BC Public Accounts: Surprise, another surplus!
BC’s public accounts for 2007/08 were released yesterday, closing the fiscal year with a surplus of $2.886 billion. This marks BC’s fourth truly massive surplus in a row, after surpluses of $2.575 billion in 2004/05, $3.060 billion in 2005/06, and $4.056 billion in 2006/07. Like all of those budgets, the 2007/08 budget as tabled in February 2007 vastly understated the province’s true fiscal position, thereby trumping demands for increased social spending (last year’s comparison is here).
In this case, at the time of BC Budget 2007, the government tabled a projected surplus of $400 million, plus a forecast allowance of $750 million. This budget was billed as a “housing budget” but did little to address the crisis in affordable housing in BC, with much of the housing dollars being tax cuts.
The gross understatement of the surplus was pointed out by yours truly at the time:
Tax cuts aside, the fact of the matter is that provincial coffers are bursting with surplus cash. On top of $3 billion surpluses in each of the past two years, the 2007 budget will also close in the $2-3 billion range. The budget document only admits to an underlying surplus of more than $1 billion, but extremely conservative assumptions about revenues hide much more than that (this game was invented by Paul Martin but has been the main story of BC budgets for several years now). In fact, the government forecasts that revenues will decline in 2007/08 in spite of projections of solid economic growth.
And while I go on about how I told them so, here is what our estimates were in our 2007 BC Solutions Budget, published prior to the actual BC Budget and relying on estimates from the 2006/07 first and second quarterly financial reports, plus some assumptions about anticipated nominal economic growth:
Using a methodology that has consistently allowed the CCPA to forecast budget surpluses more accurately than either the federal or BC governments, we have re-calculated the provincial governmentâ€™s budget numbers using a more realistic estimate of revenues, and project sizable surpluses of:
â€¢ $3.3 billion in 2006/07;
â€¢ $3.6 billion in 2007/08; and
â€¢ $4.5 billion in 2008/09.
Those estimates did not take into account the $343 million in tax cuts for 2007/08 announced in the 2007 budget. And Budget 2008 brought in the $100 per person Climate Action Dividend, which is estimated to cost $440 million, and is taken out of the 2007/08 budget surplus. Add those in to the audited surplus number above and we get $3.669 billion, which puts us pretty close in terms of fiscal forecasting.
One other important note buried in the audited statements is on page 72, called “Contractual Obligations”, is the approximate future cost of Public-Private Partnership ventures. Looking forward from 2009 to the future, there is a total of $25 billion in future liabilities associated with P3s, and if we include all Crown corporations this number rises to $55 billion. For comparative purposes, the total revenues for BC in 2007/08 were just under $40 billion.