BC Finance Minister Mike de Jong yesterday presented his fiscal hat trick—the third consecutive balanced budget of Premier Christy Clark’s government. According to Minister de Jong, British Columbia may be the only province in Canada that is delivering a balanced budget for the coming fiscal year, although Saskatchewan’s budget is still uncertain.
Despite the province’s strong fiscal position, the Finance Minister stressed words like “steady” and “modest” to describe his budgetary decisions. Consistent with last week’s Speech from the Throne, the 2015 Budget offers no significant deviations from the government’s agenda for the past several years. Instead it is positioned as a prudent budget that maintains disciplined spending, controls the size of government and promotes job creation.
Minister de Jong stated that the surplus for the current 2014/15 fiscal year is now forecast at $879 million, significantly higher than the $184 million forecasted last February. It could grow by another $100 million if government does not dip into the forecast allowance. The final surplus amount will be confirmed in June and the government plans to use any extra funds to pay down the debt.
Revenues, Expenses and Debt
Forecast allowances and contingencies will stabilize after several years of consistent growth. The forecast allowance is budgeted at $250 million in 2015-16, growing to $350 million each of the following two years. Contingencies are budgeted at $350 million in 2015-16, growing to $400 million each of the following two years. The rapid growth of these budgetary mechanisms over the past few years reflects the government’s economic stability public sector bargaining mandate, which provides higher raises to unionized public sector workers if the economy outperforms expectations.
The taxpayer supported debt to GDP ratio, a key indicator used by debt rating agencies, is declining faster than anticipated in last year’s budget. It is forecast at 17.4 per cent in 2015-16, 17.1 per cent in 2016-17 and 16.6 per cent in 2016-17. While the budget is balanced and the taxpayer supported debt ratio is dropping, overall government debt is nonetheless forecast to grow in response to capital infrastructure needs, to $65.9 billion in 2015-16, $68.2 billion in 2016-17 and $70.4 billion in 2017-18.
The Economic Forecast Council, an external advisory body to government, expects 2.6 per cent growth in 2015, 2.8 per cent growth in 2016, and 2.5 per cent growth in 2017. Building in an additional layer of prudence, the BC Government is forecasting 2.3 per cent growth in 2015, 2.4 per cent growth in 2016, and 2.3 per cent growth in 2017.
Revenue changes are minimal and targeted at easing the burden on families. They include a new children’s fitness equipment credit, enhancing the tax reduction credit for low income earners, extending training tax credits and the interactive digital media tax credit, and extending the mine allowance.
On the expenditure side, Minister de Jong said that the province’s stronger-than-expected fiscal position allows targeted reinvestments in program spending, most of which goes to health, education and social services.
Also of note is that the provincial government has ended the claw back of child support payments from income and disability assistance calculations, starting September 1, 2015. This has long been a point of contention affecting 3,200 low-income families and 5,400 children.
Energy + Natural Resources
Budget 2015 includes an additional $31 million over three years to strengthen economic growth and job creation; mainly in mining and liquefied natural gas development.
The Ministry of Energy and Mines budget will increase by $6.3 million annually to help support improved turnaround times for major work permits and support for the major mines permitting process. Budget 2015 earmarks $2 million to ensure the appropriate management of B.C.’s LNG strategy and foster the development of the industry.
Natural gas royalties are expected to decline 36.5 per cent in 2015/16 and increase 19.6 percent over the next two years due to fluctuating prices and production volumes.
Revenue from metals and minerals is expected to grow by 14.9 per cent over the next three years, mainly from rising coal prices, while revenue from other energy sources is expected to fall 9.3 per cent due to lower oil and electricity prices.
Forests revenue is expected to increase 6.2 per cent over the next three years due to increased stumpage revenue.
Health and Education
The Ministry of Health’s overall budget will see $2.9 billion in additional spending for the next three years. This results in a 2.9 per cent annual increase, a slight increase from the 2.6 per cent forecast last year. Minister de Jong said government has managed to put the ministry on more sustainable footing while maintaining B.C’s excellent health outcomes.
This budget includes $12.5 million for the Canadian Cancer Society to help establish a cancer prevention centre in Vancouver and $10 million to support hospice services.
Budget 2015 notes the Ministry of Advanced Education is well on its way reaching $50 million in cost reductions and savings. New funding from the Economic Stability Mandate increased the Ministry of Advanced Education’s three year budget by $92 million. The Ministry of Education received a $564 million increase over the three year plan to increase funding for school districts. School boards must find $29 million in administrative savings though.
Transportation + Infrastructure
Budget 2015 allocates $3 million to re-establish an International Maritime Centre to attract shipping companies and their head offices to Vancouver.
The second installment of a $5 million partnership with the Aerospace Association of Canada Pacific Division is intended to grow the province’s aerospace sector and help attract global aerospace and defense contractors to BC.
Similar to previous years, government investments in transportation are decelerating. This year’s budget offers $93 million less in provincial transportation investments over the next two years compared to last year’s forecast.
Stakeholder + Opposition Reaction
Business leaders were positive about the budget, praising spending control and the focus on diversifying the economy. Some business associations would prefer great cost containment but were pleased that the economic diversification moved B.C. out of a boom/bust cycle.
The mining industry was pleased that the province extended the mining flow through tax credit and new mine allowance. The cement industry was also pleased by the announced new measures to help the cement industry transition to cleaner fuels.
NDP Finance Critic Carole James said Budget 2015 makes BC families pay more for less. James noted various fee hikes; from MSP premiums, to ferry fares, BC Hydro and ICBC rates.
The BC Federation of Labour was critical of the budget, saying it gives money to the top two per cent and no money to the working poor.
The complete 2015 Budget is available here.