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Overspending Drives BC Deficit

Author: Victor Vrsnik 2002/10/17
In November, the Select Standing Committee on Finances and Government Services presents the findings of its pre-budget public hearings to the Legislative Assembly. Committee chair Blair Lekstrom should underline with a thick red felt marker the words "unsustainable public sector spending" and "unconscionable $4 billion deficit."

Crack open the province's First Quarterly Report 2002/03, released last month, and the first thing that jumps out at you is the dated terminology. "Deficit" belongs in the mid to late 1990s when Ottawa and most provinces bushwhacked their way through a jungle of unwieldy public sector costs. How to spend surpluses became grist for the policy wonk and media mill everywhere but in British Columbia.

By the time BC erases its deficit in 2004/05, Alberta will have celebrated its 10th year anniversary as a deficit-free province.

To put it politely, BC's deficit and $39 billion debt have overstayed their welcome. You wouldn't know it listening to the special interest group presentations to the touring finance committee. "Spend more on health, education, etc-" sounds the familiar refrain. Tally up the wish lists and you can expect to serve a few more years of work hammering the deficit down to rubble.

We've served one life sentence as it is. The cost of the BC government to its citizens is significantly larger than that of the 'have' provinces. BC's total provincial expenditures were a high 19.7% percent of gross domestic product in 2001/02 compared to 13.9 percent in Alberta and 14.4 percent in Ontario.

Labeled as the fearsome "Campbell cuts," total spending is scheduled to fall only 6 percent or $1.5 billion between 2001/02 and 2004/05. That's less than four tenths of one per cent of BC's annual $127 billion economy.

Special interest groups are wrong to link spending cuts and the deficit to recent tax cuts. The net tax cut in the February 2002 budget was $1.4 billion after health care premiums shot up $800 million. Strip away what's left of the tax cut and province is still $2.6 billion in the red. There's the rub. Overspending is the menace.

BC's remarkably large and costly public sector is crippling the private sector's ability to pay. In the 1990s, British Columbia was the one province to raise its public sector costs. Public sector wages rose in BC from $4.5 billion in 1991 to $7.5 billion in 2001, an increase of 64 percent, compared to a 21.5% rate of increase in Alberta and an 8% increase in Ontario.

Unlike the rest of the country, the average number of public sector employees in BC actually grew. Between 1991 and 2001, BC's bureaucratic roster climbed by 16.8 percent. Alberta's dropped 20.7 percent along with Ontario's at 12 percent.

Average public sector salaries have also risen to the high side of the Canadian average, consistent with Alberta and Ontario. But the rich provinces can afford to pay more. Meanwhile, public sector salaries in BC surfaced at 5.8 percent of GDP in 2001 compared to 3.3 percent in Alberta and 3.4 percent in Ontario.

The end result Between 1997 and 2000, 31,666 more people left BC than moved to the province; either a strange turn of events for Canada's most livable region, or proof positive that high public spending has done more harm than good.

When Finance Minister Gary Collins tables the 2003/04 budget in February, he should drive a stake into the heart of the deficit with a renewed commitment to spending restraint. Aggressive cost cutting, privatization of crown corporations, pursuit of private/public partnerships and corporate tax cuts following the 2004/05-balanced budget are pivotal to medicate the BC economy and spur on wealth creation.

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