Finance Minister Carole James delivered her first budget update since the New Democratic Party formed government in July. This is an update that builds upon the previous budget delivered by the BC Liberals in February. This first budget update repeats the New Democrat priorities of improving affordability, enhancing critical services, and building a strong, sustainable, and innovative economy that creates jobs and works for everyone.
Key new spending initiatives include funding for affordable rental housing, new education funding, more resources to address the fentanyl emergency and income assistance increases.
Government also announced that they are following through on their campaign commitment to increase the corporate income tax rate to 1 point to 12% and increase individual income tax rates on income over $150,000. The NDP also announced that they will increase the carbon tax by $5 per tonne next April and that it will no longer be revenue neutral which was the former BC Liberal governments policy.
Economic Forecast
The Ministry’s estimate for BC real GDP growth in 2016 and the outlook for 2017 are higher than what was projected in Budget 2017, as BC’s economy has performed better than expected. Stronger than anticipated consumer spending and export activity in the latter part of 2016 are primarily responsible for the upward revision to the Ministry’s real GDP estimate for 2017, from 3.0 per cent to 3.6 per cent growth. Meanwhile for 2017, year-to-date data for key indicators such as employment, retail sales, housing stats, and exports have exceeded expectations. As such the Ministry forecast for BC real GDP growth of 2.9 per cent in 2017 is higher than the 2.1 per cent projected in Budget 2017. The outlook for BC’s economy for 2018 and beyond is relatively unchanged from the previous outlook as the balance of risks to the domestic and global economy remains largely unchanged.
Revenues, Expenses and Debt
The September Budget update forecasts a surplus of $246 million, down $49 million from February.  However, once the forecast allowance and contingencies are factored in there is now $100 million in extra funding available before the budget would go into deficit.
The budget update anticipates $1.6 billion in additional revenue but this is offset by $1.67 billion in additional spending over the February budget.
The updated debt forecast reflects an improved outlook for the elimination of the governments operating debt by 2019/20 due in part to 2016/17 results carrying forward and stronger projected economic growth.
Improving Affordability
Government is working on improving affordability for families and businesses in BC. Budget update 2017 will see new investments to support the construction and operation of 2,000 modular housing units for the homeless, as well as the construction of over 1,700 new units of affordable rental housing. The elimination of tolls on the Port Mann and Golden Ears bridges was announced and is effective September 1, 2017. Government also announced an increase of $100 per month for both income and disability assistance, and there will be a 50 per cent reduction of the MSP premium rate for all British Columbians starting January 2018. There will be no need to apply. MSP Premiums will be lowered to levels applicable in 2002. Government will also establish an MSP Task Force to advise on how best to eliminate the premiums altogether and replace the revenue.
Additional funding will also be added to develop a comprehensive Poverty Reduction Strategy and a fair wages commission to chart the path to $15 an hour minimum wage.
The Ministry of Health will receive a further three-year total increase of $306 million versus what was announced in Budget 2017.
Almost all new health spending highlighted in the budget relates to mental health and substance use, with a direct focus on addressing the ongoing fentanyl emergency. There will be $322 million dedicated to the comprehensive response to the crisis. Of that $265 million is dedicated to the Ministry of Health, $32 million will go directly to increase police resources and to relieve pressures being faced at the BC Coroners Service. And the remaining $25 million to establish the Ministry of Mental Health and Addictions.
There was also a commitment by the government to reinstate funding to the Therapeutics Initiative to $2 million annually.
Funding in Budget 2017 for education sees a $681 million increase for the K-12 system, including $521 Million to provide for improved classroom supports for children, as well as an additional $160 million to fund enrollment growth and other cost pressures. This is in addition to capital funding of $50 million to address space requirements There will also be $19 Million dollars added to restore tuition-free adult basic education and English language learning.
The budget did not however, include any new capital spending to accelerate school construction.
Housing Affordability
New housing investments announced in this budget include $208 million over four years to help build over 1,700 new units of affordable rental housing in communities across the Province. Additionally, $291 million is budgeted over two years to build 2,000 new modular housing units for people who are homeless along with an additional $170 million to operate these units.
The update also includes $7 million dollars for the Residential Tenancy Branch to reduce wait times for dispute resolution services and to establish a new compliance unit.
Investment in Social Programs
Budget update 2017 sees a $20 million dollar increase in spending to allow for earnings exemptions for social assistance recipients by $200 per month. An increase of $114 million over three years will also be added to the budget of the Ministry of Social Development to deal with caseload pressures. Budget 2017 update also includes $312 million over three years to start rebuilding and strengthening the child protection system, and to begin to respond to the recommendations from the Grand Chief Ed John Report on indigenous child welfare.
Funding in Budget 2017 will allow for the creation of The Innovation Commissioner and the Emerging Economy Task Force.
A Fair Wages Commission will be put in place and their job will be to provide advice to government on the increase of the minimum wage to $15 per hour by 2021.
Business Tax Initiatives
Budget Update 2017 will see an increase of the individual income tax rate to 16.8 per cent (up from 14.7 per cent) on taxable income over $150,000 for individuals. The general corporate income tax rate will increase from 12 per cent to 11 per cent. Additionally, the International Business Activity Program will be eliminated. This program has been in place in BC for over 30 years.
There will also be a phase out of PST on electricity for businesses beginning with a 50 per cent reduction, effective Fall 2017. Small business corporate income tax will also be reduced to 2.0 percent from 2.5 per cent.
Protecting the Environment
Carbon tax rates will be increased by $5 per tonne beginning April 1, 2018, and the climate action tax credit for low and middle income families will also increase. The requirement for the carbon tax to be revenue-neutral is eliminated so carbon tax revenues can support families and fund green initiatives.
Stakeholder + Opposition Reaction
Immediate reaction from media pundits is that the BC NDP Government will increase taxes on the wealthy, corporations and polluters, while increasing spending in education, homelessness, rental housing and the overdose crisis. Early criticism is that key government campaign commitments such as $10 dollar a day daycare were not included in this fiscal plan. James said “her party only had a few weeks to prepare the budget update and stakeholders should expect to see more details in the February budget”.