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Les Leyne: Tick tock, tick tock goes debt clock

This week’s budget has the usual purring reassurances about provincial debt. The debt-to-GDP ratio is “steady,” and the chart is bending in the right direction.
Cash money generic photo
Provincial debt has been the fastest growing measure in the budget for years, and it’s growing faster than the government forecast it would.

Les Leyne mugshot genericThis week’s budget has the usual purring reassurances about provincial debt.

The debt-to-GDP ratio is “steady,” and the chart is bending in the right direction.

The operating debt, that accumulation of past deficits, is the lowest in a generation, on the verge of being eliminated for the first time since 1975.

“Investments made are within government’s debt-affordability framework.”

But, holy cow.

Provincial debt has been the fastest growing measure in the budget for years, and it’s growing faster than the government forecast it would.

The plan is to load another $11 billion in debt on the books over the next three years. That would take it from $56 billion in 2012 to $66.6 billion now (an ominous number) to $77.7 billion by 2020.

In the world of budget wonks who pore over these documents, there’s a small subset of debt nerds who concentrate on all the borrowing. They’re going to be a little agitated by the latest update.

The debt rarely grabs headlines in budget coverage because there’s so much else going on. And debt is a fact of life, in government and in taxpayers’ personal lives.

Also, the debt mostly represents investments in all the good things continually in demand. It takes two pages to list all the highways, hospitals and schools that are under construction.

It’s all funded with debt, but no one ever says no to these projects. That’s why being a debt nerd is such a lonely job.

The $11-billion increase in three years is also striking when viewed from another angle. The government runs on rolling three-year plans, updated in every budget. This week’s numbers are $4.4 billion higher than last year’s plan. It’s partly because the Trudeau government, which is whole-heartedly embracing debt, has enticed B.C. into more cost-sharing projects.

Significant investments in capital infrastructure account for much of the new debt. There’s $4.3 billion worth of education and health facilities in the pipeline, and $3.7 billion worth of transportation-sector projects. That’s partly offset by a $4-billion decline in direct operating debt. Liberals have directed a lot of attention to that segment, but Finance Minister Mike de Jong said it’s warranted.

“I didn’t make up this measure of operating debt. We’ve had one for 45 years. We’re on the verge of eliminating it.”

Still, it’s the only thing in the debt world that’s going down to any degree.

Government-owned corporations carry their own debt, and it is also on the rise. It will go up $6 billion to $30.2 billion by 2019, much of it due to B.C. Hydro’s Site C dam and the Massey Tunnel replacement (funded through a Crown corporation).

Sharing the taxpayer-supported debt among the population, every person in B.C. now owes $8,845. By 2019, they’ll owe $9,588.

The interest bite — the cents of every dollar of revenue that go to pay servicing costs — stands at 3.2 cents. It’s been declining, but will rise slightly over three years.

De Jong discounted any debt alarm. He said if B.C. were in Ontario’s fiscal position, the province would have to find more than $2 billion a year to cover additional borrowing costs. But that’s one of the weakest possible measures to compare against.

He said with five balanced budgets in a row, B.C. is in the enviable position of having it all when it comes to spending options. Government can spend more on programs, invest in infrastructure and cut costs at the same time, all the while maintaining the only triple-A credit rating of all provinces.

But he did acknowledge B.C. has used up a lot of the borrowing room. At a Greater Victoria Chamber of Commerce lunch on Wednesday, he was asked about future projects.

“I think I should be as forthright as I can … we’re getting toward the top end of our envelope for infrastructure. We could borrow. If we go much beyond where we are now, we will put that triple-A rating at risk. That, of course, has dire consequences.”

So there is a limit. We just don’t know what it is yet.

lleyne@timescolonist.com