B.C. Finance Minister Carole James has defended her September budget in the media, in the legislature and to members of the B.C. business community. This week, she'll face her toughest audiences, and the outcome of these meetings will have a significant bearing on the province's finances.
Ms. James is travelling to Montreal, Toronto and New York to sit down with officials representing banks, investment firms and credit-rating agencies.
She will be grilled by analysts who are not interested in hearing how the budget aims to improve affordability for families, helps children in the classrooms or how it reduces economic inequality. So she will talk, instead, about how increased spending on welfare, child care, education and social housing are going to make B.C. a more secure haven for investor dollars.
The September budget update boosts program spending and increases taxes on big business and the wealthy. These were the NDP's commitments to voters in the past provincial election. "Building a long-term, sustainable economy means investments in the very people who build that economy," she said in an interview in her Victoria office as she prepared for her first investors' tour. "That's the message I'm taking."
Mike de Jong was B.C.'s finance minister for the past five years. He's now sitting on the opposition benches, warning that the NDP spending plans will undo all his years of careful fiscal stewardship that created the robust surplus, strong economic growth and the AAA credit rating that Ms. James inherited when she moved into the Ministry of Finance in July.
"For the last number of years, B.C. has been that incredibly safe harbour for pension funds, insurance companies, sovereign wealth funds, central banks – all of whom are required to have a certain amount of their portfolio invested in AAA-rated paper," Mr. de Jong noted in an interview.
"If they see a risk of a credit downgrade, they will want a higher interest return. On a borrowing portfolio the size of British Columbia's, that can quickly add up to hundreds of millions of dollars."
Mr. de Jong agreed to dispense some advice in the spirit of working in the best interests of the province. "She can highlight the underlying strengths of the B.C. economy, highlight the underlying strength of the fiscal balance sheet that she and her government inherited. And what she'll have to do – and she may encounter some challenges here – is convince people that she intends to keep it that way."
The BC Liberals spent 16 years telling those investors that the province's economy had been ruined by the tax-and-spend NDP government of the 1990s. That criticism means Ms. James will have to overcome some skepticism.
Ms. James says she has a good story to tell: that her budget offers a surplus, conservative economic forecasts and healthy contingency funds that are every bit as prudent as Mr. de Jong's fiscal plans tabled earlier in the year, before the change in government.
"I think we have set all the conditions to continue to see the bond ratings that we have," she said.
"I'm feeling confident. We are the envy of the country when it comes to economic growth, but this budget also makes key investments that will not only help people in this province, but will also help grow the economy. I think we'll show to the financial world that we are looking long term to strengthen the economy."
Perhaps the toughest questions she will encounter relate to the state of affairs at the Crown-owned utility, BC Hydro. Back in January – yes, on Mr. de Jong's watch – Moody's Investors Service signalled alarm about the utility's burgeoning debt, saying it posed a risk to B.C.'s credit rating.
Now, as the NDP government is poised to make a decision on whether to proceed with construction of the Site C dam, which will add at least $9-billion to Hydro's debt, Ms. James will be asked how her government will manage this growing problem.
The NDP has sent the Site C project, already two years into construction, to an independent review. A final report isn't due until November, but in the interim, the review has uncovered significant questions about the project's finances and business case. As well, last week, Hydro's president revealed a key construction milestone will be missed, adding $610-million to the cost.
"There are all kinds of unanswered questions about the project's economic feasibility and the challenge of any decision, whether it goes ahead or not," Ms. James acknowledged. But all she can tell investors this week is that her government hopes to make a decision quickly on the future of the project, "because uncertainty is not good for anyone."
That uncertainty will hang over B.C. for months to come. The day of reckoning with the bond-rating agencies may not come until after Ms. James brings in her first full budget next February.