June 27, 2013 - 3:46 PM
The B.C. government has introduced June Budget Update 2013, which reflects changes in economic and revenue forecasts from February and realigns spending based on the new government structure, Finance Minister Michael de Jong announced today.
The update shows continued spending discipline to balance the budget while maintaining new investments in early childhood development and registered education savings plans (RESPs).
Economic activity in the first few months of the year has been slightly weaker than expected, and the private-sector Economic Forecast Council has revised its forecast for provincial real GDP growth in 2013 to 1.6 per cent, down from 2.1 per cent in January, matching government's February forecast. As such, government has also lowered its 2013 economic growth forecast to 1.4 per cent (down from 1.6 per cent in February), while maintaining forecasts of 2.2 per cent in 2014 and 2.5 per cent in 2015.
The lower forecast for economic growth reduces government's revenue forecast in several areas, partly offset by an improved forecast for natural gas prices, bonus bids for natural gas tenures, and other revenues. To help keep the budget balanced, government will continue its expenditure management controls. An additional $30 million has been identified to be saved this fiscal year.
These changes, together with the taxation and savings measures announced in February, combine to deliver forecast surpluses in all three years of the fiscal plan:
* $153 million in 2013-14.
* $154 million in 2014-15.
* $446 million in 2015-16.
Government will continue to implement the budget measures benefiting B.C. families and helping make family life more affordable:
* The B.C. Training and Education Savings Grant, a one-time $1,200 grant toward a B.C. resident child's RESP after the child turns six years old.
* The B.C. Early Childhood Tax Benefit will provide $146 million to approximately 180,000 families with children under six years old.
* B.C.'s Early Years Strategy will invest $76 million over three years to support the creation of new child-care spaces and improve the quality of child-care and early years services.
Taxpayer-supported capital spending on schools, hospitals and other infrastructure across the province over the next three years is expected
to total $10.6 billion. By eliminating the deficit, controlling capital spending and starting to bring down the level of government's borrowing needs, June Update 2013 forecasts British Columbia's taxpayer-supported debt-to-GDP ratio will peak at 18.5 per cent in 2014-15, and decline to 18.4 per cent in 2015-16. The taxpayer-supported debt-to-GDP ratio is a key measure of affordability, and effectively managing this ratio helps maintain B.C.'s triple-A credit rating.
Achieving a Balanced Budget: June Budget Update 2013
How is the B.C. government taking the budget from a projected 2012-13 deficit of $1.1 billion, to a projected surplus of $153 million in 2013-14, and surpluses over the following years? There are four key steps:
Expenditure growth management will reduce average annual spending growth to 1.6 per cent over the fiscal plan period, less than one- third the rate of spending growth before the economic downturn.
Expenditure management has found ministry and service delivery agency savings, resulting in savings of almost $1.2 billion over the fiscal plan period. About half of these savings ($497 million) are helping achieve the balanced budget, while the remaining half is being invested to improve family affordability, and support jobs and economic growth.
Stable economic growth
Government forecasts economic growth of 1.4 per cent in 2013, 2.2 per cent in 2014, and 2.5 per cent in 2015. Net economic growth is expected to generate $1.1 billion in base revenue increase in excess of expense increases over the fiscal plan period.
Revenue is expected to grow by an annual average of 3.1 per cent over the three-year fiscal plan, almost double the rate of B.C.'s spending growth.
Targeted revenue measures
Surplus property and asset sales: Government has identified properties and assets that are not used by government, cost taxpayers money to maintain, and would be better used in other hands.
The B.C. government has achieved approximately 37 per cent of this year's goal for property and asset sales in the first three months of the fiscal year. Sales agreements are in place for approximately $58 million (net gain) worth of surplus property and government has realized a net gain of $123 million on the sale of financial assets. These sales raise combined revenue of approximately $181 million to help balance the budget. This year's fiscal plan target for property and asset sales is $475 million.
Planned property and asset sales will provide a return to government of a minimum $625 million over the next two years, helping to balance the budget while releasing underused assets for economic development and community services. The assets identified represent less than two per cent of the government's $70-billion property holdings.
Targeted tax measures are projected to generate $1.3 billion over the fiscal plan period.
Mitigating the risks
Government incorporates four main levels of prudence in its projections to mitigate the risks to the fiscal plan:
* The government's outlook for B.C.'s real GDP growth is lower than the outlook provided by the Economic Forecast Council (0.2 percentage points lower in 2013 and 0.3 percentage points lower in 2014).
* The natural gas revenue forecast is based on a natural gas price forecast that is within the 20th percentile of the private sector forecast, continuing with a prudent approach as recommended by Dr. Tim O'Neill in the February 2013 budget.
* Government has included a forecast allowance of $150 million in 2013-14, $200 million in 2014-15, and $300 million in 2015-16 to guard against revenue volatility.
* The fiscal plan includes contingencies of $225 million in each year of the fiscal plan to help manage unexpected pressures.
Fiscal Plan 2013-14 - 2015-16
So far in 2013, key economic indicators such as employment, retail sales and housing starts are showing weakness, while exports are performing well.
The government forecasts the economy to grow by 1.4 per cent in 2013, 2.2 per cent in 2014 and 2.5 per cent in 2015.
Major risks to the economic outlook include the potential for further slowing of domestic activity, renewed weakness or a return to recession in the U.S., the ongoing European sovereign debt crisis which threatens the stability of global financial markets, slower than anticipated Asian demand for B.C. exports, and exchange rate volatility.
Total government revenue is forecast at $44.2 billion in 2013-14, $44.8 billion in 2014-15 and $46.3 billion in 2015-16. Revenue is expected to average 3.1 per cent annual growth over the next three years.
Total expense over the three-year plan is forecast at $43.9 billion in 2013-14, $44.5 billion in 2014-15 and $ 45.5 billion in 2015-16 - an annual average increase of 1.6 per cent over the next three years. This rate of growth will allow government to increase spending by $2.2 billion over the three-year fiscal plan.
June Update 2013 confirms government's ongoing commitment to protect health care. Additional Ministry of Health spending will total $2.4 billion over the three years to $17.4 billion. Total health spending by function will reach $19.3 billion, or more than 42 per cent of all government expenses by 2015-16.
B.C. continues to achieve key health outcomes that lead the country while maintaining the second-lowest rate of health spending per capita among provinces.
Block funding to school districts is stable at $4.7 billion annually through 2015-16.
Government is proceeding with the new B.C. Training and Education Savings Grant. Under the program, when a B.C. resident child turns six years old, he/she will be eligible for a one-time grant of $1,200 to be deposited into the child's registered education savings plan (RESP).
June Update 2013 also confirms $1 million to expand the School Fruit and Vegetable Nutritional Program to include locally produced milk.
Arts and Sports
June Update 2013 continues funding for the Sport and Arts Legacy Fund with an allocation of $60 million over three years to continue the program first introduced in Budget 2010.
To ensure B.C.'s young people are better prepared for the creative economy, June Update 2013 also confirms $18 million over three years under the new B.C. Creative Futures program.
Supports for Individuals, Families and Community Safety June Update 2013 confirms an additional $292 million over the next three years to support families and vulnerable individuals.
* $76 million over the next three years to improve access to quality
early learning and child-care services and supports.
* $13 million over three years in support of the Single Room Occupancy
hotel renewal initiative.
* $5 million over three years for government's responsible gambling
strategy to fund enhanced treatment, counselling and prevention services
to address problem gambling.
* $12 million over three years to complete funding for the medical
expansion program, fulfilling a commitment from 2001.
* $52 million over the next three years for increased RCMP policing
Support for B.C.'s Agriculture Sector
June Update 2013 confirms an additional $4 million over three years to support the Agricultural Land Commission for increased oversight of the Agriculture Land Reserve.
June Update 2013 confirms $20 million over three years for an ongoing carbon tax relief grant for commercial greenhouse growers, including vegetable and floriculture growers, wholesale production and forest seedling nurseries.
June Update 2013 also confirms, effective Jan. 1, 2014, a carbon tax exemption for coloured gasoline and coloured diesel fuel purchased by farmers for the same farm purposes that farmers are authorized to use coloured fuel under the Motor Fuel Tax Act, including on farm equipment and eligible farm trucks on the highway.
June Update 2013 confirms $332 million in tax measures for 2013-14 to help achieve the balanced budget and protect important services for British Columbians.
* $56 million from the new temporary increase in the top personal income tax rate from 14.7 per cent to 16.8 per cent for taxable income over $150,000, effective for the 2014 and 2015 tax years only, while maintaining the top charitable donations tax credit rate at 14.7 per cent.
* $204 million from increasing the general corporate income tax rate to 11 per cent from 10 per cent, effective April 1, 2013.
* $17 million from increasing taxes on tobacco by $2 a carton, effective Oct. 1, 2013.
* $32 million from phasing out the value of the school property tax credits for light industry (class five) over two years starting in 2013.
* $23 million from increasing medical services plan premiums by about four per cent (while protecting premium assistance recipients), effective Jan. 1, 2014.
Taxpayer-supported capital spending on schools, hospitals and other infrastructure across the province over the next three years is expected to total $10.6 billion.
This includes $1.5 billion to maintain, replace, renovate or expand K-12 facilities; $1.9 billion for capital spending by post-secondary institutions across B.C.; $2.5 billion on health-sector infrastructure; and $3.3 billion for transportation investments.
The total provincial debt is forecast to be $62.6 billion in 2013-14, $66.7 billion in 2014-15 and $69.8 billion in 2015-16.
Taxpayer-supported debt is forecast to be $42.6 billion in 2013-14, $44.8 billion in 2014-15 and $46.5 billion in 2015-16.
By eliminating the deficit and starting to reduce the government's need to borrow, June Update 2013 forecasts British Columbia's taxpayer-supported debt-to-GDP ratio will peak at 18.5 per cent in 2014-15, and decline to 18.4 per cent in 2015-16.
Taxpayer-supported interest costs continue to remain low, averaging 4.2 cents per dollar of revenue over the three-year fiscal plan.
June Update 2013 projects surpluses of $153 million in 2013-14, $154 million in 2014-15 and $446 million in 2015-16.
The fiscal plan includes contingencies of $225 million each year over the three year plan. And forecast allowances of $150 million in 2013-14, $200 million in 2014-15, and $300 million in 2015-16 to help guard against revenue volatility.
For more details on June Update 2013, visit: www.bcbudget.ca
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News from © InfoTel News Ltd, 2013