B.C. plunges into red to battle economic downturn

B.C.'s Liberal government will invest $14 billion on an infrastructure plan it hopes will cushion the province from the worst effects of the world economic crisis and create up to 88,000 jobs in the next three years, according to the provincial budget released Tuesday.

In announcing the budget in Victoria, Finance Minister Colin Hansen said while virtually all ministries — with the exception of health and education — would see cutbacks, the province would run temporary deficits of $495 million in 2009-10, and $245 million the following year, with a balanced budget projected for 2011-12.

The government also has amassed a $300-million contingency fund should the economy be challenged to a greater extent.

About 90 per cent of all new spending will go to health care, Hansen announced, with the remaining 10 per cent targeting education.  

While Hansen refused to use the word recession, the budget projects provincial GDP will fall by 0.9 per cent this year.

Stability, jobs and confidence

Asked how he would describe the budget to British Columbians, Hansen said it focused on three areas — stability, jobs and confidence.

While the budget contained no new personal tax cuts, a five per cent reduction announced last fall will be made retroactive to Jan. 1, 2008. That will put $130 million back in the pockets of B.C. taxpayers, Hansen said.

Small businesses will see its income tax reduced to 2.5 per cent, effective Dec. 1, 2008. Hansen said that would amount to savings of more than $120 million over three years.

An estimated $60 million will flow to businesses collecting provincial sales and hotel taxes on the province's behalf, Hansen said.

The infrastructure program is clearly the key element of the budget.

About $2 billion of the $14-billion figure — earmarked for new projects to be accelerated over the next three years — will be cost shared with the federal government.

The province will spend $1.4 billion in local infrastructure projects being built in partnership with local governments and the federal government. The remaining $10.6 billion is for approved projects within the province's capital plan for the next three years, Hansen said.

The budget includes more than $350 million to support social services, Hansen said, including:

• $110 million in new funding for income assistance.
• $110 million for children and families.
• $73 million in additional funding for programs and services for adults with developmental disabilities and their families.
• $58 million for policing and victim support.

Homeowners hit hard in the economic downturn will be able to defer their property taxes for two years under a temporary program announced in November.

The government also announced a northern and rural homeowner benefit that will be funded by the controversial carbon tax, which most residents of northern B.C. say puts an unfair burden on them because of their limited transportation opportunities.

Funding for the Ministry of Health Services, which will increase by $4.8 billion over three years — the increase amounts to 5.7 percent in the first year — will account for about 90 per cent of new spending, Hansen said. Included is $13 million to establish a new B.C. Family Residence Program, which will provide additional assistance for British Columbians and their families who have to leave their communities to get the care they need.

By 2011, the government projects total provincial spending on health care will reach $17.5 billion, an increase of 66 per cent since 2001.

In a bid to boost the number of health-care professionals in the province, Hansen said the government will spend $40 million to expand health education to increase the number of nurses, and an additional $23 million to train more physicians.

Post-secondary institutions will receive an additional $228 million over three years, with $165 million aimed at making higher education more accessible.

In the K-12 education system, per pupil funding will rise to $8,242, Hansen said, the highest in the province's history.

Government cutbacks

Cutbacks in government spending are expected to save nearly $2 billion over three years, Hansen said. Those reductions include travel (22 per cent); contracted professional services (23 per cent); office and business expenses (eight per cent); advertising (76 per cent); operating equipment and vehicles (nine per cent); and discretionary grants (seven per cent).

No additional funds have been provided to boost the wages of government employees, most of whom have contracts that expire at the end of 2010.

Hansen said the government is not planning any layoffs.

All savings will be reinvested in public services, Hansen said, adding that program reviews will continue over the next two years as the government aims at returning to a balanced budget in 2011-12.

Shortages in key labour markets will be addressed by "targeted investments," Hansen said, including an additional 2,000 apprenticeship training spaces.

As well, the budget will provide $16 million over three years to support programs such as Skills Connect, which aims to help immigrants bring their professional credentials up to B.C. standards.

The province's farmers will find a bit of relief in the budget, but it won't appear until 2011, when school property taxes for all farm land will be reduced by 50 per cent.

Questioned about the cost of Olympic Games security, Hansen said the remainder of the $85 million budgeted for the project would be transferred to the federal government, which would take over responsibility. He could not say what the final cost of security would be.

Looking ahead, Hansen said improving economic prospects in B.C.'s resource industries and a massive infusion of tourism dollars generated by the Olympics would raise provincial revenues in 2010, and allow the province to end deficit spending in 2011-12.

Hansen said the total economic impact of the Games, as projected by independent sources, will be as much as $10 billion.