Feb 15, 2016

7 things that should be in the BC Budget but were missing from the Throne Speech

By Coins in a jam jar
Coins in a jam jar

BC Budget 2016 will be tabled tomorrow but we already know it will include a break on MSP premiums for some single parents, $50 million for new affordable housing initiatives this year (with funding also committed in each of the next four years), help for first-time home buyers, more resources for the long neglected BC child welfare system, some mental health initiatives (not specified yet), and a tax credit for farmers who donate food to non-profits (for example, food banks, soup kitchens and school lunch programs).

It’s typical for the provincial government to pre-announce many of its new initiatives before Budget Day. What concerns me is that some of the big challenges facing BC are entirely missing from the pre-budget conversations this year. Here are 7 initiatives BC Budget 2016 should include if the premier is serious about making sure that all British Columbians “share in the benefits of a growing economy“.

It’s typical for the provincial government to pre-announce many of its new initiatives before Budget Day.

1. Funding for the implementation of the widely-endorsed $10 a Day Child Care Plan

BC families are facing an affordability crisis with child care. Fees can run upwards of $10,000 per year — higher than university tuition — and regulated spaces are available for only 27 per cent of BC children under five. Add to this inconsistent quality and it becomes clear that the status quo fails to meet the needs of BC families.

BC and Canada are laggards by international standards, investing far less than what is required to ensure all children can thrive. Small enhancements to the status quo (like the BC Early Years Strategy) are just not cutting it — we need a change in priorities.

The call to increase public investment in quality, affordable child care is neither new, nor controversial. In each of the last three years, the bipartisan (and government-dominated) committee of MLAs conducing the BC budget consultation unanimously recommended that BC “provide funding and support for the development and implementation of an affordable child care plan.”

So far this recommendation has been ignored but the time has come for BC to adopt the widely-endorsed $10 a Day Plan. The change in federal government presents a unique opportunity for action. Trudeau campaigned on a commitment to a national childcare program, at least in principle, so Budget 2016 should include provincial investment to get the $10 a Day plan going and the BC government should work together with its federal counterparts to secure federal support for the BC child care plan.

2. A comprehensive poverty reduction plan, including immediate increases in disability benefits and welfare rates

For years, the BC government has insisted that its economic development measures would automatically take care of poverty. This has not happened.

The BC economy has been growing steadily since the recession but this has not reduced the need for food banks. On the contrary, food bank use is on the rise. More than 100,000 British Columbians needed food banks last year. One third of them received social assistance. Another third received disability benefits.

The fact that two-thirds of food bank users receive government income support is alarming. It means social assistance for people with disabilities and those who have fallen on hard times are pitifully inadequate.

And how could they be adequate when rates have not increased for eight and a half years? Over this period the price of food rose by 23% and the price of rent by 12% (according to Statistics Canada’s Consumer Prices Index for BC) but social assistance rates did not increase by even 1 cent.

Offering tax credits to farmers who donate food to non-profits is not a solution to hunger. We need policy change that would reduce the need for food banks in the first place.

When the province released its disability strategy a year and a half ago, the premier acknowledged that disability supports should be increased and said this was one of her priority areas for new spending “when we can afford it.”

BC is projected to have the strongest economic growth in the country in 2016. We can clearly afford to support those in need and Budget 2016 should include boost disability benefits and welfare rates to levels that reflect the real costs of living in our province.

Social assistance is only one piece of the solution. BC must follow the lead of other provinces and adopt a comprehensive poverty reduction plan. This is another budget consultation recommendation the BC government has chosen to ignore for the last two years and I hope it won’t be ignored again.

Investments in child care, as noted above, are also consistent with poverty reduction measures. Other priority investments include increasing the stock of BC’s affordable housing, making mental health services more accessible to British Columbians who need them, supporting community-based health initiatives focused on prevention, and enhancing seniors care services.

The BC government is already planning to fund initiatives in a number of these areas. Having an integrated strategy with targets and timelines and a Minister responsible for the file would greatly increase the individual measures’ effectiveness.

3. Infrastructure investments for municipalities, including transit investments

The failure of the recent transit referendum should not be used as an excuse to continue with business as usual. With a growing population, expanding transit infrastructure and improving service levels are essential to Metro Vancouver’s economy.

It’s not a good sign that the only mention of transit in the Throne Speech was a reference to the Evergreen line, a project that has been in the works for close to a decade and is expected to finally open in 2017.

Budget 2016 must provide funding to address the urgent need for rapid transit investment in Surrey and Vancouver, and related infrastructure deficits facing BC municipalities. BC needs to work with the federal government (which campaigned on promises to quadruple federal investment in transit) and develop a long-term infrastructure investment plan to ensure that all communities have access to viable transportation options.

4. Carbon tax increase and reform of the Low-Income Climate Action Credit

BC’s renewed interest in climate action in the lead up to the Paris conference in December is welcome. An increase in the provincial carbon tax is one step the government could take immediately towards meaningful climate action.

We’ve long recommended that BC should increase the carbon tax to $40 per tonne, and reinstitute the carbon tax annual increases of $5 per tonne, which were in place for the first four years after the introduction of the tax. This would take the current carbon tax to $60 per tonne by 2020—equivalent to 13 cents per litre of gasoline.

Budget 2016 can do this. There’s no need to wait until the Climate Leadership Team releases its plan. We know it needs to be done and with the current low energy prices, it will be less noticeable at the pump.

The carbon tax increase needs to be paired with an expansion in the Low-Income Climate Action Credit to improve the fairness of the tax.

The Throne Speech made it clear that the province has no intention to break with the revenue neutrality requirement of the carbon tax regime. This is a mistake. The tax cuts put in place to ensure revenue neutrality now exceed the revenues raised. By a lot. In 2017/18, the carbon tax is projected to give out tax cuts amounting to 130% of revenues.

The funds raised by the carbon tax would be much better used to support a new provincial climate action plan.

5. Adequate funding for education programs at all levels

A year and a half after the teachers’ strike ended, our schools still don’t have the resources to support children with special needs. The much touted $75 million Education Fund was too small and only prevented further cuts. This leaves families the impossible choice between “paying their bills and the deteriorating mental and emotional health of their child” (as a recent report from the BC Parents of Special Needs Children highlights).

Budget 2016 should make the necessary investments in our public schools to ensure that students with learning disabilities, ESL, or other special needs receive the support they need to reach their full potential. This means education funding that does more than keep up with expected inflation, which is all that’s currently budgeted.

Budget 2016 should also restore funding for tuition-free adult basic education. The BC government’s decision to allow colleges and universities to charge tuition for high-school level courses has seriously undermined access to education.

The one-time reinstatement of $6.9 million as transition funding for 2015/16 is a bandaid, not a solution. The new adult upgrading grant that is supposed to assist low-income students is not enough. The full funding should be permanently reinstated in Budget 2016.

The vast majority of basic education students are low-income earners who enroll because their high-school marks or courses do not qualify them for entry into trades or other college and university programs, programs which allow them to get jobs that pay a living wage.

6. Tax fairness reform, including replacing MSP premiums with taxes based on income and restoring the tax bracket for high earners

BC’s tax system has become remarkably regressive since the turn of the century, as we’ve documented here. There’s no shortage of ideas for how to make our tax system more fair. One of the most obvious is getting rid of MSP premiums.

No amount of tinkering around the edges will solve the fundamental problem with MSP premiums: they are an unfair tax.

MSP premiums are a significant expense of the income for a two-parent family of four living on $40,000 per year, amounting to 4.5% of income. But they are inconsequential to a family making $400,000 per year. Plus, many people in jobs with good benefit plans (jobs that typically pay higher than average wages) have their premiums paid by their employers, while workers in precarious jobs with no benefits are left paying out of pocket. This makes the tax even more unfair.

In a 2013 report on tax fairness, Seth Klein and I modelled one way to replace the revenues lost from eliminating MSP with a progressive income tax. There are many others.

For example, when Ontario got rid of its health premium in Budget 1989, they replaced it with a combination of a personal income tax increase and a payroll tax (called the Employer Health Levy).

Budget 2016 should also reinstate the top tax bracket of 16.8% for individual income over $150,000, which expired in December 2015. Making this tax bracket permanent would raise an additional $235 million per year. It would also tackle the growing income disparities in BC.

BC has the lowest income taxes in Canada for individuals earning up to $122,000, the lowest corporate income tax rate and the third-lowest small business tax rate (after Manitoba and Saskatchewan). If instead BC charged taxes closer to the average for other Canadian provinces, we would easily create the budgetary room to implement the types of investments I’ve outlined here.

7. Natural resource royalties reform

The resource industry has been hit hard by low energy prices. However, even when it was booming, BC was not receiving a fair share of the proceeds of natural gas development. The LNG Income Tax was supposed to capture more of these, but the lowering of the tax to only 3.5% means any LNG projects that eventually go ahead will pay a pittance to the BC Treasury. In spite of record production levels, royalty revenues were well short of historical levels when production was much lower.

Budget 2016 should end the costly royalty credits that serve as a subsidy to fracking operations.

BC should consider a shift to a gas royalty regime that ensures a minimum royalty to the province for each unit extracted, rather than the current approach, which only pays reasonable royalties when market prices are very high.

Alberta’s recent fiscal crunch is a cautionary tale not of government overspending (as the Throne Speech suggested), but of government too reliant on resource revenues to pay for ongoing programs and services. Rents from non-renewable resources should be invested in a Norway-style Heritage Fund for future generations instead of being rolled into general revenues and used to cover current operating spending.

BC’s finances are in good shape and we can afford to borrow a little more to make these key public investments. With sufficient revenue reform — items 6 and 7 — they can be achieved without running a large fiscal deficit (examples in this 2013 report).

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