Province to run $5.4 billion deficit with $6.6 billion in new investments including focus on climate resilience and incremental progress on housing and child care, but future uncertain with prediction of slowed growth.
In the 1990 neo-noir film “The Two Jakes,” private detective Jake Gittes (played by Jack Nicholson) shared his philosophy on how to solve a mystery. “You can follow the action, which gets you good pictures. You can follow your instincts, which’ll probably get you in trouble. Or you can follow the money, which nine times out of 10 will get you closer to the truth.”
Let’s apply the grizzled L.A. detective’s sleuth-solving theory to BC Budget 2022, announced today by Finance Minister Selina Robinson. If we set aside the budget photo-ops and calculated leaks of key budget items (why hello there, year-round BC wildfire service), and we take a cold, hard look at the balance sheets, what do we learn about the BC Government and its priorities? And what does that mean for the next 12 months of public affairs and advocacy in BC?
1) The BC Government will need convincing that your new spending ideas are worth doing.
That’s an odd observation give that the budget numbers tell us that BC’s economy is back. That BC’s budget deficit for 2021-22 has shrunk to $483 million, or 95% lower than last year’s prediction of $9.7 billion. That government revenues from corporate taxes, personal income taxes, property transfer taxes, resource royalties and fees, even gambling and liquor taxes are up across the board. That all sounds like great news, right? But look at the 2022-23 budget deficit forecast – it’s more than $5 billion. That tells us that, despite the good news in 2021-22, the Province believes the economy has reached an apex. And with federal COVID dollars coming out of the provincial economy – that growth will slow. The bottom line is, the Province is signalling it doesn’t have a lot of fiscal wiggle room this year. You and your business having smart, thoughtful, targeted public affairs and advocacy strategies will be more important than ever.
2) The Province believes climate change is a material risk to BC’s economic well-being.
The Ministry of Environment and Climate Change is seeing a significant budget lift, from $261 million in Budget 2021 to $368 million in Budget 2022. This 22% budget increase, and the Province’s announcement of new measures including a year-round wildfire service, and record capital expenditures, tell us that environment and climate change considerations are a core priority for this government, and therefore must be a core priority of your public affairs strategies. The days of talking about jobs and economic benefits are over, and the days of triple bottom lines (economic, social, and environmental benefits) are here to stay.
3) The Government’s focus remains on serious government, not elections (at least for now).
How else do you explain Canada’s only NDP government taking in almost 20% more in government revenues than expected and using the bulk of that money to reduce the deficit? That’s the kind of move that delights bond rating agencies and fiscal hawks focused on credits ratings and borrowing rates, not grassroots progressive activists. A government willing to make these kinds of tough decisions is the kind of government that’s still willing to take on tough issues working together with people and organizations like yours. We haven’t reached the election cycle just yet.
4) Not everything is plain to see in the Budget.
Consider this – the BC Government is forecasting total spending of $70 billion but is only specifically accounting for about $58 billion of that. The remaining dollars, just a little more than $12 billion, are in six contingency accounts. To put that in perspective, that’s the equivalent of the combined operating budgets of the Ministry of Education, the Ministry of Advanced Education and Skills Training, and the Minister of Finance. While these funds have been set aside for emergent priorities, it is safe to say that they will give the Province wiggle room to deal with the deficit and find funding for additional programs and initiatives this year.
5) Indigenous reconciliation remains a work in progress.
The Province has talked a great deal about the importance of reconciliation. It has adopted the United Nations Declaration on the Rights of Indigenous People. It passed legislation requiring BC to align its laws with the Declaration. And it has announced there will be a new ministry to address land use issues related to reconciliation. But look at the Ministry of Indigenous Relations and Reconciliation’s budget. It’s up by less than one per cent. While it’s fair to say that all ministries have a responsibility to advance reconciliation, it’s equally fair to say that those ministries look to MIRR for leadership and expertise and support. It will be interesting to see how BC will advance a reconciliation agenda with this level of investment.
Budget 2022 Economic + Fiscal Snapshot
Budget 2022, the second budget tabled by Minister of Finance Selina Robinson includes $6.6 billion in new operating funding over the three-year fiscal plan period with the purpose of ensuring no one is left behind through increased investments in people. Key investments include $3.2 billion in additional funding to improve health care services; $633 million to expand services and shift the approach to homelessness in BC from reactive to proactive; $1 billion in new funding for CleanBC and the Roadmap to 2030. Additionally, Budget 2022 provides $12 million to create a new Declaration Act Secretariat that will guide and assist government to meet its obligation to ensure legislation is consistent with the United Nations Declarations on the Rights of Indigenous Peoples and is developed in consultation and co-operation with Indigenous Peoples.
Budget 2022 includes an updated forecasts deficit of $483 million for 2021-22, less than the $9.7 billion projected in Budget 2021. This is due to higher revenues, including significant one-time revenues and federal transfers, as well as higher natural resource and tax revenue. Total revenues forecast rise from $68.6 billion in 2022-23 to $72.3 billion in 2024-25, and the total expense forecast rises from $73 billion in 2022-23 to $74.5 billion in 2024-25. Taxpayer-supported debt is projected to be $61.7 billion at the end of fiscal year 2021-22, almost $10 billion less than what was forecast in Budget 2021. The debt is expected to increase to $90.8 billion at the end of 2024-25. The taxpayer-supported debt-to-GDP ratio is below 25% each year of the fiscal plan, reaching 22.8% by 2024-25.
The variability of COVID-19 and climate-related disasters has caused more than $12 billion in contingencies funding over the next three years. Additionally, Budget 2022 earmarks more than $1.5 billion for communities to build back from recent and future climate-related disasters which is in addition to the $5 billion in spending allocated by the Government of Canada to help disaster response and recovery efforts in BC.
Taxpayer-supported capital spending is projected to increase to a record level in Budget 2022, totaling $27.4 billion over the fiscal plan, a $1.1 billion increase over Budget 2021’s three-year plan. New investments in schools, universities, hospitals, affordable housing and more will support 100,000 jobs in BC.
While the ongoing economic recovery in BC and its trading partners remains uncertain, it is estimated that the BC economy expanded by 5.0% in 2021, following a 3.4% decline in 2020. The economy is forecast to expand by 4.0% in 2022 and 2.5% in 2023. The unemployment rate in BC represents this expansion, with the unemployment rate averaging around 6.5% in 2021, down from 8.9% in 2020.
Budget 2022 Key Spending
- BC’s health care system will receive $3.2 billion in new funding, which includes funding to expand primary care services and First Nations’ primary care, to address the wait lists for surgeries and diagnostics, and to support cancer care services.
- More than $633 million will be spent to prevent homelessness and respond to assist people experiencing homelessness to become stably housed through a new cross-government approach.
- Over the fiscal period, more than $1 billion will be invested to fight against climate change and to implement new initiatives identified in the CleanBC Roadmap to 2030.
- In addition to the $1.5 billion in allocations to support community recovery from natural disaster events, $600 million will be spent to continue the response to climate-related disasters.
- As part of a five-year plan to connect more than 280 First Nations, rural, and remote communities, $289 million in new funding will be provided to expand high-speed internet access, bringing total investments to over $509 million by 2026-27.
- Capital commitments are forecasted to be $27.4 billion, the highest ever, for health, transportation, and education sectors.
- Budget 2022 invests an additional $284 million on child care which is in addition to the $2.4 billion the BC government has already invested.
Authored by: Jeffrey Ferrier, Jarred Anderson and Angella Thang from H+K’s team in British Columbia.