B.C. budget spells disaster for province’s finances

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Appeared in Business in Vancouver, February 29, 2024
B.C. budget spells disaster for province’s finances

The Eby government recently tabled its 2024 budget. According to projections, British Columbia will incur a $7.9 billion operating budget deficit in 2024/25 with large deficits over the next two fiscal years. Once long-term spending is factored in, including on highways and schools, net debt (total debt minus financial assets) will reach a projected $129 billion by 2026/27—nearly triple the pre-pandemic level in 2019/20.

To be clear, this debt explosion is not just a result of the pandemic. In fact, more than 80 per cent of projected debt accumulation will occur post-pandemic. Instead, it’s a direct result of the reckless spending decisions by successive governments.

After nearly two decades of spending restraint from 1999/00 to 2016/17, B.C. experienced a marked increase in government spending, which began prior to the pandemic, as the Horgan government increased program spending at a far greater pace than was necessary to account for the effects of inflation and population growth. From 2017 to 2019, per-person (inflation-adjusted) program spending grew (on average) by 4.7 per cent each year—nearly 10 times the growth rate from 1999 to 2016.

High spending has continued under the Eby government and inflation-adjusted program spending reached its highest level on record in 2022/23 (the latest year of comparable data) at $14,275 per person—$2,566 higher than in 2019/20.

Again, the government can’t simply blame COVID. Even excluding COVID-related spending, B.C.’s per-person (inflation-adjusted) program spending was at a record high in 2022/23.

Although the Eby government projects that spending in almost every major area (excluding health care) will be essentially flat from 2024/25 to 2026/27—that includes spending on housing, finance, environment and climate change, education and child care, and post-secondary education—for a government with a proven track record and clear proclivity for high spending, this is an unlikely outcome, which means the government is underestimating future massive deficits and debt accumulation.

Of course, British Columbians must pay interest on government debt to the tune of an estimated $4.1 billion this year and growing to $5.7 billion by 2026/27. That’s taxpayer money no longer available for important programs such as health care or education.

In its recent budget, the Eby government’s proclivity for high spending has led to massive deficits and debt accumulation. Unfortunately, the outcome may be even worse than projected.