The list of things that link the current NDP government with the previous B.C. Liberal government is an impressive one.
Both parties agree on building the Site C dam, wooing the LNG industry, allowing fracking, keeping B.C. Ferries out of central government and spending gobs of money on health care and government advertising.
We can add another item to that list: jacking up the provincial debt by billions of dollars every year.
In fact, over the next three years, the NDP plans to increase total government debt at more than twice the rate of the B.C. Liberals’ last three years in office.
According to the government’s three-year fiscal plan, the debt is forecast to rise from the current level of $65.3 billion to $77.1 billion by 2020/21, an increase of $11.8 billion.
In their last three years in office, the B.C. Liberals hiked the debt from $60.7 billion to $65.9 billion, an increase of $5.2 billion, less than half the amount over the same period than the NDP plans to spend.
Of course, it should be noted the B.C. Liberals were in power for 16 years and the debt almost doubled on their watch, going from $33.8 billion to that $65.9 billion (although they paid off one key area of that debt – the direct operating debt, which represented accumulated annual budget deficits).
But the NDP, once critical of the B.C. Liberals’ record on debt escalation, are about to go on their own merry spending spree. The government has an ambitious capital-spending plan that will build bridges, rapid transit, schools and hospitals (just as the B.C. Liberals did; voters like this).
A new Pattullo Bridge, the Broadway subway line and Surrey rapid transit lines will cost the government around $4 billion, and indeed the fiscal plan shows transportation project spending will increase by at least that over the next three years.
Almost $500 million is earmarked for new health facilities (a new St. Paul’s Hospital likely looms) while post-secondary institutions will get close to $400 million over the next three years.
However, the fiscal plan appears not to include funding to build whatever will eventually replace the Massey Tunnel (potentially another $1.5 billion to $3 billion project). Then there is the debt granddaddy of them all: the Site C dam project, pegged to cost $10.7 billion and rising.
The dam’s costs will not be included on the province’s books until it is in operation, likely around 2024. When the dam’s costs are finally included, our provincial debt levels will likely be approaching $100 billion (assuming the annual increase in debt remains about $4 billion) at that point.
Now, this rise in debt is no cause for alarm, as long as the economy continues to perform reasonably well. The debt to GDP ratio is expected to hover around 24 per cent, a ratio considered affordable by the bond rating agencies.
In fact, the Dominion Bond Rating Service just this week confirmed its high credit rating for B.C.
But any serious slippage in economic growth may result in bond rating agencies taking a second look at B.C.’s triple A credit rating, (the only province to have one from each of the international credit rating agencies) which keeps borrowing costs lower than they would be with a worse rating. Already, Moody’s has expressed concern about one area of the budget – B.C. Hydro’s debt load and financial situation.
In addition, this debt escalation is a major reason why B.C. Ferries is unlikely to ever be brought back into central government. Doing so would push B.C. Ferries’ $1.5 billion of long-term debt back onto the provincial government’s books.
And BC Ferries’ debt load is likely to increase even more, as it replaces aging vessels and overhauls some terminals.
The NDP government, like its B.C. Liberal predecessor, would far rather have the debt increases reflect the building of new schools, hospitals, transit and bridges, rather than a ferry system.
In any event, all this borrowing comes with a cost: interest payments on the debt will be close to $3 billion annually by 2020/21. To put that into context, $3 billion would make debt servicing the fourth most expensive line item in the budget, after health, education and social development.
So add another item to the-more-things-change-the-more-they-stay-the-same list of the common ground areas that exist between our two major parties, once they get into government.
Keith Baldrey is chief political reporter for Global BC. This is reprinted from his weekly column with Glacier Media.