The B.C. Liberals will head into this spring’s provincial election campaigning on a surplus budget they insist is based on fact not fiction.
And while there are certainly elements of fiscal prudence built into the financial document tabled by Finance Minister Mike de Jong Tuesday, there is also at least one ugly battle the government will need to win in order to make its final numbers add up. The government’s fiscal model relies on stringent spending measures – including a clampdown on health-care costs that defies our times and would seem destined to force a showdown with the province’s doctors.
In order to get to its bottom line, the Liberals also had to make some uncomfortable ideological choices, which include raising taxes on corporations and the rich. And in the runup to an election, the government was being criticized for tabling a budget that contains measures for which it has historically criticized the New Democratic Party. In fact, the Liberals were being accused of tabling a very NDP-like budget, one that takes money from the wealthy and increases spending on social programs.
Still, B.C.’s fiscal plan is one that powerhouse provinces such as Ontario, Quebec and even Alberta must regard with some envy. B.C.’s closest neighbour is expected to present a deficit budget next month as a result of the $6-billion hole that recently ripped through its revenue projections because of a sudden decline in crude oil prices. Ontario and Quebec, meantime, face their own stiff fiscal challenges, not to mention climbing debt figures that remain costly albatrosses.
According to the new B.C. budget, taxpayer-supported debt (which excludes Crown corporations and ancillary agencies) is forecast to be $42.6-billion in 2013-14 and increase to $46.1-billion in 2015-16. As a percentage of GDP, the debt in the coming fiscal year will be 17 per cent and peak at 18.3 per cent in 2014-15 before beginning to decline the following year, according to government forecasts.
By contrast, Ontario’s debt-to-GDP ratio sits at 36.9 per cent, while Quebec’s is an eye-popping 48 per cent. Mr. de Jong said the difference in debt-servicing costs between Ontario and B.C., for instance, frees up about $2-billion a year in interest charges that he can use for programs and services.
Mr. de Jong said he was hopeful that the province would be able to keep its prized Triple-A credit rating – one recently threatened to be downgraded by a leading bond agency – as a result of its new fiscal plan.
The B.C. budget also highlighted why the province has emerged from recent economic storms in better shape than many other parts of the country: diversification. The financial fortunes of the province are not nearly as dependent on the economic health of the United States as they once were.
In 2001, for instance, trade with the U.S. represented nearly 70 per cent of B.C.’s total commerce activity. By 2012, that number had dropped to less than 45 per cent. Meantime, trade with China and other Asian countries grew to almost 28 per cent by 2012, up from just 6.6 per cent more than a decade earlier.
The B.C. government has projected it will finish the current fiscal year with a $1.2-billion operating deficit; which is just a little less than the amount Mr. de Jong needed to find in order to present the surplus budget that he did. How did he perform this economic miracle? By selling off government assets, factoring in some economic growth and putting the clamps on spending.
One area of expenditure management that caught many people’s attention was the modest projected growth in health-care spending over the next three years. The government is suggesting it contain those costs to an average of 2.6 per cent. And while B.C. has certainly led the nation in bending health-care costs downward, in order to realize the containment they are looking for now they will need to negotiate a new contract with doctors that allows for a net-zero wage increase – something that hasn’t been done in recent memory.
So that could be wishful thinking. As could the government’s hope of keeping spending growth to an average of 1.5 per cent over three years – including .08 per cent in fiscal 2013-14. But finance ministry officials insist there is lots of protection built into the budget, including, for the coming fiscal year, a $225-million contingency fund and a $300-million buffer against potential lower-than-expected revenues.
To the extent all budgets are political documents, this one takes on special significance given that the province is less than three months away from an election. Is there enough in this one to change Liberal fortunes, to get those who may believe it’s time for a change to perhaps give this government one more chance? Only time will tell.