Highlights:

B.C.’s fiscal position has deteriorated in recent years. In February, the B.C. government brought down its Budget projecting a $7.9 billion operating deficit in 2024/25, the largest in the province’s history. Record deficits continue across the forecast horizon. They follow a $5 billion deficit for the most recent fiscal year (2023/24).

• The government's First Quarterly Report, released on September 10, shows the projected 2024/25 deficit is now $8.9 billion, a $1 billion increase relative to the budget, reflecting higher spending.

• At 2.1% of GDP, the projected deficit in 2024/25 is larger than the 1.8% of GDP recorded in 2020/21 during the COVID-19 emergency – when the economy was largely shut down, and the unemployment rate was 13.3% compared to 6% today.

• During 2021/22 and 2022/23, temporary factors delivered a roughly $5 billion revenue windfall to government coffers. Spending was increased on the back of these higher revenues. As revenue windfalls dwindled, elevated levels of spending continued and have led to a sharp decline in the budget balance.

• As recently as 2021, B.C. had one of the best fiscal settings of any province with a long track record of balanced budgets or small operating deficits, the lowest debt load in the country, and a top-tier credit rating.

• Today, B.C. is running the largest deficit in the country relative to the size of its economy, has seen debt levels surge faster than any other comparable jurisdiction, and seen repeated credit rating downgrades that raise the cost of borrowing to fund the deficit.

• A key question for the government is how it will place the province's finances on a more sustainable footing. Unless economic growth improves (on a population-adjusted basis), B.C. may need to significantly increase taxes and/or reduce spending to stabilise its indebtedness.

• The government should commit to a fiscal anchor such as a plan to return, over a specified timeframe, to a balanced budget, return provincial debt to no more than 20% of GDP, or return debt servicing costs to no more than 3-4% of expenses.

• BCBC’s concerns align with Canada’s Parliamentary Budget Office, academic economists, and the major international credit rating agencies.