With the recent release of the British Columbia Fiscal Review Panel report, the province is apparently still deep in deficit territory. The word "still" is important to remember, given that the last NDP budget forecast an $800 million rise in the total debt of the province in the current fiscal year, after a real $400 million decline in the previous year.

The Review was somewhat limited, in that it did not forecast total debt statistics but dealt only with the more limited Summary Accounts. By that measure, this year's deficit estimate (for March 2002) is pegged at $1.2 billion, followed by a 2003 deficit of $4.5 billion and $5.3 billion in 2004.

Should British Columbians be concerned about such numbers Yes. Should the new government get to a balanced budget as soon as possible Yes. Will the deficits be as large as projected Not likely. Here are some factors to consider: The $1.2 billion tax cut this year which will rise to a cumulative $1.5 billion in the next budget year, is assumed to cost that much to the provincial treasury.

However, as it was not part of their mandate, the Fiscal Review committee made no attempt to measure any feedback effect from the tax relief. ("Feedback" refers to how much of a tax cut is returned to government coffers via increased economic activity, activity which itself produces tax revenues.)

Feedback estimates vary, and for personal income tax, some estimate a 40 percent feedback over three to four years. But others, such as University of British Columbia economist Maurice Levi, have argued that revenues will likely increase sooner. In a paper released last year, Levi noted that personal and business tax rates likely affect interprovincial migration much more quickly (and thus subsequent economic and tax revenue growth,) as compared to how inter-country migration occurs.

The reason is simple: British Columbians don't need a green card to move themselves or their business to another province. Thus, if tax rates, red tape and the government all combine to make one province unfriendly to business (i.e., B.C. in the 1990s), movement by individuals and businesses can be quite swift, which cuts down on potential economic growth and potential tax revenues thus lost.

Of course, the opposite is also true, and if business and personal migration tips back in B.C.'s favour, that holds some promise for a balanced budget in British Columbia sooner than the Fiscal Review panel forecast.

That said, even if all of the $1.5 billion tax cut was recouped by 2004 through a combination of a quicker feedback effect and a general economic lift that also pushes tax revenues up, British Columbia would still face a $3.8 billion deficit in 2004 - less if estimates of revenues are conservative.

But those who tag the deficit solely as the result of tax cuts miss the spending side of the equation. In just direct government ministries - never mind what Crowns also spent or increased - spending rose from $20.8 billion in 1999 to projected spending in this budget year of $24.3 billion (itself a $2 billion increase in planned budget spending over the course of just one year.)

Per capita, expenditures rose from $5,149 in 1999 to a projected $5,907 this year. Even adjusted for inflation, expenditures are, per capita, $439 higher than three years ago. A $1.2 billion/$1.5 billion tax cut versus $24.3 billion in annual spending: British Columbia's deficit and debt has not been all, or even mainly, caused by recent tax relief.