BC's hidden debt
The Fraser Institute has released a report slamming what it calls the provincial government's 'so called' balanced budget.
The right-wing think tank claims BC's growing debt remains 'hidden' in the province's capital budget which could pose 'serious challenges in the future.'
The study, Capital Budgeting and Fiscal Sustainability in British Columbia, looks at both capital and operating budgets.
"When the BC government says the 2014-2015 budget is balanced, it's referring to the operating budget which attracts most of the attention, said Jean-Francois Wen, professor of economics at the University of Calgary and author of the study.
"But the capital budget, where the province borrows large sums of money to pay for long-term infrastructure spending, is in deficit and is largely overlooked."
All levels of government will typically borrow money to pay for capital projects such as roads, schools, bridges and hospitals and record the annual interest payments and amortization expenses in the operating budget.
Wen said that, while the accounting process spreads the cost over many years, it 'disguises the true state of provincial finances.'
Wen said the government plans a $184M surplus in its operating budget for 2014-2015, but despite the surplus government debt is slated to grow by $1.9B this year.
He said the provincial debt will amount to 17.6 per cent of the provincial economy in 2014-2015, up from 12.2 per cent or $24.9B six years ago.
"Any proclamations about balanced budgets by the BC government must be interpreted with caution in light of increasing debt levels," added Wan who said high capital debt could saddle the operating budget with increased interest payment and amortization expenses.
"The BC government has promised to restrain spending growth over the next three years, but if it fails to deliver on that promise, provincial debt could spiral out of control."
The Ministry of Finance claims, contrary to the Fraser Institute report, BCs debt is affordable and well managed.
Information provided by the ministry states BC pays just 4¢ of every dollar of revenue on debt interest while Ontario pays more than double.
"Government's taxpayer-supported debt to GDP ratio, a key measure of affordability, is forecast to decline from 18.4 per cent in 2014-2015 to 17.8 per cent in 2016-2017, down from over 20 per cent in 2003-2004," the ministry stated in an email providing comment.
"That gives us the third lowest debt to GDP ratio in Canada. Effectively managing this ratio helps maintain BCs triple-A credit rating which saves BC taxpayers millions of dollars a year in borrowing costs."
The ministry further stated the government has 'consistently' delivered some of the most transparent financial reporting among the provinces according to independent agencies that rate the province's debt.
According to the Canadian Taxpayers' Federation pegs BC's debt at more than $62.3B and their debt clock keeps ticking.
They say each BC resident is on the hook for $13,533.
How does BC stack up? Here are the debt numbers across the country as posted by The Canadian Taxpayers' Association (in order of resident debt load starting with the worst):
- Quebec: $199.9B or $24,448 per resident
- Manitoba: $30.8B or $24,236 per resident
- Ontario: $271.8B or $19,990 per resident
- Newfoundland and Labrador: $9.1B or $17,392 per resident
- New Brunswick: $11,7B or $15,605 per resident
- Nova Scotia: $14.5B or $15,384 per resident
- Prince Edward Island: $1.9B or $13,669 per resident
- BC: 62.3B or $13,533 per resident
- Saskatchewan: $4.5B or $4,093 per resident
- Alberta: $9.5B or $2,336 per resident
Taxpayer.com also puts Canada's federal debt at $619.6B or $17,531 a person.
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