BC blinks on running a deficit
Now that the federal budget is over, I’ve been girding myself for the Feb 17 BC budget. My concern to date has been bold statements from both parties that they would never run a deficit, and that therefore we were in for a rerun of last Fall’s federal election where all parties kowtowed to the alter of fiscal conservatism. BC’s situation is aggravated by the presence of balanced budget legislation banning deficit spending.
Inevitably, however, denials have to face the reality of declining revenues, as gloomy reports from Statscan and the Treasury come in. Given the choice between balancing the budget while cutting public services or running a deficit and maintaining those services, it is an easy call, especially with an election coming. Plus the feds have broken this one wide open with their reversal on deficits as reflected in last week’s federal budget.
So just last week week BC Premier opened the door to maybe running a deficit, and today’s press conferenceÂ battered it down. This is good news, as it means we can actually have a real debate about the issues facing the province and how we should respond to the recession, rather than a phony charade about fiscal prudence. The Tyee reports:
â€œAs recently as two weeks ago I was still confident we could table a balanced budget without cutting health and education,â€ said Hansen. But the American and global economies are in such rough shape that’s no longer possible, he said. â€œB.C. played no role in precipitating this international crisis, but we are certainly feeling its effects.â€
Hansen said he could not say yet how deep the deficits would be, but he expects to return to a balanced budget for the 2001-2012 fiscal year. â€œThe numbers continue to deteriorate for us,â€ he said.
… The averaged predictions of the 12 members of the province’s economic forecast council in December put growth at 0.6 percent for B.C., but in January they downgraded their prediction to 0 percent. Campbell said there isn’t agreement yet whether the province is experiencing flat growth or a recession.
… B.C.’s Balanced Budget and Ministerial Accountability Act requires the government to prepare balanced budgets. Campbell said the legislature will be recalled a day early, on February 9, to begin making the necessary changes to the law.
UPDATE: The Vancouver Sun’s coverage echoes some of my musings:
The move comes as projected revenues for B.C. continue to plummet.
Finance Minister Colin Hansen said revenue expectations for the next three years have dropped $6 billion since last September.
… Campbell said it would have been possible for him to balance the budget, but added it would have meant dramatic reductions to key services such as health and education.
UPDATE (Feb. 3): Splashed across the Sun’s front page above the masthead banner is “Brace for Back-to-back Deficits” with a stern picture of Gordon Campbell. But “brace” implies something painful to come, like a needle in your arm, when it is actually the opposite. Running deficits will mean less pain than trying to balance the budget. Perhaps the banner should read, “prepare to bask in the warm glow of back-to-back deficits.”