Finally-A Balanced Budget

On February 17, 2004, the BC government kept their election promise, balancing the budget for the first time in more than a decade.

At this year's budget lock-up in Victoria, Richard Rees, FCA; John Cowperthwaite, FCA; and Barb Carle-Thiesson, FCA, worked to get the message out about our support for this milestone.

"Balancing the budget means we're no longer running up a tab and expecting our children to pay it," Rees told the press. "We're living within our means, rather than borrowing against the future.

"The government made a promise to break the cycle of never-ending deficits and mounting debt," he continued. "They've kept that promise, and I congratulate them."

The move to GAAP

With the usual talk about the impact of the budget on health care and education came a question we thought would get lost in the shuffle: "What about GAAP?" Although the balancing of the budget was not based on the move to GAAP, it's a concept that needs to be explained to the public.

In case you're asked about GAAP, here's a bit of history: In 1999, the Budget Process Review Panel, led by Doug Enns, FCA, was appointed by government to recommend ways to improve the budget process in the wake of the Morfitt Report (issued by former Auditor General of BC George Morfitt, FCA). Among the key recommendations subsequently released was the adoption of generally accepted accounting principles. Yet while most of the recommendations from the Enns report were adopted, the use of GAAP was not.

But by 2001, a new BC government had been elected; and soon after, the new minister of finance made good on a campaign promise by introducing an amendment to the Budget Transparency and Accountability Act to mandate the use of GAAP by 2004/05.

Now they've made good on this mandate: BC is the first jurisdiction in Canada to adopt the use of GAAP, which makes government budgeting and accounting transparent.

Budget by the numbers

The budget included estimated surpluses of $100 million for 2004/05, $275 million for 2005/06, and $300 million in 2006/07. These projected surpluses are based on a reasonable economic growth forecast of 2.8% in 2004 and 3.1% in each of the following two years. In addition, cushions of more than $400 million in each of the next three fiscal years should help to protect against unforeseen circumstances.

The CAs of BC, along with other business groups, cheered the government both for balancing the budget and for doing so using conservative numbers.

Key issues addressed

A number of the issues addressed by the government directly mirror the recommendations delivered by CAs around the province during the budget consultation process last fall. CAs brought four key issues forward: increasing the number of seats in post-secondary institutions; improving BC's productivity; reducing the disparity between urban and rural communities; and developing a long-term debt management plan.

Of these four key concerns, the government addressed three, as follows;

1. In an effort to ensure a well-trained workforce, the government has committed to creating an additional 12,000 post-secondary seats over the next three years and 25,000 new seats over ten years.

2. The Scientific Research and Experimental Development Tax Credit has been extended to 2009. This 10% income tax incentive will help increase innovation, research, and development, all of which are directly related to improving the province's productivity.

3. In addition, money allocated to improving the province's transportation network will increase access to markets and businesses. Of the $1.3 billion budgeted for these improvements, the majority-$836 million-is earmarked for the Heartlands.

Other highlights from the budget include

* An additional $29 million over three years to support EC's Oil and Gas Development Strategy;

* A further $17 million to expand the Port of Prince Rupert and open it up to container traffic;

* $694 million in capital funding for new construction, equipment, and upgrading of existing health facilities over the next three years;

* Increases to the K-12 education budget by $313 million over three years;

* $105 million more for advanced education in the next three years; and

* A rise in the Home Owner Grant threshold from $525,000 to $585,000.

Balancing the budget is a huge accomplishment, for which we give the government our praise. Now that this goal has been achieved, we'll be watching to see how the government plans to address the final recommendation from the budget consultation process: paying down the debt. A long-term debt management plan is the next step in securing the financial future of British Columbians.

For more information on the budget visit www.gov.bc.ca/bcbudget.

By Michelle McCormick, Manager of Public Affairs

Copyright Institute of Chartered Accountants of British Columbia Apr 2004
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