The Province of British Columbia ended the fiscal year with a smaller deficit than forecast in the September Budget Update 2009, announced Finance Minister Colin Hansen today with the release of the 2009-10 Public Accounts.
"As expected, due to the volatility created by the global economic crisis, British Columbia posted a deficit for last fiscal year," said Hansen. "While the 2009-10 deficit shows an improvement from the forecast in September, the ongoing instability in world markets demonstrates the continued need for prudent fiscal management in order to keep B.C. firmly on the road to economic recovery."
The audited financial statements show the Province ended the fiscal year with a deficit of $1,779 million, an improvement of $996 million from the September forecast. Government expenditures were $833 million less than forecast in the September Budget Update and revenues were down $87 million. As a result, the $250 million forecast allowance was not required.
Government revenues declined by $781 million in 2009-10 compared to 2008-09, mainly due to lower taxation and natural resource revenues. Tax revenue, mostly from personal and corporate income taxes, decreased by nearly $1.1 billion from last year, indicating a downturn across the economy. Natural resource revenues were down more than $1.1 billion due primarily to weak natural gas prices and low lumber prices.
Compared to the previous fiscal year, government expenses rose by $1.1 billion, or 2.8 per cent, to support health care, education and other social services. Health-care spending rose by $420 million for a record total of $15.5 billion, and education funding increased by $594 million for a record total of over $11 billion. Other social-service spending, including housing, income assistance and support for children and families in need, increased by $119 million in 2009 10. Other ministry spending decreased by $60 million.
"We've worked hard to set the stage for growth and prosperity in B.C. by creating a competitive tax environment and energizing the economy through investing in capital projects, while continuing to provide quality health care, education and social services for all British Columbians," said Hansen. "Our careful management of taxpayers' dollars continues to be rewarded by key rating agencies through strong and stable credit ratings, which help keep our borrowing costs relatively low."
As part of the plan to stimulate the economy and create jobs, government invested more than $1.7 billion in public infrastructure projects across B.C., including South Fraser Perimeter Road, Port Mann Bridge, Kelowna General and Vernon Jubilee Hospitals, and various building upgrades and improvements across the K-12 and post secondary sector. Government has increased its annual investment in capital projects by more than $7.4 billion since 2005-06.
"Our government committed to protect vital services while controlling discretionary spending and reducing administrative costs, such as travel, advertising and office expenses," said Hansen. "Ministers will not be receiving their full salaries this year due to government's continued deficit position. Taxpayers deserve to have their dollars expended in a manner that is sustainable in the long term and we are firmly committed to that goal."
The Balanced Budget and Ministerial Accountability Act requires a 20-per cent ministerial salary holdback for all members of cabinet to ensure ministries operate within their own budgets and government meets its overall financial commitment. As the government posted a deficit for 2009-10, cabinet members will not receive one-half of their holdback. All ministers achieved their individual ministry fiscal targets and will receive the other half of their salary holdback. The Ministerial Accountability Report, released today, outlines the specific financial targets ministers must achieve to receive their ministerial salary holdback.
The government's fiscal plan continues to project deficits in 2010-11, 2011-12 and 2012-13, before returning to balanced budgets by the 2013-14 fiscal year.
Online versions of the public accounts and related documents can be found at the following link: www.fin.gov.bc.ca/ocg.htm
.PUBLIC ACCOUNTS FOR 2009-10 FISCAL YEARDeficit
The Province ended the 2009-10 fiscal year with a deficit of $1,779 million, $996 million lower than forecast in the September Budget Update 2009. The 2009-10 fiscal year is the first of four years in which the government anticipates posting a deficit, before returning to balanced budgets by 2013-14.Economic Growth
British Columbia's economy contracted by 2.3 per cent in the 2009 calendar year, which is below the national average rate of decline of 2.9 per cent, according to preliminary data from Statistics Canada. The decline in 2009 marked the first recession in the province's real GDP since 1982.
The contraction in B.C.'s economy was largely due to a drop in goods-producing industries, such as manufacturing, which fell 14.5 per cent in 2009. B.C.'s forest sector also suffered declines as primary forestry and logging production dropped 18.8 per cent and wood product manufacturing fell 18.4 per cent. Total construction also declined 5.3 per cent, mainly due to a sharp drop in residential construction, mitigated by construction projects related to the 2010 Olympic and Paralympic Winter Games.Revenue
Provincial revenue totalled $37,521 million in 2009-10, a decrease of $781 million, or two per cent over 2008-09.
The most significant declines were a decrease in taxation revenue of $1,095 million (or six per cent) and a decrease in natural resource revenue of $1,161 million (or 30 per cent) compared to 2008-09. These declines were offset primarily by an increase in contributions from the federal government, as well as earnings from self-supported Crown agencies, fees and licences, and investment income.
The decrease in tax revenue reflects slowing economic activity. Natural resource revenues declined due primarily to weak natural gas prices and continuing low lumber prices caused by a soft U.S. housing market.Expense
Operating expenses totalled $39,300 million in 2009-10, an increase of $1,073 million or 2.8 per cent over 2008-09.
Health expenditures increased by $420 million or three per cent over 2008-09. Education spending increased by $594 million or six per cent. Spending on social programs increased by $119 million, or four per cent over the previous year. Expenditures for health, education and social services represent approximately 76 per cent of the Province's total operating costs.Debt
Total provincial debt was $41,885 million in 2009-10, an increase of $3,871 million over 2008-09. This increase was due to increased borrowing to fund capital projects and working capital requirements.
The taxpayer-supported debt to GDP ratio, a key measure of fiscal sustainability, was 16 per cent in 2009-10, based on a three-year moving average. This compares to 13.3 per cent in 2008-09, 13.8 per cent in 2007-08, and is down from 21.3 per cent in 2002-03.
British Columbia continues to maintain one of the strongest credit ratings among Canadian provinces, with only Alberta rated higher. Standard and Poor's and Moody's Investment Services rate the Province triple A, the highest-possible rating, while Dominion Bond Rating Service rates the Province AA(high).Capital Spending
The Province's total capital stock reached a value of $32,373 million in fiscal 2009-10. Taxpayer spending on capital of $3,754 million was offset by amortization and disposals totalling $2,038 million. The net capital investment to build and upgrade schools, universities, colleges, hospitals, roads, bridges and other infrastructure needed to deliver programs and services was $1,716 million in 2009-10, $1,918 million in 2008-09, and $1,937 million in 2007-08. In total, government's net annual investment in capital has increased by $7,417 million since 2005-06.