted the latter figure to $1.5 billion.)

Tax revenues from retail sales rose from $3.6 billion in 2000/01, to an expected $5.2 billion in 2010/11. The former figure was generated by the provincial sales tax (officially known as the Social Service Tax) alone, while the latter is an amalgam of the PST and the new (and much-hated) Harmonized Sales Tax, which replaced the PST on July 1.

One levy, the corporation capital tax, was whittled away to nothing under Campbell's stewardship, while a new one, the carbon tax, was introduced in 2008. The former generated $459 million in 2000/01, and zero in the current year; the latter is expected to produce $727 million in Campbell's last year in office.

The biggest gain in tax receipts over the decade was due to world-wide low interest rates, which sparked a housing boom (and bubble) in much of the western world. Property-transfer revenues totaled $262 million in our base year of 2000/01, and are expected to hit $900 million at the end of the current fiscal period.

In total, Victoria's tax receipts grew by just $3.1 billion (or $3.8 billion, based on the first quarterly report) while Gordon Campbell was premier. As a proportion of B.C.'s economy, provincial tax revenues fell from 10.8 per cent of gross domestic product (GDP), to about 8.9 per cent.

Given that the 2010/11 budget estimates that B.C.'s GDP this year will hit $196.3 billion, the annual revenue lost to tax cuts is about $3.7 billion.

Explosion in federal transfers, MSP premiums and tuition

Natural resource revenues were surprisingly anemic -- given the boom in global commodity prices -- during Campbell's premiership. Ten years ago, forests revenues totaled over $1.3 billion and natural gas revenues were in excess of $1.2 billion. This year, however, forests are expected to generate a mere $491 million, while natural gas will produce just $698 million.

In total, natural resource receipts will have fallen from $4.0 billion in 2000/01, to $3.2 billion in the current fiscal year.

But even as Victoria's receipts from taxation and natural resources deteriorated or weakened over Gordon Campbell's decade in office, many other revenue sources showed surprising strength.

Foremost among them were transfers from the federal government. In 2000/01, Ottawa sent a mere $3.3 billion to British Columbia; in the current year that figure is expected to hit a whopping $7.7 billion.

As a proportion of the provincial economy, federal transfers under Campbell will have exploded from 2.5 per cent of GDP, to more than 3.9 per cent. Simply, Ottawa's largesse over the last decade has done much to replace provincial revenues lost to Campbell's persistent tax-cutting.

Crown corporation net income also has seen significant growth over the last decade, rising from $1.6 billion, to $3.0 billion.

The biggest gains originated from gaming profits at the BC Lottery Corp. (from $554 million to $1.1 billion); alcohol profits at the Liquor Distribution Branch (from $642 million to $974 million); and insurance profits at ICBC (from a loss of $14 million to net income of $303 million).

But the biggest revenue gains which offset the losses from Campbell's tax cuts were in two areas well-known to low and middle-income British Columbians -- Medical Services Plan premiums and post-secondary tuition.

In 2000/01, MSP premiums generated $894 million for the provincial treasury, but in the current year the comparable figure is expected to hit an eye-popping $1.741 billion.

And over the same period, tuition fees recovered from post-secondary students will have nearly tripled, from $440 million to $1.135 billion.

In total, provincial GAAP (generally accepted accounting principles) revenues under Gordon Campbell will have grown from $29.689 billion in 2000/01, to $39.190 billion in the current fiscal period.

Yet, as a proportion of the B.C. economy, Victoria's revenues will have declined from 22.6 per cent of GDP, to just 20.0 per cent. Again, with provincial GDP expected to be $196.3 billion this year, that's a loss of about $5.1 billion.

Big declines in spending outside health, education and general government

Not surprisingly, even though Victoria's current-dollar spending rose under Campbell -- from $28.439 billion to $40.605 billion -- expenditures also will have fallen in relative terms. A decade ago, provincial spending represented 21.7 per cent of GDP, this year the comparable figure is pegged at 20.6 per cent.

Health spending under Campbell will have increased from $9.430 billion to $16.474 billion; education (K-12 and post-secondary), from $7.216 billion to $10.820 billion; and social services, from $3.214 billion to $3.454 billion.

These "big three" areas of government expenditure will have seen combined growth from 15.1 per cent of GDP in 2000, to 15.7 per cent in the current period.

Nearly every other area of Victoria's annual expenditure budget -- law enforcement and justice, economic development, transportation and the environment -- has declined over the last decade. One exception is "general government," which, under Campbell's leadership, has exploded from $435 million in 2000/01, to an estimated $1.376 billion in 2010/11.

Five surpluses, five shortfalls for premier who 'outlawed' deficits

Gordon Campbell and his BC Liberals won election to government in 2001 with a pledge to "outlaw" budgetary deficits. Indeed, one of the first statutes passed by the new government was the Balanced Budget and Ministerial Accountability Act, although its ban on provincial deficits did not kick in until 2004.

And so the Campbell Liberals -- after "inheriting" a GAAP surplus in excess of $1.2 billion from the defeated New Democrats -- promptly racked-up shortfalls of $1 billion (in 2001/02), $2.6 billion (2002/03) and $1.2 billion (2003/04), before recording a succession of sizeable surpluses.

Over the four fiscal years between 2004/05 to 2007/08, the Campbell government had surpluses of $2.7 billion, $3.7 billion, $4.3 billion and $3.2 billion. A fifth, but much-smaller residue of $57 million appeared in 2008/09, but then the deficits reappeared.

Last year, 2009/10, saw a shortfall of $1.8 billion, and the current fiscal year is expected to end with another $1.8 billion (or $1.4 billion, according to the first quarterly report) deficit.

Gordon Campbell's record of surpluses and deficits? Five of the former, and five of the latter.

Capital spending exploded and debt soared

For much of B.C.'s history, Victoria's operating and capital expenditures were combined in the provincial budget. That changed in the late 1990s under the NDP, and was confirmed with the BC Liberals' implementation of GAAP.

Put simply, our provincial budgets capture 100 per cent of the government's annual operating outlays, but just a fraction of capital charges. It's become much-easier, in other words, to balance the budget when only some, not all, of the capital outlays are counted.

Not surprisingly, British Columbians have seen an explosion in capital spending under Gordon Campbell. In 2000/01, total capital expenditures added up to $3.3 billion; in the current fiscal period, $8.2 billion.

And so, despite the appearance of sizeable budget surpluses in the middle part of the past decade, B.C.'s debt has grown dramatically. Ten years ago, on the eve of Campbell's first election victory, total provincial debt stood at $33.788 billion. By the end of this fiscal year, the comparable number is expected to hit $47.757 billion.

The picture improves slightly when total provincial debt is measured as a proportion of the B.C. economy. In 2000/01, total provincial debt was 25.7 per cent of GDP; by next March, that number should be 24.3 per cent.

Campbell inherited surplus of $1.2 billion, leaves similar shortfall

This is Gordon Campbell's fiscal record. An objective observer might describe it as so-so: not egregiously awful (as was that of John Herbert Turner in the 1890s), but hardly stellar (as was John Hart's in the 1940s).

And yet the mainstream media elite gush and fawn and celebrate Campbell as one of the "greats."

They do so, of course, because they have dedicated years to denigrating the fiscal record of Campbell's predecessors; that is, the two New Democratic Party governments of the 1990s. Good gave away the game with his claim that Campbell inherited a "have-not" province in 2001.

What, exactly, is B.C.'s record as a recipient of equalization payments from Ottawa, the hallmark of "have-not" status?

In the 1980s, Social Credit governments led by Bill Bennett and Bill Vander Zalm received three special equalization payments from Ottawa. Bennett got the first such payment, for $139 million, in 1983/84, and a second for $35 million in 1984/85. Vander Zalm obtained $360,000 in 1986/87.

The NDP garnered a single equalization transfer, of $125 million, in 1999/2000.

Gordon Campbell's BC Liberals, in contrast, received five such payments: $158 million in 2001/02; $543 million in 2002/03; $979 million in 2004/05; $590 million in 2005/06; and $459 million in 2006/07. (So huge were these transfers, that B.C. actually had to re-pay an overpayment of $330 million in 2003/04.)

The New Democrats got a total of $125 million in equalization; Gordon Campbell's BC Liberals, a total of $2.4 billion. Which one did Good say made B.C. a "have-not" province?

In the end, there's one easy way to review Gordon Campbell's fiscal record. In 2001, when he became premier, Campbell "inherited" a $1.2 billion surplus from the defeated New Democrats. In 2011, when he bequeaths his office to his successor, he'll leave a shortfall of exactly the same size: $1.2 billion.

One of the giants? Did Gordon Campbell truly "transform" B.C.'s finances? Only if one lives in the fairly-tale, fantasy world of the mainstream media elites.  [Tyee]

Read more: Politics

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