For a government that prides itself as a "leader in financial accountability" the release of a surprise mini-budget in September was a bit of a mis-step. The budget update contained a little something for everyone: a new $100 million Aboriginal New Relationship Fund, beefed up income support for seniors, allocation of federal daycare and pine beetle dollars and mention of the province's mounting debt. Business was offered some relief with a reduction in the general corporate tax rate to 12%. But, it was the bio-technology sector that was the big winner---now eligible for the highly sought after refundable tax credit.

The September budget wasn't just a series of targeted handouts, the finance minister also reported that the surplus forecast figures have improved since the February budget. This year's surplus is now projected to hit $1.6 billion, including the $300 million forecast allowance. Stronger revenues prompted the finance minister to increase the government's contingency fund (the 'just in case fund') by $50 million for each of the next three years.

The forecast allowance is similar to the contingency fund, in that it is used as a cushion for government forecasting. The finance minister dramatically increased the forecast allowance amounts for 2007 and 2008 by $500 million for a total allowance of $1.5 billion. In past years the unused forecast allowance, contingency fund and left over surplus were all put toward the province's debt. The update notes a change in course and stipulates that the extra- cushioning is to cover the expected increase in pubic sector compensation with the new wage mandate. [Note to finance: earmarking funds for wage increases in advance of negotiations may not be the best bargaining strategy].

Does this mean that the possible debt payment has been reduced Well, finance minister Carole Taylor indicated that from now on all surplus dollars will be put toward the debt. Funny thing is-- that already happens. In order to be compliant with the generally accepted accounting principles (GAAP) at the close of each fiscal year all surplus dollars are applied to the debt, they cannot be carried forward.

However, for the last couple of years a disturbing trend has developed: the February budget is released with a modest surplus projected, mid-year reports forecast increased revenues pushing up the surplus, the government then veers from its February fiscal plan and engages in a series of mid-year spending announcements and the leftovers go to the debt. As long as the surplus amount at the end of the fiscal year is half of the February estimate than the government has satisfied its statutory commitments.

More alarming, is the increasing amount of multi-year capital infrastructure projects announced that are all debt financed. The update proudly proclaims a three year $1.1 billion increase to the government's infrastructure plan---just since February! Consequently, fewer surplus dollars are applied to the debt and new borrowing is increasing. It is not surprising then that the debt will climb to $38 billion by 2008. Meanwhile, debt servicing costs are at $2.179 billion this year, roughly $6 million a day. The new finance minister has a chance to change the recent trend and hopefully take some past cues from her leader.

Six years ago, while in opposition, Gordon Campbell criticized the government's debt management plan and the increasing tax dollars going toward debt interest, "What's $2.6 billion in interest Ever think of that That's more money than we get from the combined revenues from business income taxes, from fuel taxes, from property transfer taxes and from corporate capital taxes all together-.the interest tab continues to run, and it doesn't provide for anything in the long-term future of British Columbia."

In the government's mandate, the debt continued to grow and debt interest costs have hovered at $2.2 billion a year. Taylor should note that the annual debt interest costs are more than the combined annual budgets for Community Services, Labour and Citizens Services and Child and Family Development. Obviously, the current debt 'plan' isn't working. Carole Taylor has an opportunity to make debt pay down a priority in British Columbia, let's hope Campbell stands by his words and offers her some sage advice on the consequences of a growing debt load.