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BALDREY: Comfortable cushion of $1B built into B.C. budget

Do not let what appears to be a relatively small budget surplus fool you: Finance Minister Carole James has socked more than a billion dollars away, ready to be used should any spending get out of hand or revenues fail to materialize.
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Finance Minister Carole James shares a laugh with a colleague before delivering the budget speech from the legislative assembly at Legislature in Victoria, B.C., on February 20, 2018. THE CANADIAN PRESS/Chad Hipolito

Do not let what appears to be a relatively small budget surplus fool you: Finance Minister Carole James has socked more than a billion dollars away, ready to be used should any spending get out of hand or revenues fail to materialize.

On paper, last week’s provincial budget projects a tiny $274 million surplus in a budget that forecasts spending at more than $58.3 billion. That surplus represents less one half of one per cent of total spending, so there does not look like there is much room for error.

Oh, but there is.

James has prudently built into the budget an unusually high contingency fund of $750 million. On top of that is a “forecast allowance” of $500 million. Added to the surplus figure and it shows James has $1.5 billion of unallocated spending, ready to be used if disaster strikes.

Then there is the question attached to every provincial budget: are the revenue forecasts set deliberately lower than the dollars that are really expected to flow into the provincial treasury?

If revenues do indeed exceed the expectations set out in the budget, the surplus grows and grows throughout the year with the publication of quarterly financial reports. This makes whoever happens to be the finance minister look like a fiscal wizard.

For example, the 2018-19 budget underestimated personal and corporation income tax revenue by a whopping $2.5 billion. Overall, revenues were $2.4 billion higher than originally forecast.

Some expenditures were higher than usual, but the surplus (after accounting for the forecast allowance and a decision to deliberately spend some of the surplus at the end of the current fiscal year) still came in at more than $1 billion. The budget, when it was tabled last year, forecast a surplus of $219 million.

The same thing will likely occur with the 2019-20 budget that James tabled last week. And it’s not a bad problem to have: even with a bad wildfire season, her new budget should come in at the end of the year with a surplus well north of that magic $1 billion mark.

This prudent rainy-day fund approach is not confined to just the next fiscal year. It is incorporated into the government’s three-year fiscal plan, to the tune of $2.3 billion on top of the coming year’s $1.5 billion in unallocated spending.

That’s a lot of elbow room for the government.

Even with the risks every B.C. finance minister faces – another bad wildfire and flood season, lower commodity prices, any slowdown of economic activity – James has built enough fiscal resilience into her plan to weather pretty much any storm, at least in the short term.

In fact, unless there is a serious economic downturn down the road (always a distinct possibility given global tension) James should be able to steer her government into the next election campaign with a fairly good track record when it comes to fiscal management.

Of course, it is not all clear sailing: various tax increases such as the employer’s health tax and the rising carbon tax could become a millstone around the NDP’s neck by the time we head to the polls again. 

Nevertheless, James has also shown a willingness to do something that her B.C. Liberal predecessors failed to do: spend some of that budget surplus at the end of the fiscal year on people, rather than simply applying it all to government debt.

She has earmarked $375 million out of this year’s surplus (it has to be spent by the end of the fiscal year on March 31) and she plans to sprinkle most of it around various local governments, primarily for small infrastructure and research projects.

This spending has to be approved by the legislature but there is no reason to think the NDP cannot get it passed, even with a tiny two-seat majority. Some of that new spending is to encourage zero emission vehicle use, which will secure the Green Party’s support.

It is another reminder of a big reason the B.C. Liberals lost the last election. They ended that fiscal year with a surplus of $2 billion, yet did not spent a single extra cent on anyone as election day neared.

James is not going to make the same mistake.

Keith Baldrey is chief political reporter for Global BC. Keith.Baldrey@globalnews.ca

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