Put the BC surplus to work

This week’s report from the BC Ministry of Finance forecasts a whopping provincial surplus of more than $1 billion. The result is a unique opportunity to improve the lives of British Columbians, particularly the poorest among us.

The surplus flies in the face of persistent pessimism from the business community about the BC economy. BC’s economic growth in 2000 was an estimated 3%-not exactly on fire, but a welcome change from the turmoil of the late 1990s, which brought us federal transfer cuts and the Asian crisis. More importantly, investment rebounded last year, while the unemployment rate hit a two-decade low.

In just one year, the government’s fiscal position has made a 180 degree turn. The 1999 Budget’s projected deficit of $1.5 billion vanished, replaced by a $52 million surplus. The $1.3 billion deficit projected in the 2000 Budget is now forecast to be a $1.2 billion surplus (including a very generous contingency reserve of $450 million). And this comes after pumping $510 million into health care, $524 million into BC Hydro and ICBC rebates, and an additional $225 million to be allocated in coming weeks.

But we need to keep in mind that while a stronger economy is a big factor behind BC’s fiscal situation, a good deal of the shift from red ink to black has to do with energy. Exports of electricity south of the border have padded provincial coffers via BC Hydro. And skyrocketing natural gas prices have meant a big increase in the provincial royalty income.

This situation, however, may not be with us forever. There is no guarantee that energy prices or economic growth will be at the same levels next year. What should BC do with this unexpected good fortune? There are three options.

Option one appears to be the government’s preferred course. If all goes according to plan, BC will declare a surplus at the end of the fiscal year, and this money will pay down some of the province’s debt. This option is ill-advised, and represents a terrible lost opportunity. It will not reduce total provincial debt enough to make a significant difference to the province’s debt service costs. Furthermore, if the US economy is going into a recession, as many economists now believe, BC will go along for the ride. So this $1.2 billion surplus is money that is being taken out of circulation just at the time when it is needed to stimulate the economy.

Option two is to reduce taxes, the preferred option of the opposition. This too would be a mistake. Given the booms and busts of the provincial economy, permanently reducing taxes could destabilize our fiscal situation down the road, and jeopardize funding for social programs, especially if the US has a recession.

A third and better option is to spend the surplus. This option would address pressing concerns that face the province and would make a real difference in peopleÕs lives. At the top of the list, the government could declare “war on poverty” by creating a one-time investment fund for priority initiatives over the next five years.

Such a fund could support harm reduction and drug rehabilitation programs in depressed areas like Vancouver’s Downtown Eastside. Funding could also be committed for a rapid build-up of new social housing and child care facilities, along with operating funding to run them. Add new funding for long-term care facilities in the health care system, and we have an action plan that would directly help the poorest in our society.

This is not about pre-election goodies to win votes, it is about doing the right thing. Instead of criticizing the $225 million the government is promising to allocate in the coming weeks as a “spending spree”, we should be calling on the government to be big and bold about putting some real money into fighting poverty and inequality in BC. The line that we cannot afford it is no longer an excuse.