Finance Minister Carole James made it clear Tuesday she’s going to be skating a lot closer to the edge than the previous provincial government when it comes to balancing budgets.
The practice of the B.C. Liberals, with a few exceptions over the long haul, was to forecast a modest surplus at the start of the fiscal year, then watch it balloon over the course of the year. In February 2016, they projected a surplus of $264 million for the year ahead, and clocked $2.7 billion by the time the books closed last summer.
It looked good on paper to have the books come in many times over the original estimate. But James said it isn’t good fiscal management.
“Having a large surplus when children are going to bed hungry, when housing is such a crisis, when income assistance hasn’t seen an increase in rates in more than 10 years is not good fiscal management,” she said. “Good fiscal management is making sure the economy is strong and the benefits are felt by all British Columbians.”
She released a quarterly report on Tuesday that gives a glimpse of how that outlook will show up on her ledger. The original surplus estimate in her September budget update ($246 million) is down to $190 million. And the report shows she had to use up two-thirds of the forecast allowance ($200 million) to hold it at that level. If the rainy-day funds had not been pressed into service, she would have posted a quarterly report with a deficit.
The ministry still has a sizable contingency fund to draw on, so the situation isn’t as dire as it looks. She all but guaranteed that the NDP’s first full-year budget next February will be balanced.
The drop in the surplus was almost entirely out of the government’s control. More than a half-billion dollars in expected revenue vanished because of the vagaries in how the federal government adjusts calculations for income-tax payouts to the provinces. B.C. won big last year, but this year the calculation went against the province. The record fire season also piled up some unexpected costs.
In the revenue and expense areas that are under direct provincial control, James is aiming to spend a lot closer to the revenue mark.
She said the difference between the NDP and Liberal fiscal approaches is that surplus funds will be spent on programs for vulnerable people.
“We’re making investments in opportunities for all British Columbians. The difference is that the resources of B.C. will be shared with all British Columbians.”
That means the certified surplus at the end of the fiscal year will likely be a lot closer to what was estimated at the start. Gone are the days of hoarding money over the year while revenue comes in higher than expected, so as to produce multibillion-dollar surpluses.
The downside to that approach is that there will be fewer large paydowns of provincial debt. Surpluses by law have to go against debt, but they won’t be as big as they used to be, because more money is aimed at income assistance, education, housing and a host of other campaign promises.
James said the overall fiscal plan is strong enough to account for all the expensive promises the party made during the campaign. She said major ones are long-term, and the costs won’t land all at once, so the budgets can account for them.
The economic outlook that was updated Tuesday shows mostly clear sailing. B.C. has the lowest unemployment rate in nine years and the lowest in Canada. The growth rate and its projections are still healthy.
The one downside specifically acknowledged is ICBC, which is running heavily in the red. Government projected a loss of $225 million in September and that number has jumped to $364 million.
That’s down from $612 million last year, but the losses are piling up, and what to do about it is one of the major preoccupations of the NDP government.
The quarterly report more than doubles the expected growth rate in claims costs, and hikes the loss-ratio from 95 per cent to 98.9 per cent, meaning for every $100 collected in premiums, all but $1.10 is expected to be paid out in claims.
