BC budget: spending capped, properties for sale, no wage hikes
B.C. Finance Minister Kevin Falcon unveiled a “prudence� budget Tuesday that put a hard cap on government spending, and a for-sale sign on many provincial properties, in a push to return the province’s books to surplus within two years.
Falcon’s $43.8-billion budget pegs the 2012-13 deficit at $968 million — $163 million worse than the most recent estimate last September.
By holding government spending at a tight two per cent increase (a one per cent cut compared to current levels), projecting revenue growth at 2.9 per cent, and rejecting any wage hikes for public workers, the province should close its gap and post a surplus of $154 million in 2013-14, said Falcon.
“I think this is the new reality for governments,� said Falcon. “We have really started to bend down the growth in government expenditures.�
To raise cash, the government plans to sell as many as 100 of its “surplus� properties and buildings, 75 per cent of which are in either Greater Victoria or Metro Vancouver. That could bring in $700 million in revenue, Falcon said.
A full list of government property for sale wasn’t provided, but Falcon specifically mentioned a parking lot at Menzies and Superior streets in James Bay, near the legislature, which could be sold for commercial development.
Government officials confirmed property for sale could include any surplus assets held by the Provincial Capital Commission, which owns notable heritage sites such as the Belleville Steamship Terminal, Victoria’s Inner Harbour lands, St. Ann’s Academy and downtown office buildings.
Also on the block are the Liquor Distribution Branch’s two warehouse facilities, in Metro Vancouver and Kamloops, as government privatizes distribution of booze.
The budget pumps new money into health care but freezes education spending, except for previously announced funding for new special education teachers. Most other ministries see their budgets frozen or reduced.
The health-care increase appears to come with a cost, in the form of another hike in Medical Services Plan premiums.
Families with three or more people will pay another $60 a year in MSP premiums next year, as part of the government’s plan to increase revenues and wrestle down health-care costs that have increased every year since 2001.
“Budget 2012 marks a turning point,� said Falcon, of a health-care portfolio projected to absorb more than 42 per cent of total government spending by 2014-15. The MSP increase is one way to show the public how expensive the health-care system is, said Falcon.
The Ministry of Health budget will increase $1.5 billion over the three-year fiscal plan to nearly $17.3 billion in 2014-15.
“Although the amount we’re investing is significant, we are bending the cost curve down,� Falcon said.
The increase in MSP will kick in Jan. 1, 2013. The four per cent increase means: a single person pays an additional $2.50 a month for a total of $66.50; a two-person family pays an additional $4.50 for a total bill of $120.50; a family of three or more people will pay an addition $5 a month for $133 a month.
The increase in MSP premiums will generate $87 million a year in revenues for health care, according to the budget.
Falcon has given colleges and universities one year to prepare for a $20-million spending cut in 2013-14 and $50 million the following year.
Government expects the post-secondary schools to find the savings by reducing travel and administration costs, while protecting programs.
“We believe a one per cent cost reduction is very achievable,� Falcon said.
Meanwhile, the finance minister froze block funding for public school districts across the province at $4.7 billion a year.
The government did, however, follow through on its promise in October to set aside $165 million to help students with special needs. The money will be spent over three years to help schools better organize classrooms.
On the social service front, the government will boost spending on people with developmental disabilities by $144 million over the next three years. The money includes $40 million that Premier Christy Clark has promised for Community Living B.C.
Falcon’s budget offered no surprises on the justice system. It received a $237-million boost from the province’s contingency fund (a kind of rainy-day savings account), over three years, though it is mostly to pay for existing police and court staff added in recent years to address gangs and court backlogs.
The money also includes the $10-million annual budget for the new Independent Investigation Office of civilian investigators overseeing police-related fatal and serious incidents.
The government said it will also find savings by holding the line on labour costs.
No civil service layoffs are projected for 2012. Instead, the government will find savings through attrition, according to budget documents.
However, the government’s new bargaining mandate is much like the old mandate under a different name.
Most unions negotiated new agreements under a 2010 net-zero compensation mandate.
This year the government is bargaining under what’s called “the co-operative gains mandate� which allows public sector employers to negotiate compensation increases but only if they find equivalent savings — or productivity improvements — within existing budgets, the finance minister said.
“We are not prepared to borrow money to pay for public-sector increases today and send the bill to our children tomorrow,� Falcon said. “It’s just not a responsible way to govern.�
The province would not be able to balance the budget with new wage hikes, he said.
The return to the PST, in April 2013, will also see government restore provincial taxes to hotel rooms, tobacco and liquor, though the prices of those items should be adjusted so there’s no net increase to the cost, according to the budget.
The budget did not change personal income tax levels, though it proposed a one per cent increase to the corporate tax rate in 2014 if the economy worsens.
The public subsidy for B.C. Ferries is frozen at last year’s levels as the government continues to limit spending. Taxpayers will contribute $170 million to the corporation, which continues to grapple with its own budget difficulties. The size of the subsidy has not increased in several years, but Falcon insists government is paying enough toward the service.
The budget also announced a review of the carbon tax, which was launched in 2008 and is most notable to consumers for adding an extra price at the pump on gasoline. The last carbon tax increase is scheduled for July and the review will look at all aspects, including its revenue neutrality, the budget said.
Despite all the fiscal restraint, the B.C. government’s debt continues to rise. Total provincial debt is set to hit $57.6 billion, and is projected to rise to $66.35 billion by 2014/15.
Nonetheless, Falcon said the debt-to-GDP ratio, used to measure a government’s ability to handle its debts, is set to be 17.6 per cent, which is comparable to 2004 levels and still manageable for government. For every dollar of revenue government receives, 4.2 cents is spent on interest for its debt.
As part of its budget, the government also said it has cut the 2011/12 deficit (ending March 31) from $3.1 billion deficit to $2.5 billion, in large part by drawing upon its contingency fund.
rshaw@timescolonist.com
More coverage of the 2012 B.C. budget
Similar Posts:
Facebook
Twitter
