Under the “we told you so” category, I am filing the BC public accounts for 2009/10. The province closed the year with a deficit of $1.8 billion. As Will McMartin comments in The Tyee:
… B.C.’s public accounts for the fiscal year 2009/2010 conclusively prove that the pre-election fiscal plan foisted on British Columbians by Premier Gordon Campbell and his BC Liberals on Feb 17, 2009 was the worst — the most egregious, the most deceptive — “Fudge-it Budget” in provincial history.
The public accounts show that the Campbell Liberals inflated revenues in Victoria’s main operating account, the Consolidated Revenue Fund (CRF), by a stunning $2.558 billion — yes, Billion — with taxation receipts alone overstated by $2.1 billion.
Even under the broader GAAP (generally accepted accounting principles) presentation, the Campbell government exaggerated last year’s expected revenues by a whopping $1.3 billion.
The result: a gargantuan shortfall of $1.779 billion for fiscal 2009/10 — nearly four-times higher than Campbell’s oft-repeated, pre-election pledge of a deficit no bigger than $495 million.
Back in early 2009 before the Budget was released, we crunched some scenarios of the fiscal outlook, noting many concerns about the state of the provincial economy moving forward. We started with the rosy estimates of the Ministry of Finance, which bases its projections on the average private sector forecast coming from the MoF’s Economic Forecast Council (a long time ago, we used to be part of this autere group but got cut after the Liberals came to power in 2001).
Noting that the EFC figures were too rosy, we then modeled the impact of two recession scenarios. Preliminary GDP data for 2009 are still not available, but we used different estimates of GDP to project revenues, and in our pessimistic scenario, this resulted an estimated deficit of $1.6 billion.
So we were off a bit but not by much – and since the economics department over here is Iglika, unlike the army of number-crunchers over at the MoF, I think we did alarmingly well. In contrast, the 2009 Budget projected a deficit of only $495 million. At the time we commented:
… those deficits may be much larger before this is all over. Spending pressures for social assistance could rise much more than currently forecast. A challenge is in interpreting the government’s revenue forecasts. In years past, tax revenues have been grossly understated leading to large “surprise” surpluses at the end of the fiscal year compared to budget time. This year those revenue projections look to be more reasonable, although it will be interesting to see what the final tallies for 2008/09 will be to get a more accurate baseline (we will not know until summer). That said, given the recession, the budget projects an increase in some tax revenues predicated on growing personal income of 1.7% and growing consumer expenditures of 1.9% in 2009. This seems unlikely, and so we could easily see bigger deficits before this is all over. Added to this is the fact that there are no forecast allowances in this year’s budget, because that would make the deficits look larger (it was only OK to make surpluses look smaller).