April 5, 2005

How Long and Deep is the Spending Spree?

A search on the news release page of the government website reveals 46 releases between January 1, 2005, and April 4, 2005, that contain the word "one-time". The amounts range from $30,000 for a one-time computer pilot project in Surrey to $400 million over the next 15 years for oil and gas development, $40 million of which is a one-time grant to "Peace River Regional District ($35 million) and Fort Nelson ($5 million) to recognize the significant historical deficits in local infrastructure." The blitzkrieg of government announcements is reminiscent of Black Thursday 2001 when dozens of news releases poured out with news about 30% to 40% cuts in government services. The message is different but the technique is the same; pump out more than can be digested. A small portion of what was cut over the past four years is being given back on the eve of the election, but it is virtually impossible to determine what is one-time, what is ongoing and what might be reconsidered if plans change. If the legislature continued to sit, as is called for in the fixed legislative calendar, budget estimates would be debated and answers would be demanded regarding the fiscal impact of the spending announcements and whether each was the best use of scare resources.

It is easy to forget in the midst of a government spending spree that resources are scarce. Since the Campbell Liberals came to power, total taxpayer supported provincial debt increased from $25.215 billion in the fiscal year ending March 31, 2001 (2000-01) to an estimated $29.588 billion in the fiscal year ending March 31, 2006 (2005-06). It is expected to grow to $30.573 billion in the following two years. Boosters of the Campbell government proclaimed that it was "Christmas in July" when premature tax cuts drove the province into unnecessary debt. They found it in their hearts to condemn debt under the former government only to praise it under the Campbell government. It is more than the Rockies that separates BC and Alberta.

Government revenues have enjoyed a temporary lift due to low interest rates stimulating real estate sales, high resource prices increasing oil and gas royalties, increased harvest of beetle wood pushing the cut in the woods, not to mention a phenomenal windfall in the form of unexpected transfers from Ottawa. All of that can disappear as quickly as it appeared. The revenues are not based on economic recovery due to tax cuts paying for themselves; income tax revenues remain lower than they were in 2001. The Campbell government is projecting a surplus of "just" $220 million this year, declining to $200 million for each of the following two years. When the "forecast allowance" is added, the projected surpluses are $620 million this year, $650 million for the year ending March 31, 2007, and $750 million for the year ending March 31, 2008. That may sound like a lot of money, but the projected surpluses, including the forecast allowance, are only 2% of expected revenue. Maybe the Minister of Finance underestimated revenues; it wouldn't be the first time. If revenues are accurately estimated, then it would take very little by way of problems on the revenue side to throw the provincial budget into an unlawful deficit. On the spending side, a cost of living increase for provincial government workers, adequate funding for child protection, decent legal aid and a long overdue adjustment to welfare rates would make the surplus more than disappear. It is easier to make $30,000 grant announcements, than it is to deal with the real fiscal pressures facing the provincial government. That is why the MLAs should be in the legislature debating estimates rather than engaging in a spending spree that may be rolled back, just like all those other broken contracts, when the bills are presented for payment.