On the eve of a provincial election, the B.C. Liberals are aiming to balance government books by a razor-thin margin with new tax hikes, increased fees and a sell-off of assets.
Finance Minister Mike de Jong tabled a $44-billion budget Tuesday with a $197 million surplus, built largely on the sale of government properties, many of which are in Greater Victoria, tax increases for high-income earners and corporations, and higher Medical Services Plan fees.
But de Jong acknowledged the budget will largely be overshadowed by concerns around its timing, within weeks of the May 14 election.
“The question today is not whether or not the government is tabling a balanced budget,” said de Jong.
“The question that is emerging ... is how the government is balancing that budget, is it credible, will it withstand scrutiny?”
[Find budget details from the government HERE]
B.C. is on track for a $1.2 billion deficit in the fiscal year ending March 31, and has to first make up that shortfall before squeezing into its narrow surplus for the next year.
“You can be reasonably confident about the expenditure projections,” said de Jong, who called it a budget that is “realistic about what we can afford today and might be able to afford in the future.”
The Liberal government had tabled four consecutive deficits before returning to the black Tuesday, and is still suffering criticism from its 2009 pre-election budget that ballooned to four times the forecast deficit after the Liberals won re-election.
Tuesday’s budget won’t be debated or passed in the legislature before voters go to the polls May 14, and few of the increased taxes or fees are actually paid before then. It could be tweaked, overhauled, or completely rewritten by the party that wins government later in the year.
Nonetheless, the new budget proposes “targeted” tax increases to generate $327 million in 2013-14, including:
• People who earn more than $150,000 a year will be hit with a 2.1 per cent income tax hike as a “temporary” measure for the next two years, according to the budget. That means an additional $200 in tax for someone earning $160,000, or $3,100 more for a person earning $300,000. “In asking people with a little more to give a little more, we’re cognizant of the fact to achieve our balanced budget objectives that [the tax increase] was necessary,” said de Jong.
• The government is charging ahead early with a one per cent hike to corporate income taxes, to 11 per cent, which it had previously said it would only implement in the future if necessary. B.C.’s business community had a muted reaction, but expressed concern about the province’s economic competitiveness when the tax increase is coupled with the return of the Provincial Sales Tax.
• Taxpayers will also see another four per cent increase on Medical Service Plan premiums, which add $2.75 a month to a single person’s $70 monthly bill, or $5.50 a month to a $138.50 bill for families of three or more. Health advocates slammed it as further downloading onto taxpayers.
• “Smokers are going to pay a little more for the pleasure,” de Jong said, as government announced a tobacco tax increase worth $2 per carton of cigarettes, effective Oct. 1. The tax also rises to $7 per cigar.
• Light industrial businesses, such as Vancouver Island’s wineries, gravel pits and small shipyards, are losing their school property tax credits, the elimination of which will generate $32 million in revenue for the government.
Overall, the provincial government says it will earn $44.4 billion and spend $44 billion in the coming year.
It plans to cut the growth in government spending to 1.5 per cent a year (half the already-slim growth rate in recent years). At the same time, the budget forecasts revenue growth of three per cent, and the growth of the provincial economy at 1.6 per cent.
“I’m not pretending it’s going to be easy,” de Jong said of “squeezing that margin” of spending.
In health care, which dominates the provincial budget as the single largest expense, the government is also attempting to squeeze growth. The $16.6 billion earmarked for health care is budgeted to rise only 2.6 per cent. That’s a significant slowdown from a seven per cent growth rate before the 2008 economic downturn, and even four per cent growth in recent years.
The throttled growth will decrease front-line health services and hurt patient care, said the Hospital Employees’ Union.
On education, de Jong offered little relief for school districts struggling with rising costs, freezing their funding at $4.7 billion. He acknowledged districts will find it challenging to balance their budgets, but that education funding remains at an all-time high overall.
The government also continues cuts to the Advanced Education Ministry, despite a B.C. Jobs Plan that touts the importance of post-secondary skills training.
Key to balancing the provincial budget is a government plan to sell 100 so-called surplus assets in the next two years, worth $625 million.
Those lands and buildings will generate $350 million in the first year, and include a vacant lot near Victoria General Hospital, a parking lot near the legislature and the site the old North Saanich Middle School.
The government only offered details on 15 properties, saying divulging the rest could harm its negotiating position with potential buyers. Around 75 per cent of the properties are in either Greater Vancouver or Greater Victoria, government officials said.
“These properties add up in value, but it makes sense to me when you are converting them and harvesting that value to do other things, or returning them when they are not required by the crown to the private sector for use and development,” said de Jong.
B.C.’s civil service will continue to shrink by attrition due to a hiring freeze. The budget cuts and staff shortages have undermined the delivery of government services, says the B.C. Government and Service Employees’ Union.
The government’s $197 million surplus is also protected by a $425 million rainy-day spending cushion, in the form of a forecast allowance and contingency fund.
New spending programs were few and far between in the budget, but they included:
• The government will add $1,200 to a child’s existing Registered Education Savings Plans, under a new B.C. Training and Education Savings Grant. It only applies to children under six years old, born after Jan. 1, 2007, who have an RESP in place. The money for that program comes from the government’s Children’s Education Fund, which it had intended to use in 2024 but is emptying early. B.C.’s child and youth watchdog, Mary Ellen Turpel-Lafond, slammed the program because the credit wouldn’t apply to children under government care — which prompted a quick retreat by government to include those kids.
• As many as 180,000 B.C. families are also expected to qualify for a new child tax benefit credit, of up to $55 a month for a child under six, but that program won’t start until 2015, said de Jong.
• Premier Christy Clark’s throne speech promise to make child care more affordable fizzled. Advocates had called on the government to push toward $10-a-day universal affordable childcare, but the government had balked at the $1.5 billion cost. Instead, the budget offered $76 million over three years, of which $32 million is earmarked as incentive money to help private operators create new spaces. There were no changes to the existing daycare subsidy formula, which critics have called woefully inadequate to pay for child care costs that frequently exceed $1,000 a month.
The government’s total debt will rise to $62.7 billion, according to the budget. The affordability of that debt, called the debt-to-GDP ratio, will rise to 18.3 per cent and the government will spend 4.3 cents on every dollar just to service the debt.
© Copyright 2013