By Tommy Osborne

Provincial Budget

Record setting budget deficit results in credit rating drop for province

Apr 9, 2024 | 4:47 PM

PRINCE GEORGE – The recent provincial budget set a record deficit at $7.9 billion, causing B.C.’s credit rating to drop. S & P Global, one of four major credit rating companies, dropped B.C. from an AA ranking to AA-, the second year in a row the province dropped.

“There’s absolutely no reason why B.C. should be in this economic position. We’ve got a wealth of natural resources. We’ve got a whole bunch of really skilled and talented people who can make our economy thrive. But a series of really bad decisions from the current government has led to yet another credit rating downgrade,” said B.C. Director of the Canadian Taxpayers Federation Carson Binda.

S & P Global’s report states “the province’s commitment to fiscal discipline and stability has wavered in recent years as B.C. has materially increased its spending for both operations and capital investment to unparalleled levels, while economic growth is slowing,” but added inflation and high interest rates also played a role, which impacts all provinces. On top of that, robust population growth meant more spending was needed on infrastructure. While Binda knows money has to be spent on key community supports, he says the government should account for this and limit costs elsewhere.

“If I can use a family finance analogy: you’ve got a leaky roof, you fix that roof, you don’t then buy three flat screen TVs and max out that family credit card. And that’s exactly what we’re seeing in B.C.,” Binda said.

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Binda added that B.C.’s lower credit rating means there will be more interest on loans, which he says will hit taxpayers wallets hard.

“We’re going to be spending about $4.1 billion just on the interest payments for that debt this year alone. When we’re spending 4.1 billion on debt interest payments, that’s money that’s going straight out the door. It’s not adding to goods and services in B.C. that folks like you and I rely upon.”

In a written statement, Finance Minister Katrine Conroy said “people across the province expect us to support them during tough times, and that is what we are doing. While some want to make cuts to the hospitals and schools people rely on, we know that’s the wrong decision and would make life harder for people when they need support the most.” She added that while it’s true we’ve seen a credit rating drop, the province still remains among the country’s best.

“Overall B.C. remains in a good position, guided by prudent fiscal management over the medium-term. B.C. is an economic leader in Canada and a leader in growing jobs and wages, with unemployment among the lowest in the country. Our debt-to-GDP ratio is one of the lowest among provinces and our interest bite is the lowest,” she said.

However, Conservative Party of B.C. Leader John Rustad isn’t convinced, and he says the government spending needs to stop.

“These guys are driving this province over a cliff. And as the old saying goes about debt, debt is never a problem until it is. And then once it is, it is the only problem,” Rustad said.

Both Rustad and Binda agree that money does need to be spent on supporting communities, but they both have concerns about where some of the government’s money is going.

“Between 2016 and 2023, the government’s core bureaucracy grew by about 31%. That’s not folks like bus drivers, teachers, police officers, nurses. That’s bureaucratic staffers in the ministry,” said Binda.

“Where is this money going within this government? I think, quite frankly, there seems to be a lot of waste going on in this government because clearly with that kind of an increase, you would have expected better services than what we were receiving in British Columbia,” said Rustad.

While the credit rating did drop, S & P Global added in its report that it expects things to improve in 2025, largely due to the LNG sector and more activity in our natural resources market.

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