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February 26, 2010

Budget Forecast

Just four days before Finance Minister Collin Hansen tables the 2010-2011 provincial budget in the legislature, the Ministry of Housing and Social Development released the welfare statistics for January 2010. Employment and income assistance for expected to work temporary cases jumped by 1,382 (3.7%) between December and January to a seven year high of 38,634. We can hope that the expected to work caseload is a "lagging indicator" which will turnaround after economic recovery, but on the way into the recession it was a leading indicator. From October 2006 to July 2008 it increased from 15,555 to 21,246, then the caseload growth exploded.

The March 2nd budget follows BC's last budget by just six months. BC's Budget Accountability and Transparency Act requires that the government make public strategic plan documents that "provide a fiscal forecast for the government reporting entity for the fiscal year for which the estimates are presented and the following 2 fiscal years, including a statement of all material assumptions and policy decisions underlying that forecast." If there is a significant difference between the 2010-2011 fiscal forecast contained in the September 2009 budget compared to the March 2nd 2010 budget, then the government must either admit that it is using mere "placeholders" and not following the spirit of the Act, or it must fully account for what changed between September 2009 and March 2010.

The September 2009 budget forecasted a deficit of almost $2 billion for 2010-2011, $250 million of which was for the forecast allowance, leaving $1.725 billion as the forecasted deficit. That budget also forecasted that the 2010-2011 budget for education would be $22 million less than the 2008-2009 education budget. That budget also forecasted cuts or freezes for virtually all other ministries except health services, which was expected to increase by $662 million (4.7%), which is more than the projected increase in total government spending. This supports the illusion that health is a black hole that sucks money out of all other areas of government.

Debate should focus on whether the government suffers primarily from a revenue crisis or spending crisis. A 4.7% increase in spending for health care is not adequate to cover inflation, population growth, aging and technological change, and a cut or freeze in other areas of government will leave vulnerable children at risk and waste the opportunities for investing in people. If the government truly believes that BC will lead Canada into economic recovery, then it has an option not to cause unnecessary damage by rushing to balance its budget before revenues recover from the downturn. On Tuesday afternoon March 2nd British Columbians will see how the Campbell government has adjusted its priorities since September.