Clouds in B.C. economic forecast forces province to tighten post-election budget

VICTORIA – Finance Minister Mike de Jong is forecasting three years of surplus budgets in British Columbia despite darkening-economic horizons, prompting the Opposition New Democrats to challenge the credibility of the government’s numbers.

Economic growth is declining, the debt is rising and the downward trend is reflected in home sales, retail sales and job creation, he said.

De Jong said the budget introduced Thursday in Victoria reveals changes in B.C.’s economic forecast since last February, when he tabled a financial plan that was never passed because the legislature adjourned for the May 14 election campaign.

“The next 12 to 18 months are going to be tough. It’s going to be tough,” de Jong said. “This isn’t great news.”

The finance minister said he’s looking to find an additional $30 million in government-spending cuts to help preserve this year’s surplus, which is now expected to hit $153 million, down from February’s forecast of $197 million.

The government is also shrinking its surplus forecasts until 2015-2016.

The Liberal government’s 2014-2015 budget-surplus estimate is now $154 million, down from $211 million forecast last February, and the 2015-2016 forecast of a $460-million surplus is predicted to hit $446 million.

NDP finance critic Mike Farnworth said he doesn’t believe de Jong’s surplus projections.

Farnworth said the budget, which relied on selling off government properties and charging some seniors a wheelchair fee, was not balanced last February, and it is not balanced now.

“Instead of owning up to their fifth consecutive deficit budget tabled in a row, the government clings to its slogans,” he said. “It’s British Columbians who will suffer the consequences through cuts and reductions of vital services that they depend on.”

De Jong said the government is facing a prolonged period of belt-tightening, but it is going to put in place fundamentals that will ensure an economic recovery, including the development and export to Asia of liquefied natural-gas from northwest B.C.

The government believes the development of LNG projects represents a trillion-dollar economic opportunity that could create 100,000 jobs and help the province pay down its debt, which currently is at more than $62 billion and forecast to rise.

One of the few positive numbers in the budget involves forecasts of rising natural-gas prices, which are now at about $2.65 a gigajoule, up from the February’s prices of about $1.90 a gigajoule.

Natural-gas revenues are forecast to reach $397 million this year, up from $169 million last year.

The government has made $58 million through the sales of 14 properties, he said. Negotiations for nine properties worth $86 million are still in the works and the government made $123 million selling financial instruments like returns from long-held bonds.

In February, the Opposition New Democrats accused the Liberals of using the proceeds from the sale of assets to balance the books. The NDP said during the election campaign that if it were not for the sales, the Liberals would have had a deficit of $800 million.

De Jong said weaker-than-expected economic activity has resulted in downgraded economic growth forecasts since February.

He said the government now forecasts B.C.’s economy to grow 1.4 per cent this year, down from the 1.6-per-cent forecast in February.

The private sector Economic Forecast Council revised its growth forecast downward to 1.6 per cent from 2.1 per cent.

De Jong said the government remains committed to make B.C. debt-free within 15 years, despite the debt increasing $6.75 million since February to $62.5 billion.

“I don’t think it’s premature to be setting a target to what we are seeking to achieve,” he said.

The rising debt numbers are partially attributed to the government’s plans to build capital projects and invest in skills training, said Phil Hochstein, Independent Contractors and Business Association president.

The budget forecasts the debt to increase to $69.7 billion from $62.5 billion over the next three years.

“Some of that is needed infrastructure spending, and clearly one way to deal with skill shortages is to create jobs and build things,” said Hochstein.

But Farnworth said the budget reveals the disconnect between the government’s throne-speech promise to improve skills training over the next decade, while the budget maintains a $45-million cut to post-secondary education and more than 5,000 fewer classroom spaces.

De Jong said the job creation outlook has declined since February to 0.7 per cent from February’s forecast of $1.1 per cent.

“We are still almost 110,000 jobs ahead of where we were back in 2009, but our objective is to show continuous progress,” he said. “We have more work to do.”

The minister said he didn’t have hard numbers, but he’s heard a “buzz” since the election that housing starts have increased and the business climate is improving.

“But we can’t budget on intuition,” he said, adding he won’t be able to confirm the buzz until September at the earliest.