BC Budget 2015: Few New Measures...But an Era of Surpluses Lies Ahead

  • February 19, 2015
The benefits of BC’s diverse and resilient economy were evident as Finance Minister Mike de Jong tabled a Budget on February 17 that calls for a modest surplus for 2015‐16, followed by slightly larger surpluses in the two subsequent years. This places BC in the position of being possibly the only province to balance its books in the coming year. Fiscal circumstances, however, remain tight, and the Budget featured few new spending or taxation initiatives. Spending increases that did make it into the Budget were concentrated in health care and to a lesser extent education, along with a few targeted measures aimed at lower income households. The government opted to advance capital spending over what it had planned last year, in line with the Business Council’s advice.

HIGHLIGHTS

  • BC has shifted firmly into surplus territory. Budget 2015 projects a ~$1 billion operating surplus for 2014‐15, a modest flow of black ink for the following year, and then slightly larger surpluses in the remaining two years of the fiscal plan.
  • BC may be the only province in the country to report an operating surplus in 2015‐16.
  • The Budget forecasts that BC’s economy will grow by 2.3% this year and by 2.4% in 2016; these are below the private sector consensus. Generally, there is an abundance of caution built into Budget 2015, including conservative growth assumptions for BC’s economy, below consensus projections for the US, and cautious assumptions about the dollar and interest rates.
  • Overall program spending is slated to increase in line with inflation and population, rising by 2.5% annually over four years. Expenditure growth is tilted towards health care (+2.9% per year).
  • K‐12 education also gets some additional funding, most of which will go to pay for compensation costs based on recent contract settlements.
  • Revenue growth tracks slightly ahead of expenditure growth over the projection period.
  • Government capital spending remains around $6.2 billion annually for the next three years, rather than being reduced by 20%, as was planned in last year’s budget.
  • Taxpayer‐supported debt rises over the coming three years, due to capital spending, but net debt as a share of GDP declines. BC continues to have a low debt‐to‐GDP ratio compared to most other Canadian jurisdictions.