B.C.s fiscal tsunami
by Dermod Travis,
If the term ‘fiscal cliff’ became part of the daily lexicon over the holidays, perhaps a new term should come into vogue in B.C. before the May election. Call it the ‘fiscal tsunami’ and it could hit B.C.’s shores sooner than most think.
It’s the hangover that comes from creative accounting, financial wizardry and a little reliance on a Magician’s sleight of hand.
B.C.’s budgets are chalk full of household terms like “Notional Allocations to Contingencies.”
What they are not is an exercise in clarity or brevity. The B.C. government’s 2012 budget came in at a mind-numbing 64,000 words or one-third the length of the Old Testament.
In spite of this, the media still tries – in a matter of hours – to report the salient facts in stories that might run 1,000 words each or three minutes on television.
Count on some key numbers to be in those reports: taxes, education and health care spending, the deficit or surplus, and major infrastructure announcements. A statement or two from the minister patting the government on the back will be thrown in, as will a few comments from critics and so-called experts.
However, what’s often missing from these reports is any real historical analysis of public finances, particularly when it comes to debt and future fiscal commitments.
Debt can be an albatross on any government. Just ask a recent college or university graduate about that student loan hanging from their neck.
It presets the amount of fiscal room a future government has to set new priorities or address unforeseen needs.
But just try to get an accurate handle on B.C.’s debt. It’s like trying to grab a fistful of water.
There’s the debt represented by accumulated budgetary deficits and there’s the debt most British Columbians begrudgingly accept that they are on the hook for as well through corporations such as BC Hydro and BC Ferries.
Taxpayers also guarantee a host of other public debt from student loans to “the Columbia Basin Trust joint venture co-venturer debt.”
Some of it ‘taxpayer supported,’ some euphemistically called ‘self-supported.’
But whether it’s through a rate increase, a toll or taxes, the B.C. government signed the IOU and one way or the other B.C. taxpayers are expected to pay the piper.
So exactly how much is B.C. in debt?
According to B.C.’s Public Accounts, taxpayer and self-supported debt stood at $51 billion last year. Some peg it higher, others lower. It’s a sum that doesn’t include revenue the government has deferred, a figure that has grown from $647 million in 2002 to $10.6 billion in 2012.
But even at the more modest $51 billion, what does that mean for an ordinary taxpayer? B.C. only counts eight billionaires among its ranks who might have some inking at what $1 billion might look like.
So knock off six zeros from $51 billion and imagine B.C. as a family home.
In 2002, the home carried a first mortgage of $35,500. Despite paying $22,711 in interest charges over the next 11 years, the mortgage still grew to $51,000 by 2012.
Put back into a provincial context, that’s $22.7 billion in interest charges that couldn’t be used to train a new nurse, teach a skill or introduce measures to address child poverty.
And while personal income taxes don’t pay the interest or the principal, British Columbians still pay to service most of the other debt the province guarantees on behalf of taxpayers.
For instance, BC Hydro’s long-term debt rose from $6.9 billion in 2002 to $10 billion last year, a sum that does not include more than $2 billion in deferred costs which supposedly will be expensed in future years.
Someone has to pay to service that debt and in BC Hydro’s case the burden fell disproportionately on the the utility’s residential users where revenue increased by a whopping 65 per cent, while consumption rose 21.3 per cent.
But it’s not just the first mortgage that should worry taxpayers. Think credit card purchases.
B.C. has made some pretty hefty contractual commitments to folks in the future.
BC Hydro has committed to purchasing $53.1 billion in power from private energy producers over the next 30 years, a sum greater than B.C.’s entire debt.
BC Ferries will soon be kicking the hulls of a few new members to its fleet. Their cost will likely be borne by new debt.
A number of crown agencies use derivative interest swaps as a way to try and reduce interest rates. It hasn’t always worked out so well. Sub-prime mortgages weren’t such a great idea either.
The Transportation Investment Corporation, responsible for the Port Mann/Highway 1 improvement project, last year reported $112 million in losses just from its hedge valuations that have been in the vernacular “realized.”
These numbers are why every political party has a duty to level with British Columbians about what is fiscally feasible and what is not in their campaign platforms and how much financial room any government will have going forward.
And they need to do it well before the May 14th election.
Dermod Travis is the executive director of IntegrityBC. www.integritybc.ca
Next up: Picking our pockets. ( to be posted Wednesday Jan. 23)
Comments
$647,000,000 in 2002. $10,600,000,000 in 2012. Thank you Liberals for your financial wizardry! Captains of free enterprise!After fleecing the ordinary taxpayers of this province they will get a golden pension the sheeple could only dream of.
Just be thankful it wasn’t the NDP in power for the last few years, woulda been twice as bad….
Just be thankful it wasn’t the NDP in power for the last few years, woulda been twice as bad….
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Thats what all the liberals tell us. Isnt it strange that that the provincial debt was only a fraction of what it is today since the lieliberals took over..
Well yeh look at the fast ferry debt?
Cheers
Hydro was forced into contracts with private energy producers to the tune of 53.1 billion, and people complain about the cost of site C at about 10 billion. Site C would have been much cheaper. Those behind IPP’s are fiberals friends and ex hydro managers. The sad part is that Site C still has to be built to cover when IPP’s are not producing. 53.1 + 10= 63.1 billion. Grizzly any comment on that?
Hydro can produce power much cheaper than the IPP’s but is forced to cut back on their own generation and buy much more expensive IPP power.
Thank you seamutt.
Cheers
The bigger question to me, and I hope the author of this article can respond in the comments – is who do we owe this money to?
I suspect the government owes it to – us – in a round about way. Who holds government bonds? Pension plans – including the CPP. Every paycheque 10% goes into the cpp, 5% from the employee 5% from the employer. And then there’s the government workers who pay into their pension plan, and private pension plans. Sure, some goes into equities, some buy bank term deposits who then lend that money to – the government.
So what is really happening – is those who save, are lending their excess production – to the government, who then gives it to those who produce less than they consume. And the idea – I suppose – is those people who are producing less than they consume, will one day produce more, and pay it back. But considering we’ve been deficit spending since the 70’s, just when will this correction take place? Especially when you have fewer workers supporting more retirees. I think all we’re really doing via government borrowing/spending is the eat drink for tomorrow we may die approach. Someone is going to get screwed, and likely they are 40 and under right now.
Debt is not the only issue… more and more the BC liberals have taken us on a path of widening the gap between rich and poor attacking the middle class and the bedrock of free enterprise that ensures equal opportunity for all British Columbians.
Take for example the move to regressive taxation through policies like the HST that tax the revenue on new small business with a flat tax regardless of profitability, while simultaneously lowering the corporate progressive tax rate enabling a monopolization of industry and wealth in the established hands.
New small business startups are now at their lowest levels since the early 70’s and falling fast. We are on the fast track to a European style conglomerate based economy of the ultra rich where entrepreneurialism is dying a death of a thousand cuts.
In BC under the liberals we have more revenue from student tuition, than we do from corporate taxation… we collect more in MSP premiums, than we do from corporate taxation… this is regressive taxation giving multinationals a free reign at our resources and making the middle class and the poor pay the same rates as the rich.
Rural schools close, rural court houses close, ferry services are cut back, mental health issues are downloaded to the municipalities, appurtennancy for forest tenures is dismantled… and we are told it is in the name of efficiencies, but all in common it is an attack on equality of opportunity and is regressive in nature… all statistics show a failure to uphold free enterprise principles and the policy is sold to us by a party that claims the free enterprise label.
Truth be told the ndp were more of a free enterprise party closer to the WAC socreds than the liberals ever were.
BC has been sold to the highest bidder on Wall Street, we have become a corpocracy run by the corporations (foreign and domestic) and the people of BC had no idea we were even for sale in the first place. BC is being sold into enservitude… especially those in the middle class.
That’s largely true about the latter day NDP under Clark, Dosanjh, and especially Dan Miller, Eagle.
Too bad they didn’t elect Corky Evans as their leader ~ he could see what the others, including Ms. James and Dix are still missing. Namely that the government’s books only show the Liabilities, the accumulated “debt”, and never the ASSETS. Which are growing too, and more likely than not most years, considerably faster.
In any private business that difference between Assets and Liabilities would be recorded as changes to the Capital Account ~ what the owner’s investment is then worth in money on the date of the financial statement, the accounting equation being Assets=Liabilities+Capital.
In the case of a private business the profit or loss for the year is NOT entirely analogous to ‘cash’ received minus ‘cash’ spent, but rather an accounting computation that doesn’t equate to ‘cash’ at all that’s always finalised on the Balance Sheet as an increase or decrease in owners’ Equity.
There is nothing comparable in government accounting to show what each British Columbian ‘owns’ as our individual share of government held assets. If a government were truly being well managed, as indicated by having proper accounting, we might expect to get a dividend back from it at regular intervals, instead of feeding its insatiable maw with ever more taxes (and still see it, and we, mired further and further in debt with each passing year).
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