Surplus good news, but puts Liberals to test

VICTORIA - It should be unalloyed good news that the B.C. government is heading towards a $2.2 billion surplus this year.
Instead, the pot of cash holds some big headaches for the Liberals.
Finance Minister Gary Collins and a clutch of finance ministry officials presented the latest budget mid-year report Monday in the basement of the legislature.
It was good news. The surplus, which Collins predicted would be $200 million at the beginning of the fiscal year, looks to be $2.2 billion. Part of that is due to an $800-million one-time boost from Ottawa, but that still leaves a $1.4-billion surplus.
And the latest forecasts show B.C. with the second strongest provincial economy this year and next, trailing only Alberta.
"This is exactly where governments want to be," enthused Collins.
It is handy to be heading into an election with money to spend, but the surplus carries some political risks.
The Liberals are going to be defined by what they decide to do with the money, and it is hugely important to their prospects in the May election.
There are three options, and infinite variations on how they are weighted. Governments can spend surpluses on programs and services to make life better for citizens. They can cut taxes, reducing the revenue governments take in and shrinking future surpluses. Or they can pay down the debt.
What the public wants, based on consultations by the legislature's finance committee, is more spending on health, education, social services and other needs. The committee's responses showed British Columbians wanted 80 cents on any surplus dollars to go to services. Debt repayment should get 14 cents and tax cuts six cents, the said.
Though that's only one indicator, as Collins rightly noted Monday, it highlights the problem for the Campbell party
What the Liberals have said over the past three years is that they have not wanted to cut budgets for ministries like children and families. It has been a necessary evil, forced by a lack of money.
What their critics have suggested is that the Liberals simply don't like government, and would prefer a much smaller role for it on principle. (And that they in fact forced that outcome with their first day 25-per-cent tax cut.)
Now both theories will be put to the test. If the Liberals really didn't want to cut the children and families' budget, or funding to women's centres, they can now put the money back. If they never really thought the programs were worth much, they can pay down the debt or offer more tax cuts.
There's no magic formula or right answer. It's always sensible to pay down debt. But the government has already committed $350 million this year and B.C.'s debt is low compared with other provinces, and easily manageable. Some targeted tax cuts might encourage investment, but broadly B.C. is competitive.
That leaves spending increases.
Those are tricky too. A benefit - perhaps intended - of the Liberals' tax cuts is that they forced ministries to reduce spending. It is one rough way of cutting, forcing managers to find a way to get by with less money.
Now the government has a lot of room to spend money on making peoples' lives better.
The LIberals' plan already calls for a program spending increase of almost two per cent in the pre-election budget coming in February. But with the new financial forecasts, the government could easily add six per cent to its spending - enough to eliminate surgical wait lists for most procedures, or offer universal child care, or a huge literacy initiative.
It's a time for real choices, and those are never easy. There are those within the Liberal party who would put both tax cuts and paying down the debt ahead of improving services.
If they win the day then the party will suffer at the polls in May.
Footnote: Collins is now set to earn a place in the B.C. record books as the finance minister who delivered both the largest surplus and the largest deficit in the province's history, in one term. It's a remarkable indication of how extraordinarily volatile the province's economy can be.