The B.C. government unveiled a grim budget Tuesday that showed the province’s revenues in free fall and a deficit of $2.8 billion — six times higher than what was predicted seven months ago.
The province’s economy is performing far worse than what was anticipated in the last budget in February, when government promised a deficit of $495 million.
Finance Minister Colin Hansen warned that the province is “not out of the woods yet.”
Unemployment is higher than expected, housing starts are down, consumer spending has decreased and the provincial economy is shrinking, according to the budget.
B.C. will now bleed more than $5.5 billion in red ink before it expects to post its next surplus in 2013-14. The province’s economy is forecast to decrease 2.9% this year and then increase slowly in the future, although Hansen cautioned against any expectation of a sharp rebound.
“Even — or especially — in a time of crisis, the people of this province must have confidence the services they need will to continue to be there,” said Hansen. “And with this budget update, we are moving to ensure that the most crucial services are, indeed, protected.”
Health-care funding, the province’s largest expense, will rise 6% each year and largely maintains the level promised in the pre-election February budget.
Education funding will hold steady. The government’s promise of full-day kindergarten for five-year-olds will only be available to half of the province by September 2010. The province budgeted $151 million to fund the program by the time it is running full force, for all children, in 2011.
Social service spending, including income assistance for the unemployed, is set to rise $445 million over three years and the province is facing an unexpected bill of $409 million for a record number of forest fires.
A drop in personal, corporate and sales tax revenue, combined with a record low price of natural gas, will cost the province $2 billion in lost revenue this year, and $3.9 billion over the next three years. That’s partly offset by $1.6 billion from Ottawa to help with the new harmonized sales tax, spread over three years.
Hansen said Ottawa’s HST payment is “hugely beneficial” for the budget.
“If it were not for those dollars we’d be looking at a significantly higher deficit, which I believe would have been very problematic,” said Hansen. The government is saving money by slowing or cutting spending in most of its ministries, except for health and education. It has also found $3.4 billion in cuts to advertising, professional services, travel and office expenses over the next three years — exceeding the $1.9 billion in savings it had promised to find in February.
Officials also cut payments to thousands of community groups and associations ranging from school groups to arts festivals and minor hockey associations. Those groups are already complaining about clawbacks to their gaming grants, and the budget outlines a further $296 million in cuts found since February. In total, discretionary grants are set to drop 30%, or a total of $354 million.
The government is also trimming its 30,000-person civil service by 5%, or 1,630 full-time equivalent positions in the next three years.
Hansen introduced tax cuts for small businesses and increased the basic personal income tax credit to $11,000, effective Jan. 1, 2010. Both tax cuts received largely favourable responses from business groups.
© Copyright (c) Canwest News Service
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I see no relief for seniors, who are going to be hit hard by the HST. Seniors, don’t have tax write offs and, even if they are under poverty, the government, still takes a chunk, for income tax. For them to have to pay 7% more on their utility bills, and previously being hit by the carbon tax grab, and now compounded by the HST, many of us will be homeless. In the last two years, food costs have gone up 27%. Campbell allows price gouging, every summer, gasoline skyrockets, just in time for vacations, and that is like clock work.. I doubt that a raise in pension would do any good, as the government would claw it all back, for income tax. The only way seniors can economize, is by, cutting food and utilities. There has been a sharp rise in seniors who are homeless right now. When the HST, is forced on these people, there will be hundreds more, made homeless. I have contributed 50 years to this country, as many of us have. We still have to contribute on a fixed pension, of $1.000, a month, depend on the food bank, and you feel bad about that, the food should go to children first.
great post as usual!