The HST as cash cow, the incredible shrinking deficit and three other interesting things from the Public Accounts, the final report on the province’s financial performance in the last fiscal year.
First, the Public Accounts reveal that, government claims to the contrary, the HST represents a significant tax increases targeted at individuals and families.
The HST was in effect for the final nine months of the last fiscal year, which ended March 31. It pulled in $4.2 billion, or about $467 million a month.
In the previous year, the PST take was about $392 million a month.
So the HST provides government with an extra 19 per cent – roughly $900 million more a year than the PST, or about $210 per man, woman and child in the province. (That’s slightly overstated – about $100 million of the increase is due to economic growth, based on the government’s budget assumptions.)
That’s on top of the HST impact of shifting some $2 billion in taxes off corporations and businesses and onto individuals and families.
Second, the government continues to introduce budgets – except for the 2009 election budget – with huge cushions. The budget forecast a deficit of $1.7 billion. The actual deficit, according to the public accounts, was $309 million.
As recently as February, the government was still forecasting a $1.3-billion deficit.
Tax revenues were $780 million higher than expected, in large part because the government underestimated HST revenues in the budget. Crown corporations revenues were $181 million over budget, mainly because the government took $180 million more from B.C. Hydro revenues than it expected.
And spending was reined in. Overall, spending increased $903 million, or 2.3 per cent over the previous year. But that largely reflects health spending, up 4.1 per cent. Education spending – K to 12 and postsecondary – was up about one per cent. Other spending was effectively frozen, despite the huge pressures in areas like Community Living B.C.’s support for people with developmental disabilities.
Prudence is a virtue, of course; better to err on the side of caution and all that. And some room for unexpected occurrences has to be built into a $30-billion-plus budget.
But consistently coming in under budget by huge amounts cheats MLAs and the public.
A more accurate budget forecast might have resulted in different choices by the legislature. Perhaps, had MLAs known the deficit was to be $309 million, not $1.7 billion, they would have voted to spend more on support for schools or additional surgeries.
Or they might have decided there would be room for substantial across-the-board income tax cuts, given the relatively small deficit.
Those options were removed because of the inaccurate budget presented to the legislature.
Third, the Public Accounts report that the B.C. economy grew by four per cent in 2010, third strongest among the province. That’s obviously good news and the increased economic activity played a role in the increased government revenues. But the report warns growth is expected to slow to two per cent this year.
And it noted the recovery didn’t ease the unemployment rate.
Full-time employment increased 1.1 per cent, and the number of people working full-time is still below 2007 and 2008 levels. Unemployment improved slightly, to 7.6 per cent – the highest level since 2003.
Finally, the accounts reported the province’s total debt, despite recent deficits and infrastructure spending, increased by $3.3 billion, to $45.2 billion. Taxpayer-supported debt equals 15.7 per cent of GDP, a manageable level.
The NDP did highlight a big jump in long-term commitments that will bind future governments – and taxpayers – well into the future.
The contracts, for everything from payments to private companies building hospitals to highway maintenance, increased from $53 billion to $80 billion in one year.
More than half the commitments – $45 billion – bind B.C. Hydro to buy expensive electricity from private power companies.
Footnote: The Public Accounts – available online at www.fin.gov.bc.ca – also reports on MLA pay and expense claims.
The base pay for the fiscal year was $102,000. But 44 of the 85 MLAs qualified for additional payments because they were in cabinet, chaired committees or played various other roles.
The actual average pay for an MLA was a record $120,198.