VICTORIA – Even though his budget last year went from projecting a miserly looking tiny surplus to becoming almost embarrassingly awash in riches, don’t expect Finance Minister Mike de Jong to start doling out new spending any time soon.
The books on last year’s budget have now been signed off by the province’s auditor-general, and that surplus ballooned from a mere $184 million to a much healthier $1.7 billion.
How did this happen?
First of all, the government was able to keep spending under control and stuck pretty close to its budget figures. Health care costs keep going up and up (to the tune of about a half billion dollars a year) but they are not exceeding what was budgeted.
On the revenue side, the provincial economy performed better than expected last year and so tax revenue to the government was up considerably over what was expected — to the tune of almost a billion dollars.
Contributions from three Crown corporations also helped out big time. Notably, ICBC contributed more than $400 million more than forecast and the take from gambling and liquor was $132 million higher than originally thought.
But for all that good news, don’t expect it to continue in the coming year.
Right now, the country appears to be in a “technical” recession, which isn’t disastrous but which does indicate people are likely spending and earning less money and therefore the tax revenues for government are not likely to exceed last year’s growth spurt.
The dramatic slump in oil prices is the biggest reason for the country’s economic slowdown, and B.C. is more protected from the oil nosedive than other provinces like Alberta, Saskatchewan and Ontario.
But being better protected does not mean being immune to any of the downsides.
As well, the stock market meltdown in China, the unresolved Greek debt crisis and what appears to be a cooling off in U.S. consumer spending don’t help matters either.
Many analysts predict the country’s economic growth rate will rebound in the latter half of the fiscal year, but not to the point of showering provincial governments in cash windfalls.
Now, de Jong has created enough elbow room in this year’s budget to afford any kind of minor slide in economic activity. The projected surplus, forecast allowance and contingency fund equal close to a billion dollars (although this year’s forest fire fighting costs will likely consume the entire $400-million contingency fund).
But de Jong has to be worried about the continuing sluggishness when it comes to natural resource revenues, which used to be a huge part of the base budget. They aren’t expected to increase significantly in the near future.
As for any money coming from the LNG industry, that remains very much off in the distant future. It will be at least several years before any revenue stream is created from LNG, if indeed any LNG facilities are actually ever built.
So while a long wish list can be drawn up when it comes to more and more government spending (higher social service rates, lower MSP premiums, more funding for education etc.), don’t for a moment think de Jong is contemplating drawing one up of his own.
Of course, as we draw closer to the May 2017 provincial election, de Jong will no doubt loosen his grip — slightly, and not all the way — on the government’s finances and he will say “yes” more often to the occasional hand that is stretched out towards him.
But that is still a ways off. In the meantime, don’t expect B.C.’s super-cautious finance minister to veer from a course he is strongly determined to follow, no matter how rosy last year’s books now look.
Keith Baldrey is chief political reporter for Global BC. He can be reached via email at Keith.Baldrey@globalnews.ca.
This is reprinted from his weekly column with Glacier Media.
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