Mar 2, 2010

BC Budget 2010 (notes from Iglika and Marc)


For a document titled Building a Prosperous British Columbia, the 2010 BC Budget is underwhelming in its ambition. Budget 2010 shows a government talking a lot about the legacy of the Olympics but lacking any coherent vision of how to translate upbeat sentiments into real improvements in British Columbians’ standard of living.

This budget says “steady as she goes,” but it’s not clear where we’re going, and whether the budget does enough to respond to the challenges that may be ahead. The risks for the BC economy are serious: the US economy remains very weak, as does central Canada’s. The Winter Games are over, and in Olympics past this has meant a drop in economic activity. And even though many feel we are in recovery territory, rising GDP coming out of a recession is typically accompanied by rising unemployment for at least another year. There doesn’t seem to be a clear economic development plan to provide jobs for people who lost theirs during the global recession.

The budget’s priority is to show a reduced deficit for 2010/11, funded by a smattering of spending cuts that will not help the province’s overall economic situation. This drop in the deficit by $1.2 billion (from $2.65 billion in 2009/10 to $1.4 billion in 2010/11) is partially offset by increased capital spending. So, a check mark for accelerated capital projects that push the total envelope to $5.4 billion in 2010/11 for taxpayer-supported projects (up from $4 billion in 2009/10). There is a drop in other (self-sustaining capital projects), but an overall increase in total capital spending to $8.2 billion. Not all of this is well spent, such as $390 million this year for the BC Place roof upgrade.

The budget heralds a return to conservative budgeting practices, with numbers set out in a way that ensures the government will outperform the targets. Barring a major economic collapse, BC will rebalance the budget sooner than the stated 2013/14. For example, the budget estimates a deficit of $145 million in 2012/13, peanuts relative to more than $40 billion in revenues. But if resource royalties bounce back (as higher commodity prices seem to indicate) the shift back to surplus could happen even further ahead of schedule.

A number of ministries saw budget cuts, led by the Ministry of Forests and Range, with a one-year cut of 35% (a drop from just over $1 billion in 2009/10 to $641 million in 2010/11, and this is on top of previous cuts. This will hurt in smaller communities around the province. Other ministries received cuts that were small by comparison, typically in the tens of millions of dollars. Translated into public sector jobs, there is a continuation in the reduction in full-time equivalents (FTEs) from a peak of 36,277 workers to 32,000 by 2012/13.

The government introduced a few new spending measures, and health care gets a 4.7% increase above 2009/10, but we remain low compared to other provinces in terms of health care per capita. For regional health services this means an extra $396 million on the heels of a $360 budget shortfall last year. The new budget does not leave health authorities much room for enhancing seniors’ services or revitalizing support for mental health and addictions programs and other preventive initiatives that would improve the health of British Columbians and reduce long-term health care costs.

That health care is the big winner on the spending side confirms how popular the program is, but also sets up a narrative that health care increases are eating up everyone else’s share of spending. To show this, the budget makes a commitment to put all HST revenues to health care, yet another budget gimmick that those in the lock-up saw straight through: this is nothing new for BC, as the old PST was properly named the Social Services tax, brought in to fund health care decades ago.

BC families hit hard by the recession will see little from this year’s budget. The new property tax deferral measure applies to homeowners only, leaving out a large number of families with children who are priced out of the housing market.

In addition, the tax deferral measure will just add to the already high levels of household debt in this province, a two-edged sword. Fundamentally, BC families do not need yet another source of credit. They need jobs that pay living wages, they need affordable housing, high quality accessible early childhood education and care programs for their young children, and enhanced opportunities for their school-aged kids to participate in arts and culture as well as sports programs.

There is nothing in this budget to address child poverty, which is currently the highest in the country and has been so for six years running. Clearly, existing initiatives to support families with children are inadequate, and the budget does not address this gap. Similarly lacking is money to house the homeless or build new social housing. In fact, the Estimates show cuts in the Ministry of Housing and Social Development’s employment and housing initiatives.

The increased funding for community sports and the arts, $60 million over three years, is more than welcome, but it falls far short of filling the enormous gap left by the cuts to discretionary grants in last year’s budgets, much of which went to funding similar activities.

Funding increases in education and social services are small, barely keeping up with inflation and the increased downloaded costs. There are some additional funds for full-day kindergarten, and an additional $26 million over three years on child care subsidies for low and middle income families, but no new operating funding to enhance the accessibility of child care spaces.

The budget announces additional ministry cuts to the tune of $320 million over the next three years. This comes on top of previous cuts announced last year – a total of $3.3 billion over three years in “administrative and other savings.” BC’s public service is already the leanest in the country as this recent CCPA brief shows and it is wishful thinking to assume that these cuts can be made without compromising much-needed public services.