B.C.'s financial outlook has improved for the current fiscal year with the province now expected to see a surplus.
The provincial Finance Ministry released its first quarterly update Monday, giving a snapshot of the first three months of the current fiscal year, from April to the end of June. Initially, the province expected a $5.461 billion deficit in the 2022-23 budget. Now, it's forecasting an operating surplus of $706 million.
"Improved first quarter fiscal results are good news, but these continue to be uncertain times, both on the international economic front and for British Columbians struggling with rising global inflation," Finance Minister Selina Robinson said during a news conference.
"While the report shows an improved fiscal outlook compared to Budget 2022, there are ongoing risks to the plan. B.C.'s economy is expected to grow next year, but high inflation, rising interest rates, heightened geopolitical conflict in Europe have had an effect on B.C.'s economic outlook. And of course, there is ongoing uncertainty regarding the evolution of the pandemic."
Robinson said while it’s good news that the economy is doing well so far, other risks, like the pandemic are unpredictable.
“We're not out of the pandemic,” she told reporters. “China just had this significant lockdown that's affecting supply chains because of COVID.”
The bulk of the "good news" update comes from higher than expected personal and corporate income taxes. Liberal Finance Critic Peter Milobar called that an imbalance that required fixing.
“When you look at $12 billion more being collected in tax revenue from when the government first took office year over year over a year. You have to wonder how long it's going to be sustainable," he said.
The Greater Vancouver Board of Trade’s President and CEO, Bridgitte Anderson called for more help for businesses.
“A lot of the gains have been made to increases in tax revenues, the employers health tax, it is clear that businesses and some individuals are continuing to really fund the growth in the province," Anderson said.
"So now is the time for the government to really invest in businesses and people take a look at tax reform. Look at the kind of costs it does to it takes businesses to operate in this province.”
Anderson renewed calls to make the cost of doing business in B.C. cheaper. She said pandemic-battered businesses are now feeling the pinch of the high cost of living and inflation, along with an acute labour shortage.
“The private sector is dealing with a lot of labour shortages. It is really, really difficult to attract and retain talent right now. And so employers are paying employees more money to be able to attract and retain them. That's just one kind of factor that needs to be dealt with. The affordability of the region is another big factor of attracting retaining talent,” Anderson added.
Projections have also improved for the years ahead, though deficits are still expected. Next fiscal year is now expected to see a shortfall of $3.8 billion, down from a previous forecast of $4.2 billion. The following year is expected to have a $2 billion deficit, down from $3.2 billion.
The ministry explained while revenue forecasts are higher than initially expected, so are expense forecasts, mostly to account for wildfire response, new labour agreements and cost-of-living measures. For example, about $1 billion is budgeted for changes made to the Climate Action Tax Credit and the BC Family Benefit.
Another $1.9 billion is set aside for labour union negotiations. So far, the province has two tentative deals, with bargaining underway with more than 150 other public sector unions. It’s unclear what the tentative deals will cost taxpayers. Robinson didn’t offer any new details but said the amounts would likely be reflected in the next quarterly update, due before the end of the year.
Contingencies for flood recovery ($400 million) and pandemic response ($2 billion) remain the same, even with the forecasted surplus.
Robinson said with tourism, recreation and live events resuming, people are spending more on those services. She noted, however, there's been a moderation of spending on consumer goods.
"Higher inflation is eating into purchasing power," she said. "We know a lot can change over the course of a year. We need to continue to make thoughtful decisions, which is why we have built prudence into our fiscal plan. We will continue to invest in the things people need."
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