BC Finance Minister Mike de Jong delivered government’s fourth consecutive balanced budget. He called this achievement a “budgetary grand slam,” reminding stakeholders of last year’s achievement of a “fiscal hat trick.”
Budget 2016 includes new measures to improve housing affordability, help families with the cost of living, increased funding to health and social Ministries and the creation of the BC Prosperity Fund.
Minister de Jong highlighted how BC’s fiscal discipline and steady economic growth provided the government with the ability to allocate targeted funding to help families with the cost of living and promote home ownership. He stated BC remains in a fiscal position envied by many jurisdictions around the world and the province is forecast to lead Canadian provinces in economic growth this year. As evidence of the benefits of strong fiscal management he cited the potential to eliminate government operating debt by 2020.
Revenues, expenses and debt
Government projects razor thin surpluses of $264 million, $287 million, and $373 million in each of the next three years. However additional contingencies of $450 million, $400 million, and $400 million in those years and an additional forecast allowance in each year of $350 million provide additional layers of funding as a hedge against fiscal volatility.
Government revenue is forecast to grow 2.1 per cent this year, mainly on the strength of taxation, housing construction, and retail sales. Natural resource revenue is forecast to decline 7.2 per cent largely due to lower commodity prices and lower revenue from Crown land leases.
The Ministry of Health receives the single largest increase in spending with $3.2 billion in additional spending which will result in a 3.0 per cent increase each year. All other Ministries combined receive $1.6 billion in additional funds, resulting in an average 2.0 per cent increase each year.
The Economic Forecast Council and Ministry of Finance project modest GDP growth over the next three years. The Ministry forecasts 2.4 per cent growth this year and 2.3 per cent for the following years, while the Council forecasts 2.7 per cent and 2.6 per cent growth falling to 2.4 per cent in later years.
Government introduced a number of initiatives to assist with housing affordability. The key policy change is a removal of the property transfer tax on new homes up to $750,000, which is meant to assist purchasers and stimulate construction of moderately priced homes. The cost of this exemption will be offset by increasing the property transfer tax on purchases over $2 million from 2 per cent to 3 per cent. They will also work with local governments to make municipal fees more transparent to home buyers.
Government also announced they will resume collecting information to identify foreign purchasers. Beginning this summer, individuals who purchase property will need to disclose if they are citizens or permanent residents of Canada, and, if they are not, their citizenship and country of residence.
Budget 2016 changes MSP eligibility and premium assistance. As of January 1 2017, children will be exempt from MSP premiums benefiting 70,000 single parent families. Premium assistance for low income people will also be expanded. Between these two changes, government estimates that approximately 40 per cent of British Columbians will not pay MSP premiums.
Investment in social programs
Budget 2016 allocates $637 million over three years in additional spending for social programs. This includes $456 million Ministry of Social Development and Social Innovation to support those in need and increase monthly disability income assistance rates. It also includes $217 million to the Ministry of Children and Family Development to help vulnerable children and families and implement the recommendations of the Plecas report.
Government announced a new Commission on Tax Competitiveness to consider ways to modernize PST. The commission’s terms of reference will explicitly exclude consideration of a return to the harmonized sales tax.
Government will invest in new and upgraded infrastructure and estimates taxpayer supported projects will inject $12 billion into the economy over the next three years. This includes $3.1 billion in transportation projects including highways and transit; $2.9 billion for health care projects including the new Centre for Mental Health and Addictions; $2.5 billion for post-secondary facilities; and $1.7 billion to maintain, replace, renovate, expand and seismically upgrade K-12 school facilities.
Budget 2016 established the Prosperity Fund with an inaugural commitment of $100 million from this year’s budget surplus. Critics noted that LNG projects are not yet generating promised new revenue but Minister de Jong defended the fund’s creation, saying it will ensure today’s prosperity is shared with future generations.
A new $75 million Rural Dividend Program will help rural communities reinvigorate and diversify their economies over the next three years. $7 million in new funding to BC Transit will help expand service around the province.
Marketing BC to the world
Government announced new funding of $5 million to promote a stronger BC wood brand in India. Budget documents outlined that 15 years ago China purchased only $15 million in BC wood products but following coordinated marketing efforts the market has grown to $1.5 billion. Budget 2016 continued funding to promote BC’s aerospace and international maritime industries.
Stakeholder + opposition reaction
Business groups praised the government for balancing the budget while improving tax competitiveness; they were also pleased with the fiscal discipline. The BC NDP criticized the continued inequity of MSP premiums and said adjusted disability benefits provide minimal increases to those in need. They also criticized government’s economic record, increased debt and the lack of LNG revenue to date.
The complete 2016 Budget is available here: bcbudget.gov.bc.ca