CASHING IN AT THE POLLS BY SPENDING A SURPLUS

Opposition, Liberals can both reap benefits of enhancing programs

When Opposition leader John Horgan promised recently that a New Democratic Party government would phase out portable classrooms in Surrey schools, the reaction from the B.C. Liberals was prompt and predictable.

“Where are they going to get the money except by raising taxes?” challenged Education Minister Mike Bernier. He claimed it would cost half a billion dollars to carry out Horgan’s promise in Surrey — and double that if the precedent were extended to districts across the province.

The Liberals responded similarly this week when Horgan promised to revise the funding formula for transit projects to increase the provincial share from the current 33 per cent to 40 per cent.

“I’m not surprised that Mr. Horgan is saying what he is saying without telling anyone how they are going to raise this money,” said cabinet minister for TransLink Peter Fassbender. The budget has no wiggle room to fund Horgan’s seven per cent solution, he insisted.

The claim that NDP promise-making would break the bank worked well for the B.C. Liberals in the two elections where the province was struggling to balance the budget following the 2008 global credit crisis.

But Bernier, Fassbender and their colleagues appear not to have noticed how things have changed.

It’s one thing to say, as the Liberals did during campaign 2013, that the NDP plan to run a further $2 billion worth of deficits over three years would make the provincial fiscal situation worse, not better.

Quite another to claim that deficits and tax increases are the only options to pay for new programs, when the government’s own financial statements show the province to be awash in cash.

For that’s the situation laid out by Finance Minister Mike de Jong this week in the latest update on provincial government finances.

Even with the decisions announced Thursday, the three-year budget and fiscal plan still contains hundreds of millions of dollars in surpluses, contingency funds, forecast allowances and other unallocated income.

Some of the revenue increases are transitory and not likely to be repeated. And yes, the economic outlook remains iffy, particularly in the resource sector and export-dependent industries.

So the province needs to exercise caution about approving increases in program funding that have to be paid for year after year. For all the sizable amounts of money tucked under the couch cushions in Victoria, there’s not enough to fund an across-the-board increase in an overall budget approaching $50 billion annually.

A mere five per cent increase in health care wouldn’t cover every outstanding concern about waiting lists, staffing levels and program funding. But it would eat up $1 billion this year and every year going forward, whether the current revenue windfalls continue or not.

Likewise, simply eliminating medical service plan premiums without a substitute source of revenue would strip the provincial treasury of $2.5 billion this year and every year.

Still, for the first time in almost 10 years, there’s significant room for the provincial government to increase funding for some programs without having to increase taxes or borrowing. And that’s just the operating side of the budget — ongoing programs that are funded year in and year out from incoming taxes and other annual revenues. There’s also the capital side. Where the operating budget has been in surplus for several years, government continues to borrow to build schools, hospitals, roads, bridges and other big-ticket capital projects that are neither completed nor paid for in a single year.

The distinction between capital and operating debt is one that both major parties mobilize when it suits them.

De Jong cites the difference between borrowing to pay for groceries (operating expenses) and taking out a mortgage to build a house (capital projects). NDP premier Mike Harcourt drew precisely the same analogy when he was in government in the 1990s. All of which matters in the current financial context because both of the Horgan promises cited above — building schools and funding transit lines — are on the capital side of the budget.

Indeed, on the same day that the Liberals claimed the province had not the financial wiggle room to cover Horgan’s increase in capital funding for transit, they were themselves choosing to fund huge increases on the capital side.

The quarterly financial report confirmed $350 million in new capital funding in education and health care and a further $170 million for B.C. Hydro. Plus, for the first time, the capital plan includes $3.5 billion as the tentative cost of a 10-lane bridge to replace the Massey Tunnel.

By comparison, Horgan’s promise to increase the provincial share of capital funding on transit would oblige the B.C. government to contribute $140 million over several years to the proposed $2-billion SkyTrain extension in Vancouver and the same to the proposed $2-billion light rail network for Surrey.

Granted, the Opposition leader did not spell out whether he would choose to rustle up additional capital dollars by postponing other projects or by approving more borrowing. Likewise, he has yet to provide a full financial reconciliation on other promises, such as phasing out MSP premiums.

But in the last three provincial election campaigns, the New Democrats eventually did put out a fully costed election platform and I expect they will do so again next year.

Meanwhile, suffice to say that the rosy numbers and forecasts in this week’s financial update could help fund an Opposition election platform no less than one for the governing party.

On the same day that the Liberals claimed the province had not the financial wiggle room to cover Horgan’s increase in capital funding for transit, they were themselves choosing to fund huge increases on the capital side.