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B.C. budget's $1-billion 'wiggle room' turns out to be a mirage Add to ...

The biggest surprise facing British Columbia's premier-designate, Christy Clark, in her second week of transition is the discovery that the almost $1-billion in wriggle room laid out in last month's provincial budget is illusory.

Finance Minister Colin Hansen introduced the budget on Feb. 12, saying it was crafted to give the next premier maximum flexibility. "The new premier will have lots of options," he told reporters at the budget lockup.

In fact, the unusually large contingency fund - $600-million worth - includes money that has already been committed, while the risks to government revenues are too great for Ms. Clark to dip into the $350-million forecast allowance any time soon.

On Tuesday, Mr. Hansen said the flexibility in the budget he has tabled amounts to "a couple of hundred million dollars," plus there may be some small change left over in the contingency fund for the fiscal year just ending - somewhere in the order of $10-million.

"There is lots of pressure on those contingencies," he said in an interview.

Ms. Clark's transition team has been poring over the books since Feb. 26, when she won the B.C. Liberal leadership. She will be sworn in as premier next Monday, along with her new cabinet, and will want to quickly outline an agenda of change.

Earlier this week, Ms. Clark told reporters she plans to stick with Mr. Hansen's current budget plan, at least until the June 24 referendum on the harmonized sales tax. Although she has mused about reining in fee hikes and has made some relatively small tax-cut commitments, her short-term options are more limited than the transition team might have expected.

For example, the contingency fund is actually $91-million smaller than advertised thanks to what the budget terms "notional contingencies allocations." It's a fancy way of saying that the money has already been promised. The government has to pay for the $30-million referendum on the harmonized sales tax out of that pot of money, while the rest is, notionally, tied to the 2010 Sports and Arts Legacy and Climate Action and Clean Energy initiatives.

Of the $510-million remaining, there are the usual risks: Forest fires, floods, surprises on major capital projects, as well as higher-than-expected demands for welfare or postsecondary education.

In the last fiscal year, contingency spending, lawsuits and natural-disaster response pushed spending $787-million beyond the original budget forecasts. In the four years previous, B.C. spent $320-million annually on contingencies including items like forest-fire fighting.

As well, there is no money to implement the Yale treaty that has been signed. Or for any as-yet signed revenue sharing pacts, reconciliation agreements or litigation with first nations.

Jock Finlayson, chief economist for the Business Council of B.C., said Tuesday it is a good thing Ms. Clark didn't make a lot of major financial commitments in her leadership bid. "I don't think she has a lot of room, because the economic outlook just in the last month has deteriorated appreciably."

He said the current budget could accommodate the small tax changes Ms. Clark has promised but the vote on the HST remains a huge unknown. "If it is rescinded, it blows up the fiscal plan," he said.

The HST couldn't be lifted overnight if the public votes to repeal it, but the B.C. government faces significant costs to unbundle its provincial sales tax from the federal GST. And it will have to work out a repayment plan for the more than $1-billion in transition funds it has collected from Ottawa.

Mr. Hansen's current budget also provides for no wage increases in the public sector. After two years of wage freezes, the pressure on contract bargaining that gets under way in April will be significant.

"That's the reality of the times," said Mr. Hansen. "If anyone thinks we are out of the austerity times, we are not."

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