British Columbia’s new government has released a budget update that puts people first, Finance Minister Carole James announced today.
The balanced Budget 2017 Update forecasts a surplus of $246 million in 2017-18 and takes key first steps to improve affordability, build better services for everyone, and invest in a strong, innovative economy that creates jobs and works for all British Columbians.
Making life more affordable
Government is taking immediate steps to make life more affordable, including:
- $208 million for the construction of over 1,700 new units of affordable rental housing;
- $291 million to support the construction of 2,000 modular housing units for people who are homeless and more than $170 million over three years to provide 24/7 staffing and support services;
- A 50% cut in Medical Services Plan premiums for all British Columbians as a first step toward the elimination of the premiums over the next four years;
- $472 million to provide an increase of $100 per month for both income and disability assistance;
- The elimination of tolls on the Port Mann and Golden Ears bridges effective Sept. 1, 2017, a move that will save individuals as much as $1,500 per year and commercial truck drivers $4,500 a year.
Funding is being provided to improve and restore the services British Columbians count on, including:
- A $681-million increase for B.C.’s kindergarten-to-Grade 12 education system over three years, including $521 million to improve classroom supports for children for up to 3,500 new teaching positions, $160 million for enrolment growth and other pressures, along with $50 million in capital funding to provide the resources needed to help all children succeed;
- $322 million to provide an immediate and evidence-based response to the fentanyl emergency with prevention, early intervention, treatment and recovery efforts, improved data collection and analysis, along with a new Ministry of Mental Health and Addictions, and increased law enforcement to disrupt the supply chain;
- A new investment of $189 million over three years through a federal-B.C. agreement that helps seniors with improved home and residential care;
- $15 million over three years for the Healthy Kids Program, which provides hearing assistance benefits and improved rates for dental services;
- The restoration of the UBC Therapeutics Initiative providing funding of $2 million annually for the program, benefiting citizens with evidence based information on proposed prescription drugs, while saving health-care system costs; and
- $7 million over three years in new funding for the Residential Tenancy Branch to ensure renters are treated fairly in this province and that the rights and responsibilities of both renters and landlords are clearly understood.
Building a strong, sustainable and innovative economy
Budget 2017 Update includes new investments that grow jobs and help develop a strong, sustainable and innovative economy for the people and businesses of the province, including:
- Helping evacuees, communities and businesses impacted by wildfires with $100 million in supports through the Red Cross, along with $140 million in forest projects focused on wildfire risk reduction, reforestation, wildlife habitat restoration, and raising awareness of the FireSmart program;
- $19 million for the restoration of free adult basic education and English language learning in both the K-12 and post-secondary sectors;
- The establishment of an innovation commissioner, emerging economy task force and the fair wages commission;
- A $200-a-month increase to the earnings exemption for income and disability assistance recipients to help people connect to employment;
- Restoration of the tax benefit for credit unions;
- A reduction in the small business corporate income tax rate from 2.5% to 2%; and
- Phasing out the provincial sales tax on electricity to help support industry competitiveness and job growth.
Commitments made in Budget 2017 Update are funded by improved revenue forecasts over the fiscal plan period, as well as steps to improve fairness in the tax system, including:
- Introducing a personal income tax rate of 16.8% on taxable income over $150,000, up from 14.7%; and
- Increasing the general corporate income tax rate to 12% up from 11%.
The Province will act to reduce carbon emissions by increasing the carbon tax rate on April 1, 2018, by $5 per tonne of CO2 equivalent emissions, while increasing the climate action tax credit to support low and middle-income families.
The requirement for the carbon tax to be revenue-neutral is eliminated so carbon tax revenues can support families and fund green initiatives that help address the Province’s climate-action commitments.
B.C.’s economy is strong, and employment, retail sales, housing starts and exports have all exceeded expectations so far this year.
The outlook for 2017 real GDP growth is 2.9%, which is prudent compared to the outlook provided by the independent Economic Forecast Council. Private-sector forecasters expect B.C. to rank near the top of the provincial rankings in economic growth in 2017 and 2018.
Fiscal Plan 2017-18 – 2019-20
Strong economic growth for British Columbia
Government’s estimate for B.C. real GDP growth in 2016 and the outlook for 2017 are higher than what was projected in Budget 2017 as B.C.’s economy has performed better than expected. Stronger than anticipated consumer spending and export activity is primarily responsible for the upward revision to the Province’s real GDP estimate for 2016, from 3.0% to 3.6% growth. Meanwhile, for 2017, year-to-date data for key indicators such as employment, retail sales, housing starts and exports have exceeded expectations.
Government’s forecast for B.C. real GDP growth in 2017 is now 2.9%, compared to the 2.1% projected in Budget 2017. The outlook for B.C.’s economy for 2018 and beyond is relatively unchanged from the previous outlook, with real GDP growth of 2.1% in 2018 and 2.0% annually from 2019 to 2021, as the balance of risks to the domestic and global economy remains largely unchanged.
Downside risks to B.C.’s economic outlook include uncertainty regarding the United States’ fiscal and trade policy; potential for a slowdown in domestic and Canadian economic activity; faltering of Europe’s economic recovery as it faces the challenges of the United Kingdom exiting the European Union and elevated sovereign debt; slower economic activity in Asia, particularly as China transitions to a consumer-driven economy, resulting in weaker demand for B.C.’s exports; potential for monetary policy tightening to dampen economic momentum; and exchange rate and commodity price uncertainty.
Budget 2017 Update projects surpluses of:
- $246 million in 2017-18
- $228 million in 2018-19
- $257 million in 2019-20
The government has included a forecast allowance of $300 million in each of 2017-18 and 2018-19, and $350 million in 2019-20 to guard against volatility, including revenue changes. The fiscal plan also includes contingencies of $600 million in 2017-18, $300 million in 2018-19, and $350 million 2019-20, to help manage unexpected pressures and fund priority initiatives.
Total government revenue is forecast at $52.4 billion in 2017-18, $52.6 billion in 2018-19, and $53.7 billion 2019-20.
Total expense outlook over the three-year plan is forecast at $51.9 billion in 2017-18, $52 billion in 2018-19, and $53.1 billion in 2019-20.
B.C.’s taxpayer-supported debt to GDP ratio remains low compared to recent fiscal years, peaking at 16.4% in 2018-19 and ending the fiscal plan period at 16.3%.
Due in part to B.C.’s stronger than projected economic growth, the Budget 2017 Update forecasts elimination of government’s operating debt by 2019-20.
Taxpayer-supported debt is forecast to be $44.9 billion in 2017-18, $47 billion in 2018-19, and $48.6 billion in 2019-20. Taxpayer-supported debt is projected to end the fiscal plan period higher than Budget 2017 due mainly to significant investments in capital infrastructure over the next three years and the one-time impact from government’s decision to cancel tolls on the Port Mann Bridge. Debt increases associated with new investments include $2.8 billion for education and health facilities, $3.8 billion for transportation sector projects, and $1.7 billion for other initiatives over the three-year period.
Self-supported debt of commercial Crown corporations is forecast to be $21.6 billion in 2017-18, $22.5 billion in 2018-19, and $23.8 billion 2019-20. The decrease compared to Budget 2017 is due to the reclassification of the Transportation Investment Corporation debt as taxpayer-supported debt resulting from the elimination of tolls on the Port Mann Bridge and the cancellation of procurement for the George Massey Tunnel Replacement project.
Taxpayer-supported capital spending on hospitals, schools, post-secondary facilities, transit and roads is forecast to be $14.6 billion over three years. These significant capital investments are needed to deliver critical services and contribute to a strong economy and will create jobs in communities around the province. These investments include:
- $2 billion to maintain, replace, renovate or expand K–12 facilities, including continued investments in new school space to accommodate increasing enrolment in growing districts, and continued investments in seismically upgrading or replacing schools.
- $2.6 billion for post-secondary institutions around the province to invest in priority projects to build capacity and help meet the province’s future workforce needs in key sectors, including science, trades and technology.
- $3.1 billion to expand and upgrade health facilities. These investments support new major construction projects and upgrading of health facilities, medical and diagnostic equipment, and information management/technology systems.
- Nearly $500 million on housing initiatives, which represents the new government’s first steps taken to address homelessness and make housing more affordable for British Columbians. These provincial investments will support the construction of over 3,700 housing units as part of government’s commitment to help build 114,000 units of housing over 10 years, in partnership with local governments, the federal government, and the private and not-for-profit sectors.
- $1.4 billion to support investments in maintaining, upgrading, or expanding ministry infrastructure, such as courthouses, correctional centres, provincial office buildings and information systems.
The Budget 2017 Update also includes continued investments in government’s Transportation Investment Plan. The Province has secured federal cost sharing on projects and has leveraged investments through partnerships with private partners. Over the next year, B.C. will continue to work with the federal and municipal governments to identify priorities and confirm details around project criteria, timelines and cost-sharing arrangements for the new federal infrastructure funding.