As Mother Nature takes her toll on vast swaths of this province (via floods right now, with extensive wildfires sure to follow) one of the folks nervously watching those disasters unfold surely has to be B.C.’s finance minister.
Technically, Carole James has not budgeted much money directly to deal with natural disasters. Finance ministers never really do, but changing weather patterns may force some changes.
The line item for costs associated with fighting forest fires or compensating flood victims is based on a rolling 10-year average. Thus, this year’s budget has set aside just $64 million for fighting fires – even though last year’s total fire management costs exceeded $600 million.
And the budget allocates a puny $15 million for costs arising from the Emergency Program Act, which deals with response to and recovery from emergencies and disasters. Last year’s total costs were almost $240 million.
To be clear, any “budget” for dealing with disasters is largely fiction anyways. While spending in other areas such as health and education is highly predictable (largely because fixed labor costs make up a huge portion of health and education budgets), spending on fires and floods is not.
Fires have to be fought, floods have to be contained, clean-up must happen and victims must be compensated. The budget to cover those costs, then, is simply what has to be spent at the end of the day, not what was planned for.
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James tells me she is not thinking about ensuring her budget remains balanced in the face of what looks like another spring and summer of natural disasters that may cost a tremendous amount of money to deal with.
Rather, her mind is set on ensuring that people affected by fires and floods get the help they need. That’s her priority, as it should be.
In any event, she maintains, she has built enough elasticity in her budget to absorb any big costs arising from those looming disasters. Perhaps so, but she may find her balanced budget pushed right to the edge of a deficit if the fire season is particularly bad, and the flooding we are witnessing right now gets much worse.
James has socked away $550 million in the contingency fund and has a further $350 million sitting as a “cushion” to absorb any loss of revenues in other areas. That adds up to $900 million in unallocated spending and there is a good chance it will be absorbed by any natural disaster costs.
Now, $900 million sounds like a lot of money but consider this: last year’s total disaster-associated costs were about $900 million more than is budgeted in that area for this year. So James potentially has little elbow room to protect her tiny projected surplus of $219 million.
There are other unrelated cost pressures on that surplus as well. For example, a tiny one per cent increase in doctors’ billings cost $25 million, while a one per cent hike in interest rates costs an additional $43 million in borrowing costs.
In addition, any significant slowdown in the housing market could eat into the $2.23 billion projected to flow from the property transfer tax. In fact, the revenue from that tax is supposed to increase $100 million over last year, which is hard to see happening given any slowdown.
But back to the natural disaster front.
Weather patterns seem to be changing due to climate change with potentially dire consequences for not only many communities but for the government treasury itself. Massive flooding and fires may become the norm going forward, and so therefore future provincial budgets may have to deal with much bigger costs than in the past in terms of dealing with disasters.
If B.C. does suffer through another major wildfire season, James (and her successors in the finance portfolio) may have to revisit the practice of basing budgets on a 10-year average. Either that, or finance ministers will have to continue the practice of budgeting for huge contingency funds that likely have to get bigger each year.
The impact of climate change is yet another thing to add to the list of worries for any finance minister, including James.
Keith Baldrey is chief political reporter for Global BC. This is reprinted from his weekly column with Glacier Media.
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