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politics

David Parkins for The Globe and Mail

With B.C.'s deficit falling more quickly than expected, should the province cut taxes, boost spending - or return to a balanced budget sooner?

The story so far:

The size of the B.C. government's deficit for the 2009/2010 fiscal year has fluctuated wildly over the past 14 months. The Liberal government forecast a $495-million deficit in May, 2009, during the last election campaign. Four months after winning re-election, Finance Minister Colin Hansen announced the deficit was expected to rise to $2.8-billion. Then, on July 8, public accounts showed a deficit of only $1.8-billion for last year. Government cutbacks since September had reduced spending by $833-million, while tax revenues from natural resources increased more than expected. The deficit was financed by borrowing, pushing up the provincial debt to $41.9-billion. The provincial economy as measured by real GDP contracted in 2009 by 2.3 per cent. The decline marked the first recession in real GDP in B.C. since 1982.

Political calculations:

Despite the sharp improvement in the provincial books, Mr. Hansen says the province will not have a balanced budget until 2013. Coincidentally, the next provincial election will be held in May, 2013. Mr. Hansen says any expansion of programs must come out of savings found elsewhere in government spending. The NDP campaigned in May, 2009, on running a bigger deficit to increase spending on health care and housing, but also promised a balanced budget by 2013. NDP finance critic Bruce Ralston has called for sustained stable funding for education and criticized cuts in health care and cutbacks in funding to arts groups and sporting organizations. The NDP also vigorously opposed two new taxes that will help the government balance its budget: the HST and the carbon tax on gas at the pump.

Players:

Mr. Hansen on July 8: "The sooner we can get this province back into a surplus position, the sooner we will have the opportunity to explore new programs and new fiscal measures." Mr. Ralston during the May, 2009, election campaign: "Both parties agree there will be a deficit going forward. The question is, based on projected government revenues, what is the deficit going to look like? I say we have a plan that we put forward. I think our plan is better able to meet the economic challenges."

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