LOSING HER BALANCE
Budget surplus shrinking
VICTORIA B.C.’s finance minister continues to deal with a shrinking budgetary surplus amid slumping retail sales, a collapsing forestry sector, and worsening losses at the Insurance Corp. of B.C.
Carole James lowered the projected budget surplus to $148 million during her second-quarter financial update on Tuesday. That’s a $31-million drop from September’s first-quarter figures, and a larger correction from the $274-million surplus projected in February’s 2019-20 budget.
Nonetheless, James promised to hold course on her plans to balance the books by looking for more savings within ICBC and continuing cutbacks to discretionary spending within government.
James still has a $550-million contingency fund and a $500-million forecast allowance, according to Tuesday’s figures. That gives her roughly $1 billion in emergency financial wiggle room for the last half of the fiscal year, ending March 31, 2020.
“People can look at our budget and see those levels of prudence built in, and they can see those funds there for the risks that are there,” said James.
Opposition Liberal critic Shirley Bond said the NDP continues to be reliant on taxes to keep its budget balanced while economic growth slows.
“John Horgan’s government has no more money to pay for the billions of dollars of promises they made like $10-a-day child care, the $400 renter’s rebate, and the elimination of school portables. These are all broken NDP promises,” Bond said in a statement.
The largest risk to the budget remains ICBC, which lost a court case to limit the use of medical experts last month and Attorney General David Eby has said will need to take a $400-$500 million hit this fiscal year. The negative impact isn’t reflected in the thinner $148-million surplus because James said ICBC is still trying to figure out its exact losses.
“ICBC is looking at options to be able to mitigate the court decision,” said James.
“So until we get that information in, until we take a look at what savings they may project from a different direction or another direction, we won’t be able to account for how much that’s going to take out of the budget.”
Emptying the contingency or forecast allowance to cover a half-billion dollar loss would be “the worst-case scenario,” said James.
ICBC has lost almost $2.5 billion over the past two years due to rising claims costs and legal fees.
The corporation was projected to lose $50 million this year, but James said on Tuesday that historic claims have escalated losses to $91 million.
Premier John Horgan has brushed off any suggestion that his government would run a deficit budget if financial pressures continue to mount, thereby giving him fiscal room to fund some of his election promises.
James acknowledged on Tuesday that she’s heard some calls for change to her balanced budget approach, but has rejected them entirely.
“The job is to manage the economy well for the people of British Columbia, to make sure you are spending within your means, that you are balancing the budget, that you are providing that support,” she said.
James said she’s “very pleased” with savings found from discretionary cutbacks to travel, contract staff and other discretionary spending within ministries, and expects those cuts to continue.
A slight bump in income tax revenues and refundable tax credits have offset some of the losses.
But several months of forestry mill closures, and almost 4,000 jobs lost in the sector, have hit the budget in the form of an 11 per cent drop in forestry revenue worth $133 million. James said she’s “concerned” at the downturn.
Tuesday’s financial documents also showed that provincial sales tax revenue is down $49 million due to slow retail sales on building supplies, new appliances and vehicles.
Meanwhile, B.C.’s cannabis sales targets have also missed their mark in the first year of legal sales, with the province taking in $18 million less revenue than was projected due to the slow rate of stores opening and fewer sales.