The B.C government is hiking Medical Services Plan premiums and tobacco taxes to help cover the cost of a $1.3-billion increase in health-care spending over the next three years.
Finance Minister Mike de Jong announced the measures on Tuesday in the provincial budget, noting that health care has the “biggest budgetary appetite” among government priorities.
By 2016-2017, the minister said, health costs including services provided by ministries outside the health ministry will reach $19.6-billion or 42 per cent of government expenses. Spending by the health ministry alone is projected to reach $17.9-billion.
Measures announced on Tuesday include a four per cent increase in MSP premiums as of Jan. 1, 2015 – about $5.50 per month for a family of three or more.
In another move, the government is raising taxes on cigarettes by 32 cents per pack or $3.20 a carton, generating $50-million in annual revenue that will largely be spent on cancer-reduction programs including joint efforts with the Canadian Cancer Society.
“Smoking just got a little more expensive,” Mr. de Jong said.
Projected growth in health-care spending over the coming three years will be 2.6 per cent a year, which budget documents noted is “slightly higher” than the 2.5 per cent projected in the budget of June, 2013.
The difference between the two figures is about $16-million, a health ministry official said on background.
Mr. de Jong and his predecessor, Kevin Falcon, previously have made much of seeking to hold increases in health-care spending.
During a budget lockup news conference, Mr. de Jong said the growth rate in health spending was less than increases of up to six per cent that were more common earlier in the 13 years that the Liberals have been governing B.C.
Also, he took aim at the Canada Health Transfer. In 2011, the federal Conservative government unveiled long-term funding for health and social transfers, presenting a multibillion-dollar spending plan that is to run through to 2024. The B.C. government has said the approach does not acknowledge the province’s aging population or its push to control health-care costs.
“That does not operate in a way that is favourable to B.C.,” he said.
Mr. de Jong said he had no preferred target in the growth of health-care spending, noting he would have to draw money from other budget priorities to hit such goals.
“I am probably more interested in the shifts that can take place within the budget around preventive health care,” he said.
The Liberal government praised the province’s health care under its management, touting B.C. as a leader in important health outcomes. Also, in 2013, the province ranked second on a list of the least costly jurisdictions in per capita health-care spending.
Mike Farnworth, the B.C. New Democrats’ finance critic, noted MSP premiums will cost families $400 over three years, along with other costs, including hydro and ferry rates, that are applying pressure on families.
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By the numbers
“We continue to balance on a razor’s edge.” – Mike de Jong
The province projects a budget surplus of $175-million for the fiscal year ending this March, fulfilling the Liberals’ election pledge. The surplus is somewhat more than what Mr. de Jong predicted at the end of the third quarter – $165-million – but it is smaller than the $197-million surplus projected in last February’s budget.
The budget surplus for the upcoming year is forecast to be $184-million. Economic growth is expected to be two per cent.
The provincial debt for 2014-2015 is projected to be $64.7-billion.
“I don’t want to suggest a cascade of dollars flowing into the Prosperity Fund in the next five years.” – Mike de Jong, referring to the fund established last year to use profits from liquefied natural gas for, among other things, paying down provincial debt
Last year, British Columbia had promised to outline how it planned to levy taxes to realize the government’s much-touted dream of LNG riches, leading to a debt-free province. But Mr. de Jong was forced to admit the complexities of coming up with the regime mean the details will not be available until fall.
The government does not expect the first plant to begin production until 2018, and revenues are not expected to begin until after that.
Tuesday’s budget included the structure of how that tax regime will work: a two-tier system with a 1.5-per-cent tax applying for the first three years, transitioning to a tax of up to seven per cent by the sixth year and beyond.
The exact tax rate for the second phase will be introduced in the fall after an assessment of global and provincial conditions.
Measures for individuals
“Admittedly, the tax relief in this budget is pretty thin.” – Mike de Jong
In an effort to get into the black and to bolster an election campaign based on a balanced budget, the Liberal government introduced several new taxes on individuals last year.
The 2014-2015 plan has fewer of those. Medical Services Premiums, boosted last year, continue the pre-arranged climb. Effective Jan. 1, 2015, the premiums will rise by about four per cent, amounting to about $5.50 a month for a family of three or more.
Tobacco taxes will rise as of April 1 by 32 cents per pack. That is over and above the increase announced last week in the federal budget.
The B.C. Training and Education Savings Grant – a one-time payment for children born in B.C. in 2007 or later and whose parents have contributed to a registered education savings plan – kicks in with payments of $1,200 per child by the end of the coming fiscal year.
As well, starting in April 2014, the B.C. Early Childhood Tax Benefit of $55 per month per child under the age of six will begin to be paid out. The benefit is income-tested.
“We’re not going to ask taxpayers to shoulder this burden on their own. We see the potential for partnerships with the industrial sector.” – Mike de Jong on skills training
Funding for advanced education actually drops by just over $16-million, which the government says is a result of finding efficiencies and not cutting student services. Critics, however, question whether the number can reflect the government’s stated priority on skills development.
Provincial funding for Kindergarten to Grade 12 nudges up barely, with a $22-million increase over last year.
The spending estimates make no provision for higher expenses due to a judge’s ruling last month ordering the province to reinstate contract language for teachers that was in place prior to 2002. The language, wiped out by the Liberals, dictated class sizes and composition, and Education Minister Peter Fassbender has said following the ruling would cost $1-billion.
The province has filed its intention to appeal. If it loses, the money to pay for it this year would wipe out the $300-million contingency fund intended for unforeseen disasters such as forest fires and floods.
“We have more work to do.” – Mike de Jong on job creation
The government is devoting $29-million over three years to push the LNG strategy forward.
Another $9-million has been pledged for environmental assessments of resource development of proposed LNG facilities, as well as pipelines, mining and other major projects.
The province has also underlined a commitment of $5-million over five years to the Aerospace Association of Canada Pacific Division.
Still, Mr. de Jong acknowledged jobs growth isn’t where the province would like it to be, noting that though employment has been stable, job growth has been flat.