The British Columbia budget for fiscal 2014 was presented to the Legislative Assembly yesterday, in circumstances of rather modest expectations and rather muted enthusiasm. While sitting in the Gallery of the Legislature in Victoria on Tuesday, awaiting the Minister of Finance’s remarks, I was struck by how little excitement there was regarding the prospect of a balanced budget. Given the global economic events of the past six years, and the profligate government spending taking place over that time in most other jurisdictions (including all other Canadian provincial governments), one might have expected a somewhat more charged atmosphere. That was not to be.
Regardless of the prevailing sentiments and awareness surrounding the prospect of a balanced budget, the government will end the current fiscal year with a surplus of $175 million. The Liberal fiscal plan forecasts a surplus of $184 million in 2014-2015, a surplus of $206 million in 2015-2016 and a surplus of $451 2016-2017
Yet, it is right to say that the provincial debt currently stands at some $60B, which suggests that future budget surpluses and LNG derived tax revenue need to find there way to reducing that overall debt. This is particularly more significant, when looked at from the perspective of annualized interest costs on that debt, costing the Province in excess of $2.5B a year.
In addressing that issue, Minister de Jong stated: “You will note that we have not booked any revenue from an LNG income tax in the current three-year fiscal plan,” de Jong said. “That’s because the tax dollars won’t start flowing until the first plant starts production.”.
The government of British Columbia has delivered the “steady hand on the tiller” budget that it promised but, as always, there is more work to do. For a more detailed summary of Provincial Budget 2014, pleases see that detail, set out below.
B.C. is forecast to end the fiscal year 2013-14 with a surplus of $175 million, with progressively larger surpluses forecast in all three years of the fiscal plan:
• $184 million in 2014-15.
• $206 million in 2015-16.
• $451 million in 2016-17.
While the fiscal plan shows continued spending discipline, modest surpluses allow government to make choices and ensure new spending is put into priority areas. Within the balanced budget, government is providing additional funding of $415 million to benefit B.C. families, help make life more affordable, and help stimulate economic growth and job creation:
• Community Living B.C. receives incremental funding of $243 million over the three year plan as government remains committed to maintaining existing services for adults with developmental disabilities and their families.
• An additional $15 million over three years for Ministry of Children and Family Development for children and youth with special needs.
• An additional $15 million over three years for increased RCMP policing costs and $6 million for legal aid-related services.
• Funding of $29 million over three years is provided to support the development of an LNG industry in B.C., including attracting investments to B.C. and supporting a stable environment for investment decisions; facilitating timely processing for regulatory and permitting requirements; and ensuring ongoing environmental protection, management and stewardship.
Government is working with employers, educators and communities to make sure British Columbians are first in line for the jobs of the future:
• The new NorKam Trades Centre of Excellence in Kamloops, scheduled for completion this fall, will offer courses in areas such as mining exploration, industrial skills and construction trades training.
• New trades training facilities at Camosun College in Victoria will support an additional 370 students in the marine, metal and mechanical trades by 2016.
• New facilities at Okanagan College in Kelowna will more than double the size of the current trades training complex by 2016
• A new campus for the Emily Carr University at Great Northern Way in Vancouver will include a state-of-the-art visual, media and design art facility, with the capacity for 1,800 students.
With Balanced Budget 2014, government has also introduced legislation to implement the new B.C. Early Childhood Tax Benefit. Starting in April 2015, the benefit will provide $146 million annually to approximately 180,000 families with children under the age of six (up to $55 a month per eligible child). About 90 per cent of B.C. families with young children will be eligible.
Many British Columbians buying their first home will pay less Property Transfer Tax, as the Province is increasing the threshold for the first-time homebuyers program to $475,000 from $425,000, an exemption that can save the purchaser up to $7,500 when buying their first home.
Budget 2014 confirms government’s ongoing commitment to protect health care. The Ministry of Health budget will increase $2.5 billion over three years. Total health spending by function will reach $19.6 billion, or more than 42 per cent of all government expenses by 2016-17.
To help encourage healthy choices, taxes on tobacco will increase by 32-cents per pack, or $3.20 a carton, effective April 1, 2014. This increase is expected to generate an additional $50 million in annual revenue over the course of the fiscal plan. Government will dedicate a significant portion of these revenues to provide specified funding for cancer prevention and will work with the Canadian Cancer Society and other research partners to develop and implement a number of innovative cancer-prevention initiatives.
The Province continues to develop and implement all the elements of a competitive tax and policy environment to assist with LNG development in B.C. To this end, government intends to introduce income tax legislation later this year applicable to the LNG industry.
The LNG Income Tax will be a two-tier tax with a tier one tax rate of 1.5 per cent and a tier two rate of up to seven per cent, with the final rates to be determined and confirmed in legislation. The LNG Income Tax will apply to income from liquefaction of natural gas at LNG facilities in British Columbia.
The B.C. LNG income tax structure and rates are subject to approval of the legislature. Government intends to have legislation ready for introduction by fall 2014, once the complex drafting process is complete. Regulations and additional legislation will follow in 2015.
The independent British Columbia Economic Forecast Council forecasts provincial real GDP growth to be 2.3 per cent in 2014, 2.7 per cent in 2015 and an average of 2.7 per cent over 2016-2018. Government’s economic growth forecast is 2.0 per cent in 2014, 2.3 per cent in 2015 and 2.5 per cent in 2016 — a forecast that is prudent relative to the Economic Forecast Council.
The Economic Forecast Council’s forecast for provincial real GDP growth takes on new significance with Balanced Budget 2014. Government’s Economic Stability Mandate offers employees the opportunity to benefit from B.C.’s economic growth through the Economic Stability Dividend. Under this agreement, employees will receive a wage increase equal to half of any percentage-point gain in real GDP growth above the Economic Forecast Council’s forecast published in the February budgets.
Taxpayer-supported capital spending on schools, hospitals and other infrastructure across the province over the next three years is expected to total $11 billion. This includes $1.5 billion to maintain, replace, renovate or expand K-12 facilities; $2.3 billion for capital spending by post-secondary institutions across B.C.; $2.6 billion on health-sector infrastructure; and $3.4 billion for transportation investments.
By eliminating the deficit, controlling capital spending and reducing the level of government’s borrowing needs, Balanced Budget 2014 forecasts British Columbia’s taxpayer-supported debt-to-GDP ratio will peak at 18.5 per cent in 2013-14 and decline to 17.8 per cent in 2016-17. The taxpayer-supported debt-to-GDP ratio is a key measure of debt affordability and effectively managing this ratio helps maintain B.C.’s triple-A credit rating.