Palmer: B.C. revenue boost will give Eby leeway if he’s premier

Opinion: With all this well-documented fiscal wiggle room, the NDP is taking its time to deal with the immediate and direct health care crisis

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VICTORIA — Finance Minister Selina Robinson updated the state of provincial finances Monday, increasing revenue projections in her February budget by $9 billion.

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The outlook contrasted with recent reports of a weakening economy, falling employment figures and the combined impact of inflation and rising interest rates.

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The main sources of the revenue increase were personal income tax at $3 billion more, corporate income tax at almost $2 billion and a $1.7 billion increase in dollars from natural gas royalties. Revenues from forests and other natural resources, sales tax and employer health tax also contributed.

“The improvement comes from increases in most sources of government revenue,” Robinson said.

The only precedent for this big miss in the Department of Finance’s forecasts goes back to the previous fiscal year.

Robinson forecast a deficit of $9.7 billion in 2021 and ended up with a surplus of $1.3 billion according to the recent public accounts release. However, this budget was set in the first year of the pandemic, when pessimism was the order of the day.

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There was less justification for understating revenue by billions of dollars this year as the provincial economy weathered the worst of the pandemic.

Yet the department downplayed it again, necessitating the upward revisions in Monday’s report for the first quarter of 2022-23.

It showed nearly 14% in the revenue forecast after the fiscal year passed just three months from April to June. Even after increasing some expenses, the increase in revenue was enough for Robinson to revise its net income projection for the year from a $5.5 billion deficit to a $706 million surplus.

Some of the push is expected to continue over the next two fiscal years, boosting revenue and also lowering deficit expectations in 2023 and 2024.

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The change also improved the debt picture.

Last February, the main measure of provincial debt (the part financed directly by taxes) was expected to reach 20% of gross domestic product and 111% of annual income this year.

On Monday, the revised projections were 17% of GDP and 88% of income. Good news for the credit score.

Only three cents of every revenue dollar will be used to pay interest on the provincial debt, less than under the BC Liberals.

Looking ahead, Robinson warned of uncertainties ranging from the cooling of the housing sector to the continuation of the pandemic.

But the immediate impact of the increased revenue forecast has been to reinforce the current government’s notion of its spending room.

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The revised spending forecast for the year includes $1.9 billion to cover the first year of public sector wage and benefits settlements. The figure is based on the cost of the negotiating mandate that the government published on July 5.

New Democrats have since softened the terms of the three-year tentative deals with BCGEU and HEU, so the final price will be higher.

The new spending plan also includes $1 billion in “affordability measures” to help people cope with the rising cost of living.

Last week, Robinson committed $600 million for temporary increases to the BC Family Benefit and carbon tax credit.

It is therefore clear that there is more to come in terms of affordability measures.

This is in addition to nearly $5 billion that was set aside in the February budget to pay for unspecified pandemic and economic stimulus measures, Clean BC and other “broad programs.”

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The updated spending outlook “also includes a $2 billion per year placeholder beginning in 2023-24 for workload pressures and priority initiatives to be developed for future budgets.”

This is a reserved space, especially since the number of medical and social assistance cases does not usually increase very much during a fiscal year.

The $2 billion split over each of the two years is likely to address a concern about the timing of leadership changes in government.

Although Prime Minister John Horgan gave his opinion at the end of June, the leadership vote for his successor – expected to be David Eby – will not be concluded until the first week of December.

December is late in the annual budget cycle. As a result, the spending plan to be presented to the legislature in February would already be largely locked in.

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With $2 billion earmarked for “priority initiatives for future budgets,” a Prime Minister Eby — assuming he wins — would still have leeway to put a personal stamp on Budget 2023 and Budget 2024.

The financial update could have another impact on the leadership of the NDP, given the expected windfall in natural gas revenues.

The revised projection calls for a $1.7 billion increase in natural gas royalties this year and nearly $4 billion over three years. The bargain is the best in years in the industry and should pay the bills for years to come.

NDP leadership candidate Anjali Appadurai is calling for an end to hydraulic fracturing – which underlies most natural gas extraction in British Columbia – as well as any future industry expansion into LNG.

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It is unlikely that she will succeed in this call.

A more fruitful investigation – for her and other critics of the current government – ​​would focus on the billions of dollars sunk in “unallocated contingencies” and “priority initiatives for future budgets”.

With all this well-documented fiscal wiggle room, New Democrats are taking their time to deal with the immediate and direct crisis in the health care system.

vpalmer@postmedia.com

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