Part of the campaign mantra for the Campbell Liberals will include reference to a so called "structural deficit" which current evidence shows never existed. The figure they use, $3.8 billion, is not supported by the audited financial statements that in the summer of 2004 finally allowed estimates made by the Fiscal Review Panel to be tested. The Panel, appointed by Gordon Campbell on May 25, 2001, two weeks before he was sworn in as Premier, produced its report on July 23, 2001. That was after the June 5th announcement of $1.5 billion in income tax cuts but before the Panel was aware of $790 million in corporate tax cuts that were announced in Finance Minister Gary Collins' July 30th "fiscal update".

With the benefit of hindsight we can now compare the last budget tabled by the NDP under then Finance Minister Paul Ramsey, the report of the Fiscal Review Panel, the budgets tabled by Finance Minister Gary Collins and the Public Accounts. The comparison shows that the Panel under-estimated revenue and that there was no basis for including a $1.5 billion "forecast allowance".

The Fiscal Review Panel invented a $3.8 billion deficit for the fiscal year ending March 31, 2004 by assuming that revenue would be lower and expenses would be higher than forecast by Ramsey. They then puffed-up their pretend deficit by a further $1.5 billion by throwing in a "forecast allowance". The Panel assumed that in 2003-04 government revenue would total $24.788 billion before allowing for the tax cuts. In his last budget, Ramsey had forecast revenue in that fiscal year to be $25.817 billion. When Collins presented his budget for 2003-04, he estimated total revenue of $26.000 billion, and that included the tax cuts. Public Accounts show that actual revenue for the year was $26.674 billion. The Panel's estimate was over $1.029 billion lower than Ramsey's figure, $1.212 billion lower than the estimate made by Collins in February 2003, and $1.886 billion lower than what it turned out to be when the books were closed. While the estimates of Ramsey and Collins look close, the details show big differences. The Campbell government made major structural changes to the tax structure. They got revenue back up by increasing regressive taxes like the MSP premium, receiving more federal transfers and benefiting from high resource prices. One way or the other, $1.886 billion of the Panel's "structural deficit" was nothing but bad guesses about revenue.

The Panel forecast total government spending of $27.281 billion for 2003-04. Ramsey had predicted $25.045 billion for that year, and when Collins presented the actual budget for that year in February 2003, he forecasted $27.800 billion. Public Accounts show that actual spending for 2003-04 was $28.013 billion. On the spending side Ramsey was low, but his budget acknowledged that it relied on controlling spending pressures. Even if that had not been done, the Panel's estimated deficit should be reduced by its $1.886 billion understatement of revenue, and by its unnecessary $1.5 billion forecast allowance. That takes the figure down from $3.8 billion to less than $400 million. There was no structural deficit after the reduced figure is adjusted for the tax cuts. That won't stop Campbell and his crew from making misleading claims about the fiscal situation left by the NDP. The Campbell government finished 2003-04 with a deficit of $1.339 billion; that would have been a surplus in the absence of $2.29 billion in tax cuts.

Another part of the Campbell Liberals' campaign mantra is the claim that they now enjoy a "structural surplus". That means that they believe current spending and revenue patterns will produce surpluses for eternity. Some of the recent announcements have already reduced future surpluses, but an examination of the Second Quarter Report, which was prepared before recent commitments, shows that future surpluses are not solid enough to be labeled "structural". The November 2004 document forecast a surplus $2 billion higher than anticipated when the budget was tabled in February 2004. $941 million of that was due to a one time windfall from the change in equalization payments from the federal government. Almost $700 million was due to higher than expected natural resource revenues. If BC has learned one thing in the past 100 years, it is that resource booms are followed by resource busts. No one should plan on prices remaining high forever, and everyone should know that accelerated harvesting due to beetle kill is not sustainable. BC has a surplus that resulted from a lot of good luck. A windfall from Ottawa and international commodity markets saved BC's finances from the failed theory that tax cuts pay for themselves.