B.C. Liberals’ pile of surplus cash masks serious deficit in services

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On Monday, B.C. Finance Minister Mike de Jong will make his regular pilgrimage to the Olde Towne Shoe Repair shop in Victoria, where he will pick up his resoled budget shoes. He'll have another merry exchange with cobbler Mike Waterman, who runs a lean, no-frills operation featuring a non-electric cash register that should be in a museum.

Mr. de Jong cannot be persuaded to go elsewhere for his pre-budget photo opportunity, because it is his favourite backdrop for his annual sermon to the press about the merits of being thrifty with taxpayers' dollars.

On Tuesday, the Finance Minister, wearing his 20-year-old refurbished shoes, will present a budget that promises to be loaded with good pre-election news.

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The B.C. Liberal government loves to point out that it is the economic envy of the country. This will be B.C.'s fifth surplus in a row. But sitting on a mountain of spare cash right now is an uncomfortable position for Mr. de Jong.

"In terms of the composition of the budget, this has been the most difficult one I have done," Mr. de Jong said in an interview.

Everyone knows the treasury is flush, and the election campaign begins in seven weeks.

Although Mr. de Jong is accustomed to turning down demands from interest groups, the difference this time is that the pressure is coming from his cabinet colleagues.

Premier Christy Clark has promised tax relief, investments in affordable housing and more spending on child-protection services. The courts have dictated higher spending on education that will cost no less than $200-million more in the coming year. And on Friday, Health Minister Terry Lake signed a pact with the federal government on health-care transfers, leaving an additional $142-million funding gap to meet service demands.

The B.C. Liberals have been in office now for 15 years, and as they ask for another term they are acknowledging that, on many fronts, they have cut services to the bone in order to balance the budget.

Mr. de Jong sat down for an interview in his office just after a Question Period in the House where his government was hammered over a report on death of Alex Gervais, a teen who was in government care, whose story once again highlighted the failures of British Columbia's underfunded child-protection system.

The debate was fresh on the Finance Minister's mind, and he said there is "legitimate pressure" for new spending and his government is "anxious" to meet the costs of improving services – now that his government has the means to do so.

Melanie Mark, the NDP critic for children and families, wasn't applauding the government for its promise to do better.

"A generation of vulnerable kids has been neglected by this government," she said in an interview. "The tone is set from the top. Christy Clark has been treating kids as a cost, not an investment… So now we have a massive surplus, but a social deficit."

Eighteen-year-old Alex Gervais killed himself after experiencing a child welfare system "marked by constant instability, a distinct lack of permanent connection and trauma," according to the independent report on his death.

His case is disturbing, but terribly familiar. The B.C. Liberal government has been warned in dozens of reports that it has starved the child-protection system and left children at risk. Still, even as the Liberals racked up successive surpluses, funding for child protection has been close to static.

Tuesday's budget is expected to reinvest in that system, but that is just one of many commitments, and of course all of this new spending will be limited to fitting within another surplus budget.

Economist Jock Finlayson, chief policy officer for the Business Council of B.C., doesn't believe Mr. de Jong will have much room to play with after all the spending promises have been accounted for.

"I think the surplus will be fully spoken for – and perhaps then some – by the time we pore through the details of the budget," he said.

He said government can count on growing revenues, although growth will slow compared to the year just ending. "Tourism is firing on all cylinders, high technology is doing well, film and TV production is setting new records," he said, as just a few examples.

"While there will be some room for targeted tax measures over the course of a three-year fiscal plan," Mr. Finlayson concluded, "it's hard to imagine the surplus is large enough to finance big-bang tax cuts."

The surplus can only be stretched so far, so Tuesday's budget will reveal something of the B.C. Liberals' essential nature: It will favour the broadest tax cuts possible, or it will tilt toward meeting the legitimate pressure – to use Mr. de Jong's words – to fund frontline government services.