Plunging tax and resource revenues compounded with the most expensive fire season in history will result in a $2.8 billion provincial deficit in 2009, Finance Minister Colin Hansen forecast in Victoria yesterday.
Hansen also revealed — that sometime during the election campaign — he was told revenue projections would be lower than predicted. In February, Hansen predicted a deficit of $495 million for 2009 and the Liberals ran with that number in the spring’s provincial election.
“The government can’t get its story straight,” said New Democrat Leader Carole James. “That certainly contradicts what the premier has said previously. It’s a budget based on deceit.”
Hansen admitted that he had a casual conversation during the election with a member of the finance staff who indicated that revenues were being hit harder than expected, in the order of $200-$300 million. He felt the reduction was “quite doable,” because it would be offset by savings in various government ministries.
Premier Gordon Campbell said yesterday that a week before the election, he too had heard during discussions around the H1N1 influenza A virus (also known as swine flu) that revenues were weakening, but was told that they could be managed within the framework of February’s budget.
Hansen, who forecast consecutive deficits of $2.8 billion, $1.7 billion, $945 million and $140 million, returning to balanced books by 2013-2014, said his budget will protect vital services while laying the foundation for economic recovery.
“This is a very tight budget,” he said. “It is belt tightening not just for one year, but over the entire three years of the plan.”
Hansen blamed the ballooning deficit on a $2-billion drop-off in expected revenues. The largest drop is expected in personal income tax and natural gas revenues. Corporate tax, forest and mineral revenues are also projected to decline.
The province increased spending to health care, education and social services. It also saw a massive increase in the cost of fighting forest fires. B.C. has experienced about 1,000 more fires than normal. The province is also spending about $80 million to prepare for swine flu. Blunting the shortfall is $750-million from the federal government, part of a $1.6-billion payout to smooth the transition to the pending harmonized sales tax (HST).