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B.C. Budget 2019: Government offers only modest new spending

VICTORIA — B.C.’s NDP government delivered a stand-pat budget Tuesday that offered little new spending on its priority housing and child care agendas, but did unveil modest funds for student loans and clean energy incentives.

Finance Minister Carole James tabled a $58-billion 2019/20 spending plan for the fiscal year starting April 1, with a $274 million surplus. There are no new tax increases beyond those already announced last year on high income earners, corporations, luxury homes and the carbon tax.

However, there is new small-scale spending, such as $31 million this year to eliminate interest rates on student loans — a move government estimates will save an average undergrad student with $11,200 in loans roughly $2,300 in interest.

“We were very pleased to see that coming in the budget,” said Noah Berson, chairperson of the Alliance of B.C. Students.

It applies to all existing student loans as well, effective immediately.

“The past government racked up surpluses simply for the case of surpluses while not investing in people,” said James. “We are looking for a balanced approach … while also making sure we invest in people who help build that strong economy.”

The budget offered only $9 million in new spending for child care in the coming year, which is on top of $1 billion announced in the last budget spread over three years.

The hold-the-line spending meant the current hybrid system of subsidies and 53 pilot locations for $10-a-day child care won’t be significantly expanded in the coming year, according to ministry officials. Nor was there any signal when full $10-a-day child care — a key NDP election promise from 2017 — may become a reality.

James said there’s still $366 million in child care funding occurring this year from her previous announcements, even if it was not re-announced in this budget.

“Lets remember the child care plan is phased in over time,” she said. “Over the next year you’ll see the minister and ministry doing evaluation of the prototype of $10-a-day and looking at how we expand those.”

Child care advocate Sharon Gregson said she still believes the government is on track by increasing funding incrementally every year despite not making a big deal of re-announcing it. She said she expects the pilot locations and subsidies to increase this year, even if government doesn’t.

“They’ve got room within this funding envelope to do that,” said Gregson. “Now we want to make sure they are spending the money the right way.”

Housing affordability also held to its $7-billion spending plan over 10 years, with a $9 million increase in the budget for “incremental housing initiatives” and more homeless modular housing.

There was no sign of the $400 annual renters rebate promised by the NDP in the 2017 election, which is opposed by the NDP’s power-sharing partners, the B.C. Greens.

“It is something we’re working on with our Green colleagues,” said James. Government is creating a provincially backed rent bank for those who fall behind on their rent and need help to avoid eviction.

James announced a new “Child Opportunity Benefit” as a key new budget promise that would provide up to $1,600 a year for a child, through monthly deposits to families on an income-tested scale.

“We really want to make sure we have the opportunity for every child to thrive and provide more help to families in raising those children,” she said.

“So I’m very proud that budget 2019 introduces the child opportunity benefit. This really is a historic investment, and puts dollars in the pocket of middle class families.”

But the program does not actually start until October 2020 — meaning it is not even part of the coming fiscal year.

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Therefore, there’s no money set aside to fund the program in the coming year, and no cheques in the mail for almost 20 months. James said that’s because it takes a year’s notice for B.C. to get the Canada Revenue Agency to agree to help with the administration of the program.

James reiterated the elimination of Medical Services Plan premiums this year — which are replaced with an Employer Health Tax — combined with future credits like the child benefit could be considered in one of the largest middle-class tax breaks in provincial history.

The government’s ambitious plan to promote clean electricity use to hit its pollution-reduction targets, called CleanBC, received $902 million over three years in the budget.

The money will fund already-existing climate action tax credit cheques, as well extend for a year the current $6,000 point-of-sale rebate on electric vehicles, $2,000 to replace a fossil fuel burning furnace with an electric heat pump and $1,000 to upgrade windows and doors to be better insulated.

Some programs, such as electric vehicles subsidies, have been so popular in the past that they’ve run out of money and had to be topped up by government during the year, said James.

The government had set up expectations of a fully funded poverty reduction plan to be unveiled this year.

However, there was almost no mention of such a plan in the budget.

Instead, the budget outlined a $50 monthly increase to disability and income assistance levels — which advocates have already said are so low they need a major spike in order to provide a livable foundation for the poor.

“We know more needs to be done to make income and disability assistance more accessible,” said James.

“You’ll hear more about this as the poverty plan comes forward in the spring with more specifics.”

That disappointed advocates like the Canadian Centre for Policy Alternatives, which said the $50 monthly increase was insufficient.

“I think we could have done more,” said senior economist Iglika Ivanova. “I think we definitely have the fiscal capacity.”

She said she can see the outlines of a poverty reduction plan on the horizon, but that the new child benefit tax program won’t help as much as government claimed.

“No children and families on welfare will be lifted out of poverty by this child benefit,” she said. “It is not big enough.”

Other small-scale new spending initiatives in the budget include $74 million over three years for new mental health and addictions programs for children, and redirecting $297 million in gaming revenue to share with First Nations over three years.

James said there’s flexibility built into the budget for unanticipated spending, both in a $500 million forecast allowance as well as a $750 million contingency fund. There’s also $553 million set aside for bargaining mandates.

James said the provincial economy remains the healthiest in Canada, with forecasts of the Gross Domestic Product increased to 2.4 per cent in part due to the new Canada-United States-Mexico trade agreement.

“It’s a budget strong on the social side and quite weak on the economic development side,” said Jock Finlayson, executive vice-president of the B.C. Business Council. “It’s complacent. It says the relatively strong economy we’ve been operation on will continue. I’m not sure that’s necessarily true.”

Finlayson said James deserves credit for holding back on large spending initiatives and pressure within her party to spend big.

“The fiscal and economic projections I think are credible,” said Finlayson.

The Greater Vancouver Board of Trade gave the budget a “B-“ rating, calling it “a steady as we go budget” built on last year’s tax increases.

A cooling housing market is estimated to cut into property transfer tax revenue, lowing it from $2.2 billion to $1.9 billion. B.C. Housing starts are expected to drop almost 33 per cent by 2023, compared to the final year of the previous Liberal government.

However, the government does not necessarily think lower construction and sales will translate into lower prices for housing.

“The average home sale price in B.C. is expected to increase moderately over the forecast horizon,” read the budget.

James said she’s still pleased with what she sees.

“We’re finally starting to see some moderation,” she said of housing. “I’m cautiously optimistic.”

But she said the government wants more “moderation” in prices

“I don’t think we’re at that stage to say housing is affordable particularly in our metro centres,” she said.

Paul Kershaw, of Generation Squeeze, said the housing measures “were resting on last year’s laurels” but the government deserved credit for at least trying to influence the market.

Kershaw said he wished government would act on incentivizing municipalities to approve more density in communities that would allow for more purpose-built rental housing.

The government has already introduced a speculation tax as well as surcharges on homes valued at more than $3 million, as part of a 30-point plan James said needs more time.

The budget predicts a stunning turnaround at the Insurance Corp. of B.C., which Attorney General David Eby has called a “dumpster fire” financially and is on track to lose $1.18 billion this year. ICBC’s finances should reverse to only a $50 million loss in the coming year, after government institutes a new $5,500 cap on pain and suffering claims for minor injuries as well as other legal reforms, according to the budget. By 2020/21 ICBC is predicted to be back in the black.

“All of us and I as finance minister feel some frustration that these change didn’t occur early and we’re faced with this kind of fiscal challenge in our budget,” James said of ICBC.

Health care spending, the single largest item in the annual budget, is budgeted to rise almost $1 billion to $20.8 billion, or roughly 36 per cent of all government spending. Some of that is for expanded cancer services and improved access to drugs, though much appears to be the simple growth in the cost of delivering health care services.

Elementary and secondary school funding is budgeted to grow $197 million. The government says it has hired more than 4,000 teachers and restored $423 million in extra funding annually to the system after the Supreme Court of Canada decision on class size and composition.

An increase in capital spending for transportation, health, schools and other infrastructure will also grow the total provincial debt from $67.9 billion to more than $82 billion in 2021/22, an increase of almost 21 per cent.

Almost four cents of every dollar of revenue is set to be used to pay for interest on debt. James said the debt-to-GDP ratio on taxpayer-supported debt — a key metric credit agencies use when awarding B.C. a AAA credit rating — remains affordable at an estimated 15 per cent.

“British Columbia is thriving,” said James. “We have a balanced budget across the fiscal track. We’re the only province with a AAA credit rating …

but we will never have a truly prosperous province unless everyone in British Columbia can share in that prosperity.”

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