This week’s release of the 2012-13 Public Accounts provides a timely opportunity to review the provincial government’s financial position and the underlying trends in the public finances. Produced by the Office of the Comptroller General, the Public Accounts cover the financial activities of all provincial Ministries and Crown agencies on a consolidated basis. It is the best available source to follow what is happening with the government’s activities in the areas of spending, revenues, borrowing and debt management.

What does the new document show?

• In the budget year 2012-13 (ending on March 31, 2013), the B.C. government posted an operating deficit of $1,146 million. This is up from the $968 million deficit projected at the time of the February 2012 B.C. budget – although in its 2013 budget, the government increased its estimate for the 2012-13 deficit. The primary reason why the deficit in 2012-13 was higher than the government was expecting a year earlier was lower than expected revenues, particularly natural resource-related revenues.
• The total provincial debt jumped by $5.6 billion last year. Some of this reflects the aforementioned operating deficit, but most of the rise in the debt stemmed from capital spending undertaken or mandated by the government to build infrastructure and maintain/improve fixed assets across the broad B.C. public sector. This includes capital investments in areas like transportation, education and health care.
• As a result, the overall provincial debt now stands at $55.8 billion. Of this, $38.2 billion is debt incurred 1) to finance past operating deficits, 2) to pay for capital spending by Ministries and 3) to build, acquire and improve assets in the health care, education, and transportation sectors. This $38.2 billion figure is sometimes referred to as the “taxpayer-supported” provincial debt.
• The remaining slice of provincial debt, amounting to $17.6 billion, is defined as “self-supporting debt,” and consists of past borrowing to finance capital projects by B.C. Hydro, the B.C. Lottery Corporation, and a few other Crown corporations.

Despite carrying more than $55 billion in debt, B.C.’s underlying financial position is strong. The province benefits from having a top-ranked credit rating that, among other things, translates into relatively low borrowing costs. Most importantly, B.C.’s taxpayer-supported debt represents a modest share of gross domestic product compared to most other provinces (see the figure below).

In short, while a figure of $55 billion in overall debt may seem worrisome, there is no cause for alarm. B.C.’s public debt is both affordable and reasonable, when viewed in relation to the size of the economy and the robust mix of revenue sources available to the provincial government. In addition, B.C.’s debt-servicing costs, at approximately 4% of government revenues last year, are also very manageable as well as being substantially lower than the debt-servicing burdens facing provinces in central and eastern Canada.