For the past couple of years, membership in Canada’s balanced-budget club has been fairly restricted. In fact, there have only been three participants; Alberta, Saskatchewan and B.C.
Beyond approving nods and better grades from the credit-rating agencies, there isn’t much that association in this exclusive society buys other than the opportunity to gloat at annual gatherings of first ministers. For some, that’s enough.
But as budget time approaches across the country, there is certain to be a shakeup among club members. Alberta, a balanced-budget stalwart, will be on the outside looking in thanks to the global crash in oil prices. That same plunge could claim Saskatchewan as a victim, as well. Midway through the current fiscal year, the province was hanging on to its small surplus by a thread, and that was before oil’s price dropped further.
Of the three provinces that have been in the black recently, only B.C. is promising to table a surplus for the 2015-16 fiscal year – and the two that follow.
B.C. Finance Minister Mike de Jong told reporters Monday at a cobbler where he was picking up his budget-eve resoled shoes, that the province was going to do something no other provincial jurisdiction in the land was able to. “Which is a balanced budget and healthy surplus for 2014-15, and surpluses in all three years thereafter,” he said.
It remains to be seen who, if anyone, will join B.C. this year. Quebec says it intends to balance its books – although that seems like a tall order given the fiscal state of affairs in the province. Newfoundland has also said it would to return to surplus in 2015-16, although that prediction was made in last year’s budget speech. The only other government that is promising to not spend more than it takes in is Prime Minister Stephen Harper’s federal government. And in an election year, that pledge seems like a certainty – even with the wicked financial hit Ottawa has taken with oil’s decline.
In B.C., Christy Clark’s balanced-budget declarations remain divisive and somewhat controversial. Her critics claim it’s only been done by raiding the coffers of B.C. Hydro and raising myriad fees while shortchanging areas such as education. It is often noted, as well, that the accumulated debt of the province has increased by $15-billion during the Premier’s four-year reign, and now stands at north of $60-billion.
Nonetheless, the credit-rating agencies still like what they see. The province has the top rating a province can get. And Ms. Clark has made balancing the budget a big part of her political brand.
Even without the LNG riches that the Premier continues to insist are coming, B.C. remains in good economic shape.
One reason is that it does not depend on oil for its revenue, and so consequently has not been affected by the sharp decline in prices the way Alberta, and to a lesser extent, Saskatchewan, have. Rather, the simultaneous drop in the price of gasoline could put as much as $1-billion in savings in the pockets of British Columbians, which is likely to generate more economic activity.
The province has also been aided by a stronger economy in the U.S., which remains B.C.’s largest trading partner. That association has also been bolstered by the decline in the Canadian dollar, which always makes the province’s products more desirable. B.C.’s forestry industry is one sector that is sure to benefit from this current advantage.
Beyond economic factors, B.C. has also done a good job of reining in the cost of government, particularly in health care. Spending in this ministry had been increasing at rates of five to six per cent annually. In the past few years, however, the province has been able to keep growth rates at three per cent or less.
Consequently, other provinces have begun looking at the B.C. model, which accepts that balanced budgets are virtually impossible to achieve when any one area of government – particularly one that consumes the greatest chunk of spending like health care – is growing at unsustainable rates.
“We’ve got to be careful going forward,” Mr. de Jong said. “There are good days ahead, the economy looks promising, growth looks promising, but British Columbians expect the government to be cautious going forward.”
Undoubtedly it will be.Report Typo/Error