VICTORIA, B.C. – The B.C. Liberal government is taking a temporary leave from their championed balanced-budget law to clear the path for two years of deficit spending.
Finance Minister Colin Hansen introduced amended legislation Monday that allows the government to spend in the red but he promised to return the province to balanced budgets in the near future.
At a government meeting Monday prior to introducing the amended legislation in a hastily recalled legislature, Hansen said he had little choice.
“We’re a government that believes very strongly that government should live within its means,” he said. “Going to a deficit is something, I think, that is very difficult for all of us.
“But, given just the way we’ve seen revenues erode over the last three weeks, we were left really with no other option because the alternative would have been to significantly cut back on the important and vital funding for health care, education and social services.”
Late last month, Hansen and Premier Gordon Campbell announced at a joint press conference that provincial revenues have fallen prey to the worldwide economic meltdown.
British Columbia – much to the government’s regret, they said – must post a deficit in the budget it tables Feb. 17.
Hansen said the size of the deficit will be revealed next Tuesday when he tables the budget.
But he has also said the province worked too hard to dig itself out of deficit to fall back into the same financial pit.
“Immediately at the end of the two-year period, the authorization to present deficit budgets will be automatically repealed and the original prohibition against deficit budgets will be restored,” Hansen said as he introduced Bill 48 in the legislature.
The Finance Statutes Deficit Authorization and Debt Elimination Amendment Act 2009 also includes an amendment to reduce provincial debt.
Beginning the first year the budget is again balanced, the finance minister must use any year-over-year increase in cash in a consolidated revenue fund to reduce or eliminate provincial government direct operating debt.
Hansen also said cabinet ministers will lose up to 20 per cent of their annual salaries due to a provision in the balanced-budget act. It cuts ministers’ pay if their individual ministerial budgets are in deficit and if the entire budget is in the red.
The legislature was recalled unexpectedly in order to allow the government to introduce the amendment.
New Democrat Leader Carole James said the Opposition is reviewing the amendments but the Canadian Taxpayers Federation blasted the Liberals.
“Balanced-budget laws are supposed to about more than just creating photo-opportunities for politicians,” said Maureen Bader, B.C. spokeswoman for the federation. “They need to stick with these things in the tough times. That’s supposedly why they have them to keep them on track in the tough times.”
British Columbia introduced Canada’s first balanced budget law in 1991 when the former Social Credit government passed its Taxpayer Protection Act.
The New Democrats repealed that law shortly afterwards and ran a series of deficits but in 2000, just prior to their electoral defeat, passed the Budget Transparency and Accountability Act.
The Campbell Liberals then introduced their own Balanced Budget and Ministerial Accountability Act, which they’re now amending.
Many provinces have some form of balanced-budget law, and they all come with some form of escape clause. Only Alberta’s Balanced Budget and Debt Reduction Law, appears iron clad against deficits, said Bader.
In Manitoba, the budget law says if there is a deficit, the next budget must be in surplus.
Ontario made budget deficits illegal in 1999 but about five years later, the province had a $2.2-billion deficit. Ontario then introduced a new financial accountability act, which allowed the province to forecast a deficit this year of at least $500 million.