文章基本信息

标题：Reducing Provincial Debt
作者：McCormick, Michelle
期刊名称：Beyond Numbers
印刷版ISSN：1208-5499
出版年度：2005
卷号：Oct 2005
出版社：Institute of Chartered Accountants of British Columbia

Reducing Provincial Debt

McCormick, Michelle

Over the last few years, the ICABC has been actively encouraging the provincial government to balance its budget and develop a debt management plan. We were pleased when the government was able to balance its 2004/05 budget and pay down the provincial debt by $1.9 billion in 2005 as a result of a strong budget surplus1-this reduced the province's taxpayer-supported debt-to-GDP ratio to 18.3%, keeping BC's debt level below both Ontario and the national average.

Still, we continue to call for debt repayment because our neighbour to the east has no debt, because we still spend $1.6 billion dollars a year in interest payments, and because investors want to see our debt reduced to ensure stable tax rates.

Taxpayer-supported debt-to-GDP ratio

Over the last five years, BC has consistently maintained the lowest taxpayer-supported debt-to-GDP ratio of all the jurisdictions reviewed in the BC Check-Up report (with the exception of Alberta), and this ratio is projected to decline further over the next three years.

However, BC's debt did increase during the 1990s, at a time when other provincial governments saw their fiscal positions improve and their debt burdens decline accordingly. On average, provincial governments reduced their debt-service burdens (interest paid) from about 14.5 cents on every revenue dollar in the mid-1990s, to approximately 10 cents today.2 Several provinces were also able to introduce tax cuts while increasing spending on health care, education, and infrastructure.3

Unfortunately, this was not the case in BC, where the taxpayer-supported debt-to-GDP ratio increased steadily during the 1990s. In 1984/85, taxpayer-support debt in the province was just 13% of GDP, but by 1998/99 it had passed 20%, reaching its peak of 21.3% in 2002/03. Currently, British Columbians pay $1.6 billion in interest each year on our taxpayer-supported debt.

Debt reduction and repayment are not just an important means of improving competitiveness-they're also important because interest money takes resources away from programs and services for British Columbians.

Current debt-repayment initiatives

EC's budget surplus of $2.6 billion in 2004 is the result of several positive developments during the past three years: strong economic growth, prudent fiscal management, and larger federal government transfers. The government's ability to meet its annual budget targets and maintain a low taxpayer-supported debt-to-GDP ratio have earned BC an upgraded credit rating from the three major credit rating agencies over the past year.4

This revenue surplus also enabled the provincial government to increase spending on priority programs such as health care and education, and extend tax relief in a variety of forms. But the projected surpluses for the next two years are expected to fall to $220 million and $200 million respectively,5 and no firm commitments have been made with regard to future debt repayment.

Looking forward

In 1995, the then-NDP government developed and committed to a debt-management plan that called for a taxpayer-supported debt-to GDP ratio of 10.2% by 201 5; unfortunately, this plan was cancelled just one year later. Nonetheless, this target remains reasonable.

The ICABC recommends that the BC government commit to automatically applying any unused portion of the contingency funds to the debt, and commit to a targeted taxpayer-supported debt-to-GDP ratio of less than 10% within the next decade. We also recommend a long-term debt-management plan that sets targets for debt reduction over a ten-year period.

Predictions suggest that over the next five years, BC will experience GDP growth that is ahead of the national average. We believe the province must take advantage of this growth period to begin paying down the debt, and that the government should commit to a long-term debt-management plan now, while interest rates are low, our debt-to-GDP ratio is heading downwards, and we're in a surplus position. A plan that manages and reduces the debt, particularly as a portion of the GDP, will enable the government to reallocate to other priorities some of the $1.6 billion currently spent each year to pay debt interest and debt servicing. It will also give the government greater flexibility to deal with challenges like rising health-care costs, social demands, and the inevitable ups and downs of EC's resource-based economy.