The person with the biggest smile around the legislature these days has to be Finance Minister Carole James, who is sitting on a pile of cash that allows her government to continue to spend its way into voters’ hearts.
And the most envious folks? They would be BC Liberal MLAs, who can only shake their heads at the tone-deaf approach their government took when it came to dealing with huge budget surpluses.
In their last year in power, the BC Liberals boasted a surplus of more than $2 billion, but chose to apply it all to retiring the direct government debt, rather than improving services people want and need.
In contrast, the NDP government is coming through on the ambitious spending plan promised in this year’s budget and is in position – because of a much higher budget surplus than originally forecast – to be adding even more resources to tackle the thorny issue of affordability.
Already this fiscal year we have seen a big increase in the number of MRI procedures and joint replacement operations, a trial run at $10-a-day child care, a plan to build 1,100 homes on First Nations reserves, and a $1.1 billion program to retrofit social housing.
Thousands of teachers and hundreds of doctors are being hired. Record funding increases for the K-12 education system have occurred, and the year-to-year increase in health care spending is the largest ever.
Of course, much of this spending can occur because the NDP has also raised taxes by a significant amount. Long dubbed the “tax and spend” party by its opponents, the NDP is clearly betting such an approach will positively resonate with voters looking for more from government.
However, it is unclear how long this fiscal paradise can last. In fact, the current situation may be as good as it gets for the B.C. government, and perhaps the high water level has been reached.
The Organization for Economic Cooperation and Development (OECD) has just concluded that “the global expansion has peaked” and the world economy will begin a slow (but not necessarily steep) decline.
If true, this forecast has inevitably negative implications for the B.C. economy. This province remains heavily reliant on trade, and any downturn in the United States or in Asia is bound to have a ripple effect that touches our shores.
China’s economic growth, while still much higher than most jurisdictions, is slowing and that may have an adverse effect on this province to increase trade there.
James continues to take a prudent and cautious approach – her ministry is forecasting a decline in real GDP next year (to 1.8 per cent from the forecast for the current fiscal year of 2.2 per cent), even though the private sector average pegs B.C.’s rate next year to be 2.4 per cent.
And there is every reason she will continue to post budget surpluses for the foreseeable future (although not likely as high as this year’s is expected to be).
Nevertheless, James’ latest quarterly financial report – released last week – contained some warning signs that suggest next year’s numbers might not be quite as rosy as this year’s are.
First, although this year’s budget surplus is expected to come in at $1.3 billion, much of that is attributed to higher income tax assessments from 2017 and a readjustment of corporate income taxes from that year as well. That is not going to happen to that degree every year.
In addition, the disaster that has become ICBC shows no signs of disappearing anytime soon. In fact, ICBC’s financial loss this year is expected to be $890 million, higher than forecast. As a result, you can expect a couple of jarring rate hikes in the year ahead.
There is also the sobering reality of the impact of climate change on the government’s budget. This year, fighting forest fires and floods cost almost $800 million more than originally budgeted for (that figure is higher than the entire budget of 14 different ministries).
However, even with all those potential worries, it is easy to see why James has reason to smile these days, while the BC Liberals can do nothing but glumly watch.
Keith Baldrey is chief political reporter for Global BC. This is reprinted from his weekly column with Glacier Media.