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Mike de Jong’s razor-thin B.C. surplus could be undone by two big unknowns

B.C. Premier Christy Clark knows there are two things her government must deliver before another election rolls around: balanced budgets and evidence that the riches she's assured are coming from liquefied natural gas are indeed on the way.

On Tuesday, Ms. Clark provided further proof that when it comes to fiscal management, she and Finance Minister Mike de Jong understand rule No. 1 of running a tight ship: Don't spend more than you have. Mr. de Jong presented a three-year fiscal plan that touts balanced budgets throughout, and in fact promises small but growing surpluses.

Few believed the government when it tabled a balanced budget last February, with critics calling it a pre-election document not based in reality. But it turns out it was. British Columbia finished the year $176-million in the black. Now it is projecting surpluses of $184-million for the upcoming 2014-15 fiscal year and excesses of $206-million and $451-million for the next two.

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There isn't a provincial government in the country that wouldn't kill for those bottom-line projections.

It's anticipated that Saskatchewan will also table a balanced budget in a couple of weeks – making it and B.C. the only two provinces in the country to pull off the feat. Alberta is widely expected to submit a budget that will be in deficit, one that is the result of a confluence of factors, including the costs associated with the summer's devastating floods. Most other provinces, meantime, are still mired in red ink, recovering in their own way from the 2008 financial crisis that crippled governments everywhere.

But generally, B.C. has a pretty positive story to tell. Other than Alberta, it has the lowest debt-to-gross-domestic-product (GDP) ratio in the country at 18.5 per cent. It anticipates that percentage will begin shrinking in 2016-17 to just over 17 per cent. (Although, total taxpayer-funded debt will continue to grow). By comparison, Ontario's is 37.4 per cent and Quebec's a miserable 55.7 per cent.

B.C. is one of only three provinces (along with Saskatchewan and Alberta) with a Triple-A credit rating, and beyond simple bragging rights that status is worth billions. As Mr. de Jong pointed out, the difference between B.C.'s rating and Ontario's AA minus designation represents a savings of $2.2-billion in annual borrowing costs.

And the government once again demonstrated admirable restraint on health-care spending, projecting an average increase of only 2.6 per cent over the next three years. Not that long ago, policy experts thought health budgets across the country would be going up at rates of 5 and 6 per cent as the population aged. B.C. (and Quebec) has led the way in Canada in using innovation and restraint to begin bending that cost curve downward.

Amid the mostly positive news to be found in B.C.'s latest budget, there is, however, a missing number. It is the figure – estimated to be about $350-million annually – that would be needed to meet the obligations set out in a recent B.C. Supreme Court decision. That ruling stemmed from an education bill the provincial government introduced in 2002 that was found to be unconstitutional and which impacted class size and composition numbers.

The Liberal government has decided to appeal that decision and, as such, chose to ignore in this budget the financial burden that the B.C. Supreme Court decision would impose on the province. But if it loses its appeal, forecasted allowances and surpluses would instantly disappear to pay the bills linked to the case.

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The other question mark is, of course, LNG. The government introduced the framework for a tax regime for the nascent industry, but no one has signed up yet to open a plant. Companies are getting closer to making that ultimate decision, but the government, rightly, hasn't booked a dime in its revenue forecasts for tax money derived from LNG development.

That might be years away.

Until then, B.C. seems content to produce boring balanced budgets that rely on the diversification of its trade markets, modest spending growth, and the continual hunt for ways to get more from less. Even with that, B.C.'s budget continues to be balanced on a razor's edge, as the Finance Minister admits – vulnerable, as all governments are, to the global economic uncertainty that has become the new norm.

But in these times, B.C.'s budget is an achievement that is a model for the rest of the country.

With no LNG industry in place yet, the B.C. Liberals relied on an increase in medical services premiums to balance its budget (full story here)

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