Image Credit: Canadian Press

By Simon Little, Global BC

Economy

B.C. budget: $4.2B deficit forecast amid new program spending, economic headwinds

Feb 28, 2023 | 2:00 PM

The British Columbia government is projecting a more than $4 billion deficit in a 2023-2024 budget packed with new spending aimed at health care and affordability measures.

The province earmarked $8.7 billion in new program spending and a record $37.5 billion in new capital spending for schools, hospitals and highways over the next three years.

The increases in funding come as the province sails into tough economic headwinds, amid high inflation and reduced economic growth projections.

“Some believe we should respond to uncertainty by pulling back, by making cuts that reduce services, or by making people pay out of pocket for tolls and private healthcare,” Finance Minister Katrine Conroy told the legislature in her budget speech.

“That’s not what British Columbians want, and that’s not our government’s approach.”

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Health and mental healthcare carry the lion’s share of new spending in Finance Minister Katrine Conroy’s first full budget, with the province dedicating more than $6.4 billion over three years including $1 billion in new funding for mental health and addictions.

$4.5 billion over three years will go to a suite of affordability measures, including the long-promised renters rebate, expanded carbon tax and child benefits and hikes to social assistance.

And $4.2 billion over three years, including more than a billion dollars in this fiscal year, has been earmarked in capital and operating funding for a “refreshed housing strategy,” including a new property transfer tax exemption to incentivize purpose-built rental.

Of the money earmarked for this year, $396 million is dedicated to new units through Building BC, $384 million is aimed at fighting homelessness, $119 million will go to supporting renters and $83 million will go to buy land near transit corridors for future housing.

Details of the plan will come “soon” from Housing Minister Ravi Kahlon, Conroy said.

After posting a surprise surplus of nearly $6 billion last year on faster-than-expected economic recovery and federal income tax changes, B.C. is returning to deficit spending for the foreseeable future.

The budget forecasts a $4.2 billion deficit of $81.2 billion of total spending for 2023-2024, falling to $3.75 billion and $3 billion in the following years.

Economic growth is forecast to fall to just 0.4 per cent this year, before recovering to 1.5 per cent in 2024, and projected provincial revenues are down by six per cent over last year.

That figure includes $6.5 billion less in personal and corporate income taxes, however, last year’s figures were anomalously high due to a one-time adjustment from the federal government.

But it also includes a more than $400 million dip in the property transfer tax tied to B.C.’s cooling housing market, a billion dollars less in forestry revenue and a $200 million drop in natural gas royalties.

The total provincial debt is expected to rise to nearly $108 billion for the fiscal year. Of that, $75.6 billion is taxpayer-supported debt, a figure expected to rise to more than $99 billion over the course of the three-year fiscal plan.

Conroy sought to cast the debt figures in a rosier light, noting B.C. ended the 2022-2023 fiscal year with $9.8 billion less in debt than originally projected, with a taxpayer-supported debt-to-GDP ratio of 16.4 per cent, lower than the expected 20 per cent.

The debt to GDP ratio is forecast to rise to 18.9 per cent this year, and reach 23 per cent by 2025-2026.

Amid economic uncertainty, the budget also maintains $6.2 billion in flexibility for the year, including a forecast allowance of $700 million, along with contingency funds of $1 billion for pandemic related issues, $500 million for climate emergencies and $2.2 billion in contingencies related to new collective agreements with the public service.

Minister won’t rule out spending more of last year’s surplus

Along with the coming year’s budget, Conroy provided an update on last year’s unexpected surplus, of which $3.6 billion remains.

By law, the government must dedicate any unused surplus money remaining at the end of the fiscal year to paying down the provincial debt.

The BC NDP government has already spent about $2.7 billion of that money on a number of one-time funding announcements, including a billion dollars to help municipalities with infrastructure, and $500 million each to subsidize BC Ferries fares, create a rental protection fund, and roll out a spring affordability credit.

Asked Tuesday if the government was done with the pending spree, Conroy said it would “continue to use the surplus to support people.”