Tuesday, September 16, 2008

'Surprise' surplus sign of bad budgeting

Surprise. Three months into the fiscal year and the provincial government has discovered that it underestimated revenues by about $1.2 billion.
Well, not really a surprise. More the norm by now.
The Liberals have made it standard operating procedure to introduce and have the legislature vote on budgets that project modest surpluses.
Then, like an exotic dancer, the finance minister slowly reveals the real numbers over the course of the year.
The modest surplus turns into several billion dollars, which the government can do with as it pleases.
Generally, that means paying down the debt. But with an election coming next May, expect some goodies out of this year's slush fund - maybe even another carbon rebate next spring.
This can all seem a little abstract, I know. But the bad budgeting has consequences.
The Canadian Taxpayers Federation points out that as a result the government is collecting more money from you than it actually needs. Last year's surplus of $2.1 billion - after about $1 billion in last-minute spending - would have let the government cut income taxes by 15 per cent for a year or chop a point off the provincial sales tax.
Or, alternately, the surplus means the government has money it could have allocated for services that people need. The B.C. Association for Community Living asked this week why so many children with disabilities are on waiting lists for services if the government has more than $1 billion extra.
And anyone waiting for surgery will wonder why more of that money isn't addressing health-care issues.
Some of it will. Finance Minister Colin Hansen's first quarter update included the $120 million the government has already committed to address health authority underfunding. More is likely on the way. (Again, welcome, but why not do it right the first time so health authorities can plan properly?)
It's certainly better to err on the side of caution. But this goes beyond prudence. The surplus for this year, budgeted at $800 million in the budget, is already forecast to be more than $2 billion.
The "surprise" surplus comes even though Hansen also warned that economic growth will be slower than the government expected this year and next.
The ministry's panel of outside economists had forecast growth at 2.8 per cent in 2008 when the budget was being prepared; they've knocked that back to 2.1 per cent; they pared the estimate for next year from 3.0 per cent to 2.7 per cent.
That's still healthy growth. But not for everyone. The quarterly update includes bad news for hard hit forest communities. The expected harvest from Crown land has been cut by 12 per cent since the budget was prepared. Those communities too will be wondering why some of that surplus isn't coming their way to help deal with the crisis.
The Liberals mostly used the surpluses as a way to reduce the debt. Collect more than you really need, spend less than you have and then end the year with no option but paying down debt. That's not a bad thing, but B.C.'s debt is manageable and the public - according to the annual budget consultations - wants the priority to be better services, not tax cuts or debt reduction.
The government has also used of the money for year-end spending - setting up a housing fund, sending the $100 carbon dividend cheques to every British Columbian (and about 18,000 people who are no longer living in the province).
That's probably what lies ahead, with the election coming in May. Hansen said the surplus gives the government "flexibility" to cut taxes, or spend more on programs people want.
Or even to send out rebate cheques again. They'll decide, but because the fall sitting of the legislature has been cancelled, the decision will be rubber stamped next spring.
It's really not a good way to run a government, or a business, or a family's finances. If you work with bad forecasts, you make decisions based on faulty information.
In the private sector, that can land you in trouble.
Footnote: A budget consultation flyer - that will look much like a Liberal campaign brochure - is being mailed to every home in the province, allegedly to allow you to comment on the budget options. Based on past practice, the comments stand a good chance of being ignored; one year, the government only looked at 10 per cent of the forms.

1 comment:

DPL said...

It's a sad state of affairs, and shows us that the goverment figure we are all a bit dumn. Overcharge for everything, reduce a few more programs, cook the books and suddenly another big surplus. This group makes me sick