WATCH: On Monday, for the first time in 16 years, an NDP finance minister delivered a budget speech. Carole James offering a financial blue print, spending a good chunk of the existing surplus and raising taxes to pay for new spending priorities. Mary Griffin has more.
There were no major surprises in British Columbia?s budget update released on Monday, but it did outline the NDP government?s priorities over the next three-and-a-half years.
WATCH LIVE: Finance Minister Carole James delivers the NDP government's first budget update.
Posted by CHEK News: Official Page on Monday, September 11, 2017
In the budget update, presented by B.C. Finance Minister Carole James on Sept. 11, the government indicated that the real GDP growth in 2016 and the outlook for 2017 are higher than what was projected in February.
The real GDP growth estimate for 2016 is now 3.6 per cent, up from 3.0 per cent. This is due to stronger than anticipated consumer spending and export activity.
While the government?s estimate for real GDP growth in 2017 is lower than 2016, at 2.9 per cent, it is higher than 2.1 per cent projected by the previous Liberal government in February, based on employment, retail sales and housing starts.
The NDP government projects a surplus of $246 million in 2017-18, $228 million in 2018-19 and $257 million in 2019-20. Overall, the NDP will spend $51.9 billion for this fiscal year to focus on affordability. The budget will be balanced, according to the update, but the NDP government will spend $2 billion more than the B.C. Liberals planned to spend in their budget in February.
The surplus of $2.7 billion from 2016-17 went to operating debt due to balanced budget legislation.
To fund new commitments in the budget, such as an increase in the earnings exemption for social assistance, the government pointed to the improved revenue forecasts as well as changes to key revenue sources.
These changes include an increase in the individual income tax rate from 14.7 per cent to 16.8 per on taxable income over $150,000. James said this increase was brought in by the former Liberal government a few years ago but was then clawed back.
?We?re living up to our promises and our commitments,? James said.
?Those commitments and promises included those tax increases. They included making the tax system fair and we believe everyone should pay a little bit to support programs and services.?
James said the top two per cent of income earners in B.C. will pay the increase, as it is a tax on the income they earn over $150,000.
?I think this budget is a balanced approach,? James said.
?This is a balanced approach where yes we asked those at the top to pay a little bit more to contribute to all of the programs and services that are needed for all British Columbians but we also recognize the importance the competiveness in our tax system.?
There is also increase in the general corporate income tax rate to 12 per cent, from 11 per cent, which James said will keep the province competitive with other western provinces.
?We believe they can pay a little bit more to be able to contribute to the services and programs that are a benefit to everyone,? James said.
?When you?re taking a look at large employers, I?ve certainly heard the concerns that lack of support of everything from childcare to affordable housing and the struggles that individuals and businesses and corporations are having finding employees because of those pressures so other investments, key investments that we?re making in this budget to supporting those corporations.?
The International Business Activity Program, which provided tax breaks on provincial corporate income tax to international financial organizations, will be eliminated. The program has been in place in the province for around 30 years.
?The intent it appears was to spur investment and create jobs in our province but in examining this program, there appeared to very little evidence, concrete evidence on jobs that have been created,? James said.
?This program provided tens of millions of dollars that were given out in tax refunds to companies, to investors and to banks. We believe that every dollar needs to be accountable and we felt that there wasn?t enough evidence to show these were dollars well spent.?
Another tax change is phasing out of PST on electricity starting with a 50 per cent cut effective in fall 2017 and eliminated by April 2019. Small business corporate income tax rate has already been reduced to two per cent from 2.5 per cent. This took effect on April 1 of this year.
The provincial preferential income tax treatment for credit unions was restored on Jan 1, 2017. This means there will be $15 million a year to credit unions to reinvest in communities.
The carbon tax rate will increase by $5 per tonne of CO2 equivalent emissions per year for four years, starting on April 1, 2018.
The rate will then be $50 per tonne by 2021, a year ahead of the requirements in the Pan-Canadian Framework. B.C.?s carbon tax is currently at $30 per tonne.
Revenue neutrality for carbon tax is also being eliminated. This means the requirement to prepare an annual Carbon Tax Report and Plan will be gone, as will the requirement to return the carbon tax revenues to taxpayers, which means the government can allocate some funding to green investment or other goals.
?We believe that the value of a carbon tax is carrot and stick,? James said.
?Asking people to pay a carbon tax encourages a change in people?s behavior but also providing incentives and opportunities for people to be able to change their behaviour is just as important and so ending the revenue neutrality means we can utilize the resources for green initiatives to put more investment in transit, to be able to give people the choice to be able to change their behaviour that may not be there for communities.?
James said the government will be upfront about where the revenue is coming in and where it is being spent.
The low- income climate action tax credit will be increased on April 1, 2018. The low and middle income climate action tax credit maximum annual amount will go from $115.50 to $135 per adult, and $34.50 to $40 per child. Single-parent families will receive the adult amount for the first child in the family.
Implementing the carbon tax increase was one of the elements of the NDP-Green agreement.
MSP Rate Reduction
The budget update also included a plan to eliminate Medical Services Plan (MSP) premiums in the next four years.
On Jan. 1, 2018, MSP premiums will reduced by 50 per cent for all British Columbians. No new application process will be necessary.
The previous Liberal government had said it would limit the 50 per cent reduction to individuals and families with income up to $120,000. However, James said this would have caused more work for individuals and employers, who would have to determine the family income.
?Facing these complexities and knowing the program would be eliminated in a few years, many employers would likely stop administering group plans, forcing employees to apply for the 50 per cent reduction on their own,? the budget update said.
The income threshold where households are fully exempt from paying MSP premiums will also be increased by $2,000. For example, a single person earning $26,000 net income per year will be exempt, as will couple with two children earning $35,000 per year.
The revenue the government receives from MSP premiums is expected to decline by 12.1 per cent in 2017/18 and a further 40.2 per cent in 2018/19. A task force will also be established to look at how to eliminate the premiums and replace the revenue, with a report expected in February.
?We are the only province that does it through an MSP system which costs a lot to administer, is a nightmare for people to try and manage the system,? James said.
The NDP government said there will be $208 million over four years to build more than 1,700 new units of affordable housing across B.C. James said there will be affordable rental housing for seniors, families and people with mental health issues.
There is also $291 million allocated over two years to build 2,000 new modular housing units and more than $170 million to operate the new modular housing units for people who are homeless. The operating costs include 24/7 staffing and support.
Seven million will also go to the Residential Tenancy Branch. According to the government, the money will reduce wait times for dispute resolution services, establish a new compliance unit and support a 27 per cent increase in resources for the branch.
Social Assistance Rates
There is $472 million in the budget update to increase social assistance rates, including a $100 per month increase to both income assistance and disability assistance, on top of the $77 increase implemented by the Liberal government.
Earning exemptions for social assistance recipients will increase by $200 a month. An individual receiving income assistance can now earn up to $600 a month on top of their monthly benefits while a single person receiving disability assistance will be able to earn up to $12,000 a year on top of their monthly benefits.
As for the annual bus pass addressed in the throne speech, James said the details are being worked on for the Jan. 1, 2018.
The NDP government is putting $681 million over three years toward for the K-12 system, including $521 million to provide improved classroom supports for children, capital funding of $50 million to address space requirement and $160 million for enrolment growth and other pressures.
A total of $19 million will go toward restoring tuition-free Adult Basic Education and English Language Learning.
A total of $322 million will go to a response to the fentanyl crisis in the province, including $265 million for the Ministry of Health, $32 million to increase police resources and address BC Coroners Service pressures and $25 million to establish the Ministry of Mental Health and Addictions.
Taxpayer-supported debt is forecasted to be $44.9 billion in 2017-18, $47 billion in 2018-19 and $48.6 billion in 2019-20. The taxpayer-supported debt is projected to end higher than outlined in the February budget due to capital infrastructure investments and the impact from the government?s decision to cancel tolls on the Port Mann Bridge. There is $479 million in the budget to remove tolls on the Port Mann and Golden Ears bridges, which is expected to save the average commuter $1,500 and a commercial truck driver $4,500.
The debt increases associated with the new investments include $2.8 billion for education and health facilities, $3.8 billion for transportation sector projects and $1.7 billion for other initiatives over the three year period.
The taxpayer-supported debt to GDP ratio is expected to peak at 16.4 per cent in 2018-19 and end at 16.3 per cent in 2019-20.
Five-hundred-and-six million dollars will go to direct wildfire fighting costs, $100 million to the Canadian Red Cross to support people and communities impacted by the wildfires, $140 million invested for wildfire prevention and habitat restoration and $15 million in new capital funding for wildfire infrastructure.
One of the NDP?s campaign promises was $10-a-day childcare, which was not included in the budge update. The update did include an additional $20 million for new childcare investments. This was originally provided by the Liberal government in February, which increases provincial funding for early childhood development to $330 million this fiscal year and will support up to 4,100 new child care spaces.
The budget update said the NDP government will work closely with advocates and parents to develop a longer-term plan for affordable childcare in British Columbia.
Another promise missing from the budget update is a $400 rental rebate. James said both a child care strategy and a housing strategy is being worked on, beginning in the fall.
?We are committed to $10-a-day daycare and $400 rental rebate,? James said.
?That?s a discussion we still have to have with the Greens because that?s part of our discussion around how we get to the philosophies and policies we agree on together.?
She referenced that some of the promises made during the campaign were not included in the budget due to the timeline following the election results, which saw the NDP and Greens sign an agreement for a minority NDP government. Premier John Horgan was sworn in back in June.
?We?ve approached this budget in a month time period that normally takes months to create,? James said.
?I?ll acknowledge that we didn?t have the time to implement all of the commitments in the timeline that was laid out and we are going to work on that as we come into February.