Bogus Budgets

Carole Taylor has the cash to solve BC’s pressing needs -- but will she admit it?
February 12, 2007

BC’s provincial budget has become more fiction than fact in recent years. Whopping “surprise” surpluses at year-end have become the order of the day, a trend that undermines our ability to have a full and honest debate about our shared priorities.

Surpluses have grown large enough that if the government simply put all of that extra money to work, it could make a huge difference in addressing pressing social problems that a hot economy has not been able to solve.

Consider that in February 2005, the government projected that it would finish the year with a mere $220 million surplus. By the end of 2005/06, that surplus swelled to a record $3 billion. We are likely to see more of the same as the current year (2006/07) draws to a close. Last February we were told to expect a modest $600 million surplus, but we are on track for another $3 billion plus in extra cash.

The difference between budget projections and actual year-end results is almost entirely due to the government systematically low-balling its revenue estimates — even though its own economic growth forecasts should lead to a far rosier picture of how much money is available.

This is not just a blip in the Ministry of Finance’s calculations. Over the last five budgets, the government has underestimated the year-end balance by a grand total of more than $10 billion. That’s not “fiscal prudence.” It is gross inaccuracy.

The provincial government automatically puts year-end surpluses towards debt reduction. Its ridiculously conservative budgeting habits forecloses on billions of dollars that could instead be invested in reducing class sizes, shortening health care wait lists, building a universal child care system, and improving public transportation. Why bother having a legislative committee travel around the province listening to British Columbians when the government artificially restricts the options by denying how much money is really available?

Our top priority is to address the plague of poverty and homelessness that has emerged in BC. A report recently published by the Pivot Legal Society estimated that homelessness in Vancouver could triple by the time the 2010 Olympics arrive, and along with it increases in crime, social disorder, and drug addiction. Yet BC has enough surplus funds to end homelessness by 2010, significantly raise welfare rates, and invest in thousands of needed social housing units.

In our just-released BC Solutions Budget 2007, we predict that the surplus heading into 2007/08 is $3.6 billion, growing to $4.5 billion in 2008/09. Even if our provincial economy were to slow to a crawl, we’d still be looking at a surplus of more than $2 billion in the coming year.

Some of that surplus has now been committed to health care. The government’s pre-budget announcement last week of $740 million (in new money) is good news. It partially recognizes that health spending over the past five years has not been enough to cover cost pressures from inflation, population growth and aging. But a solid, multi-year commitment is needed, and it must be tied to a reform agenda that puts more resources in community care, such as more long-term care beds, enhanced home support, and better mental health services.

Even with the new health care money, there is still plenty of room to make a difference in other areas that have been neglected. There is no excuse for poverty in a province as wealthy as BC. There is nothing inevitable about our unacceptably high poverty rates, growing inequality and rising homelessness. They are the result of bad policy choices, and we can fix them. In other countries (Ireland, Scandinavian countries, for example) governments have made these issues a priority and have succeeded in dramatically reducing poverty without hurting their economic fortunes.

Some will say that debt reduction and tax cuts should be the government’s priorities. But investments in early learning programs and other levels of education would generate much higher economic and social returns than either of those options. Tax cuts will not solve our problems — they won’t put an end to homelessness, provide adequate home support for seniors, build child care spaces, address climate change, or solve our transportation needs. Tax cuts only diminish our ability to act together to make a better province, while debt payments close the door on making a difference today.

BC needs to use its plentiful resources to make better choices consistent with a more equitable and sustainable society. An honest budget debate would be a good place to start.


Seth Klein is the Director of the BC Office of the Canadian Centre for Policy Alternatives. Marc Lee is the Centre’s Senior Economist.

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