B.C. budget holds line on spending

B.C.’s budget is getting mixed reviews after the provincial government presented the financial plan for 2012 Tuesday.

Finance Minister Kevin Falcon indicated there will be few loose purse strings for provincial coffers, given the current economic climate.

“I think it’s a budget that speaks to the times that we’re in,” he said Wednesday during a conference call with media. “We’re in very different times now, and I think there’s a new reality for government. I don’t think every government yet has figured that out, but in British Columbia, we’ve been watching very carefully what’s happening in Europe, the United States and even in parts of Canada with real concern.

“The concern is underpinned by governments that have lost discipline in controlling expenditures, primarily, and have found themselves labouring under very large deficits and huge debts.”

The good news offered included a provincial outlook not as bleak when considered in the broader context: B.C. still maintains its AAA+ credit rating, compared to countries like the United States and provinces like Ontario that have been downgraded. B.C. has also seen employment recover partially and retail sales rebound from March 2009’s low of $4.83 million to $5.1 million this January.

But the optimism has to be tempered by the reality of the day. With Europe entering a recession and provincial housing starts muddling along, the Economic Forecast Council is projecting a 2.2 per cent increase in real GDP for the coming year. The finance ministry has adopted the conservative end of those projections, at 1.8 per cent.

Radical cuts by governments can cause “social upset” as evidenced around the world, Falcon said, adding the province is choosing to attempt to contain spending growth to an average of two per cent over three years, putting the deficit at $968 million for 2012-13. He projects a surplus of $154 million and $250 million for the next two years, respectively.

“We have protected the important public services of health care and education, but virtually every other ministry is going to be asked to hold the line or manage with some increased resources,” he said, noting that “vulnerable” areas like Community Living B.C. will see additional revenues from contingency funds to handle the caseloads.

All provincial ministries and Crown corporations are expected to “follow the same type of discipline,” Falcon stressed.

“All Crown corporations are getting a detailed review,” he said, adding ICBC has been transferred to the finance ministry for close scrutiny. “I’ve made it clear to the Crown corporations that we’re going to take a hard look at executive compensation and bonuses.”

Land owned by the province may also be liquidated to generate funds and economic activity. Falcon gave the example during his budget speech that a piece of land north of Kelowna had been held as a potential site for a new corrections facility.

“Now that the project is going ahead on Osoyoos Indian Band land, the site near Kelowna is surplus — and could be sold to the private sector,” he said, adding school districts, health authorities and post-secondary institutions may also be permitted to sell their surplus assets as well.

Although no income tax hikes are proposed, B.C. families can expect to pay more in other ways. Monthly MSP charges will increase four per cent or about $5 a month for a family of three, generating $87 million for health care.

Falcon said the premium increases, first introduced in 2009, are to illustrate to residents the rising costs of providing health care.

“Prior to 2009, MSP fees had not changed for seven years. Although every increase results in an additional cost, I think if you look at it from that perspective, it’s not entirely unreasonable given what’s going on,” he said.

Two new items pitched in the budget offer incentives relating to homes: first-time buyers purchasing a newly built home will be eligible for a credit bonus of $10,000, and seniors looking to renovate their home will be eligible for a tax credit up to $1,000.

Jason Cox, president of the Penticton and Wine Country Chamber of Commerce, said those credits come as welcome incentives to a home-building industry in need of a boost.

“I think it’s a budget that the business community can support. It’s what I’d call a disciplined budget,” he said, noting that chamber members haven’t yet been polled about the news.

“The work done by this government in previous years under premier Campbell to lower personal and the business tax rates was beneficial. If they’re just going to hold the line, that’s not ideal, but understandable.”

Cox said items like eliminating the fuel tax on international flights and supporting marketing for international investment dovetails the premier’s jobs plan, and changes like maintaining the small business corporate tax rate at 2.5 per cent and increasing corporate tax rates one point increase to 11 per cent effective April 1, 2014 are manageable.

“I think we’re still a competitive tax regime. I understand the province’s position with having to make some of those adjustments, considering the previous promises around taxes were in light of the HST,” he said.

The $1.6 billion in HST transition funding is on the books to be paid back to the federal government this year as a result of the tax reversal. Cox said that amount and the lost revenue will cost B.C. not only in taxes, but lost investment back into the business community.

“We have to start a conversation in this province about how we want to tax business and consumers generally,” he said. “There is a whole paradigm shift in how we have to look at the financing of the province with the reversal of that decision.”

Some sectors, however, were looking for more from government in the 2012 budget.

Jeet Dukhia, acting president of the B.C. Fruit Growers’ Association, noted the agriculture sector in B.C. is faltering due to lack of competitive support from the provincial government.

“When we talk to people in other provinces and states, the past two years have been good. In B.C., we have had four years of negative net farm income, for all of agriculture. The lack of agriculture programs is preventing our sector from growing and creating jobs,” Dukhia said.

B.C. could trigger an additional $88 million of federal funding for agriculture by bringing its contribution to national average levels.

“B.C. is leaving federal funding on the table to the detriment of local farmers. Nearly everybody supports the Agriculture Land Reserve, but the government is failing to do so, and government is failing to even meet the other competing provinces when it comes to budget time,” Dukhia said.