B.C. Liberals, wary of NDP rivals, gamble on the budget

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Beyond divvying up dollars, provincial budgets are political documents, and Tuesday's B.C. budget will have to accomplish some key goals for the embattled B.C. Liberal government of Premier Christy Clark.

Intent on winning a fourth straight term in the May, 2013, election, the Liberals are running behind the Opposition NDP in the polls. And, the B.C. Conservative Party is attacking them from the right, eroding the centre-right coalition that sustains the party. The government is under fire over its competence in handling tough files such as justice, health and the HST that will be in the spotlight on Tuesday.

Pollster Mario Canseco says the budget gives Ms. Clark a shot at making a good impression with voters to begin shoring up support.

"It's the government setting up the agenda for what they want to do," says the vice-president at Angus Reid Public Opinion. "That's part of what they need to do on Tuesday – find those two or three sound bites that people are going to think about even if you're giving them a lot of bad news."

Here are some of the issues the Liberals have to grapple with:

Deficit: Balancing the books is going to be a key competence test for the Clark government, and Finance Minister Kevin Falcon is sure he can pass. After some uncertainty, he said he can wipe out a $700-million deficit expected for the 2013 fiscal year. This year's budget is in deficit, but Mr. Falcon will project that the budget for 2013 will be in the black. Failure to balance the budget would be embarrassing for the Liberals. Mr. Falcon told The Canadian Press last week the government won't slash programs, but also won't offer much in the way of spending increases either. All of this is a relief to Jock Finlayson, executive vice-president of the B.C. Business Council, who says he got the chills recently reading Don Drummond's report about Ontario's structural spending woes. "It's a homegrown example of how things can spin out of control," he said, expressing the expectation that Mr. Falcon can confirm a "realistic agenda" for getting back to balance.

Economic Outlook: Mr. Falcon said he's not as optimistic on growth in Canada, as are his finance minister peers. "We're in for a slow-growth period across the country, and I think finance ministers had better be budgeting in that manner," he told The Globe and Mail during a weekend interview. "To be excessively optimistic, I don't think is reasonable given some of the uncertainty that still swirls around us." He recently backed the B.C. Economic Forecast Council view that growth for 2012 will be 2.2 per cent. Pointing to the housing outlook, Mr. Falcon said B.C. is a "bit of a standout" given a 26-per-cent jump in housing starts in B.C. in January compared to one per cent across Canada. He said he hoped his announcement last week on HST mitigation measures as they apply to new homes would help spur that sector. "It's an important employer and a big part of our economy."

Education Funding: Susan Lambert, president of the B.C. Teachers' Federation, has an optimistic philosophy she cites when asked about the prospects of more money for teachers in the budget. "My motto is, '[Be] prepared for the worst and everything else is better than that,' " said Ms. Lambert. Ms. Clark announced $165-million over three years for special-needs students in the classroom last week but emphatically ruled out more money for teachers' wages. It remains to be seen how this will affect the standoff between teachers and the province. Political scientist Michael Prince of the University of Victoria said it will be worth looking beyond the budget numbers to the language of Mr. Falcon's budget speech. "It will be interesting what code words or euphemisms or spin techniques would be used to really convey a really tough message to the teachers' federation and that sector," he said.

Health-care spending: Mr. Falcon, a former health minister, told The Globe that continuing to bend back the growth of health-care spending is a priority he will elaborate on in Tuesday's budget. Health-care funding, he noted, has risen from just more than $8-billion since 2001, when the Liberals came to office in B.C., to about $16-billion in 2012. The Health Ministry has forecast a 2.8-per-cent increase for fiscal 2012-13 and 3.7 per cent for 2013-14. "Politicians have to be honest with the public about the fact that the answer to our health-care challenges are not just more money," said Mr. Falcon. He said the health-funding formula the Harper government sprang upon the provinces in December helps make the case for discipline in health-care funding. "Any government that is going to ignore that challenge has simply got its head in the sand," he said. Under the plan, federal health transfers will continue at six per cent until the 2016-17 fiscal year, then move to a system that ties increases to the growth in nominal gross domestic product.

HST Transition: Ahead of his budget speech, Mr. Falcon confirmed the province will return to the provincial sales tax on April 1, 2013 – about a month ahead of the next provincial election. On Friday, he announced the PST will drop to 2 per cent on all new homes sold for $850,000 or less. But what about other sectors? The HST has affected pricing on many other goods and services, including, for example, restaurants. So there's a lingering question about whether Mr. Falcon might whip up some applicable tax relief. Given the fiscal straits of a government pinching pennies, the director of B.C. and Yukon provincial affairs for the Canadian Federation of Independent Business isn't expecting any breaks, but would appreciate clarity. "The key for us is ensuring the transition back to PST is one that is really clearly communicated and one that is open, predictable and one where timelines are set and then timelines are maintained," said Shachi Kurl. "One of the things that has been very difficult for small-business owners is uncertainty."

Justice: B.C. is spending about $1.4-billion a year on justice, but there's an ongoing raucous debate over underfunding. Case backlogs are being linked to the province being 17 judges short of 2005 levels despite the hiring of 14 new judges in the past two years. As she announced a justice-system review, Ms. Clark has ruled out more money, suggesting efficiencies will have to be found in the system. Also on the horizon are costs associated with the federal Tory omnibus crime bill. Although supportive of the legislation, B.C. has rallied with other provinces to request talks on costs.