B.C. projects record deficit as budget builds on COVID-19 pandemic recovery plan

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British Columbia’s latest budget pledges to accelerate construction and repairs of schools, roads and hospitals, part of a job-creation and capital spending plan aimed at spurring a swift economic recovery from the impacts of the pandemic.

Health care spending will be driven to record heights, and so will the deficit: $9.7-billion on a $64.3-billion budget. A little more than a year ago, B.C. was expected to produce a surplus, but now is not expected to return to balance for at least seven years.

Still, Finance Minister Selina Robinson said while the province’s health care system is still struggling to meet the demands of the third wave of the pandemic, the budget forecasts the provincial economy will have recovered by 2022.

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“The pandemic will end. When it does, B.C. will be ready for the opportunities that come with recovery,” Ms. Robinson said in her budget speech.

The budget was praised for its spending on public services, but many interest groups warn it fails to provide ways for businesses to take advantage of a strong global economic recovery.

The government promises modest progress on the province’s four-year-old commitment to create a $10-a-day daycare program. A day earlier, Ottawa’s budget outlined tens of billions of dollars in federal subsidies for a national child care program. The federal government’s proposal, which requires negotiation with the provinces and territories, would split subsidies evenly with those governments, and aims for a 50-per-cent reduction in average child care fees by the end of 2022.

With the B.C. budget locked in before the federal plan was announced, the province had already committed $111-million in the coming fiscal year to add 3,750 child care spaces to its pilot project. The province is now scrambling to determine how its program may mesh with Ottawa’s.

B.C.’s fiscal plan includes a sizable cushion – contingencies and forecast allowance totaling $5.2-billion – as the uncertainties of the pandemic continue. Nearly half of the contingency funding is expected to be spent on pandemic supports, including the vaccination program, relief grants to business, and youth employment programs, but the province can adjust those programs as needed.

The B.C. economy contracted by 5.3 per cent last year. This year it is expected to grow by 4.4 per cent. Employment is back at prepandemic levels, and revenues are being buoyed by strong commodity prices, retail and housing sales. But the recovery has been uneven.

Greg D’Avignon, president and chief executive officer of the Business Council of B.C., said the province has already lost about 2,300 businesses because of COVID-19, and many more are not expected to survive the third wave of the pandemic, which is hitting the tourism and hospitality sectors especially hard. As many as 50,000 businesses could fail, he said in an interview on Tuesday, adding that it was disappointing the provincial government didn’t have more measures to help businesses pivot to emerging opportunities and demands.

“The global economic recovery is already under way,” he said. “Nobody is waiting for British Columbia or Canada. We need to start to act now in order to participate in that growth opportunity, because we have a lot that the world wants, but we need to position ourselves to get on our front foot, to take advantage of the demand.”

The budget promises new money for training and job creation, but its grants program for small and medium-size businesses had a rocky start. Last spring, the government approved $345-million for pandemic relief, but just $150-milion has been distributed. The new budget offers only to finish distributing the promised grants, with no new cash.

However, Ms. Robinson told reporters the budget contingency funds have enough money to help businesses that are struggling because of public-health measures that have banned non-essential travel and closed restaurants and bars to in-room service.

“We have recognized that there needs to be more supports for these businesses that are impacted by this,” she said. “There’ll be more to say in the days ahead around that.”

Also absent is specific funding for the health sciences. The federal government promised this week to spend an additional $916-million over the next five years for the life sciences and bio-manufacturing sector to develop a domestic vaccine manufacturing capacity. To date, Quebec and Ontario have secured the lion’s share by offering matching supports.

B.C., which has a large life sciences sector, is not offering matching funds. Ms. Robinson said bio-tech, therapeutics and other life science companies will be able to seek support from a new Crown corporation called the InBC Strategic Investment Fund, which is expected to be launched in the fall. The budget provides $100-million this year for the fund to help companies scale up – if they meet the government’s criteria for economic, social and environmental policy priorities.

Bridgitte Anderson, president and chief executive officer of the Greater Vancouver Board of Trade, applauded the fiscal prudence in the budget and welcomed the plan to return to balanced budgets in the next seven to nine years.

“However, we are still striving for a postpandemic vision for the economy that attracts investment, creates good jobs and promotes opportunity,” she said. “It’s not clear this budget puts B.C. on the fast track to thrive in an increasingly competitive world.”

In addition to the largest-ever infusion of capital spending, the budget will increase money for education, health, seniors care, mental health, the opioid crisis and the homelessness response.

Health care spending will reach $23.8-billion this year. At $7.1-billion, education spending remains the second-highest budget item. But Stephanie Higginson, president of the B.C. School Trustees Association, which represents the employer in B.C. public schools, said it is not enough.

“Unfortunately, the funding announced today does not cover inflationary cost increases faced by school districts,” she said, “nor are there any commitments to cover increased cost pressures related to the pandemic.”

There are also a string of new commitments, including free transit passes for children 12 and under, a boost of $175 a month for income and disability assistance – which Ms. Robinson called the largest-ever permanent increase – and the elimination of the provincial sales tax on e-bike purchases.

The Finance Minister pointed out that the pandemic has been particularly hard for those preparing to enter the work force.

“We also know that the pandemic derailed many young people’s plans to attend postsecondary school or training, or to find a summer job. Not only are these major life milestones, this disruption could have long-term consequences for employment down the road. We owe it to young people to recreate some of the opportunities they lost.” She announced a $45-million “Future Leaders” program to help 5,000 young people land jobs, internships and co-ops.

Stephanie Smith, president of the B.C. Government and Service Employees Union, welcomed the spending on child care and public services.

“Over all, this budget shows that the government is committed to supporting British Columbians and leveraging the lessons of the pandemic.”

Delivering her first budget as Finance Minister, Ms. Robinson said the province’s strong economic foundation helped provide the room for the new spending and borrowing programs. Spending is set to increase by $2.8-billion over last year even as revenues are forecast to decline. And taxpayer-supported debt will leap to $71.6-billion, a debt load she said is sustainable because of low interest rates.

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