Last year the Second Quarter Financial Report was released on November 28th. That means it will be two and a half months before British Columbians get information to update what Gary Collins released during Wednesday's staged cabinet meeting when he summarized the First Quarter Financial Report for 2003-04. That report admitted that there are "significant economic and fiscal challenges" but claimed that "government's plan to balance the budget beginning in 2004-05 remains on track".

The September report shows that it will be necessary for revenue to increase by $1 billion and for expenses to decrease by $856 million in order to balance the budget next year. In determining whether those are realistic numbers it is useful to examine the "significant" challenges as evidenced by the enormous shifts in the first quarter's forecast vs. actual numbers.

Collins once again provided proof that the tax cuts are not paying for themselves. The forecast for income tax revenue was revised downward by $71 million on an annual basis. That's down by only 1.5% and it still leaves the revised estimate almost 10% higher than last year; look for a further downward revision in November's update. Sales tax revenues are also down $100 million on an annual basis from February's forecast.

Combined with the forest fire costs that could add $487 million to expenditures, the revenue shortfalls create a big hole. In New Speak language, Collins also claimed that "additional funding for the Ministry of Children and Family Development is offset by higher energy revenues." Of course, there isn't any additional funding for children, it is simply that the cuts are a little less severe than originally planned. Including the Columbia River Treaty, higher energy revenues are expected to bring in $246 million more than originally forecast.

BC Hydro is also expected to provide $325 million more than previously forecast over the next three years ($185 million this year, $100 million next year, and $40 million in 2005-06) because of "improved water levels and interest savings", or is it that what they are going to gouge out of consumers when they get their rate increase through the Utilities Commission? The report (page 8) asserts that rate increases are not reflected in those numbers and that the windfall is due to 8% increased flow into the reservoirs.

The revised BC Hydro numbers are very soft as they depend on the weather. The other energy revenues may be understated. The February budget assumed a natural gas price of $4.75 ($Cdn/gigajoule at plant inlet); the First Quarter Report revised that assumption to $5.50 although it also reported that "Natural gas prices are over 100 per cent higher on average for the first five months of 2003 than the same period last year." The natural gas windfall could add a further $1 billion to the provinces' revenues.

Even with a further $1 billion windfall due to high natural gas prices, Collins may have trouble balancing his budget in 2004-05. The figures behind the forecast for a balanced budget include health services going from $10.504 billion this year to $10.584 billion next year. That increase of just over three quarters of one percent is less than the rate of population growth - it means a substantial cut when the effects of aging, technology and inflation are factored in. The balanced budget is also based on no forecast allowance in 2005-06 and beyond. Including an amount equal to this year's allowance drives the bottom line into a substantial deficit.

Comments on the tragedy of this year's forest fire season reveal another example of Campbell Era New Speak. Collins' First Quarter Report summary says that despite the worst fire season on record, with total fire fighting and related costs expect to reach $545 million, "major fiscal impacts are not expected beyond 2003/04" Isn't that interesting? Does it mean that whenever government gets hit with that kind of major expense there are no future fiscal impacts? Everyone can think of times Campbell and Collins argued the opposite position. The fact is that the extra money to fight the fires has to be borrowed; it has to be repaid; and interest will come due on it. What they are really saying is that borrowing an extra half billion does not cause a "major fiscal impact" in future years.