Five things to watch for in Tuesday’s B.C. budget

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B.C. Finance Minister Michael de Jong will take delivery of his repaired budget-day shoes in Victoria on Monday – a media stunt designed to deliver an austerity message on the eve of presenting his next provincial budget.

The annual ritual of the finance minister's budget shoes has become a device to set the tone for the year's fiscal plan, and Mr. de Jong is expected to present a balanced budget which will preach fiscal restraint rather than new goodies.

Here are five things to watch for in the Tuesday budget plan:

Back in black

Mr. de Jong is expected to table a balanced budget, with an update confirming that the current year is still on track to be in the black despite sluggish economic growth. The B.C. Liberal government has made balancing the budget a political priority, especially after it missed successive targets. Circumstances have not made it easy in the current fiscal year. Economic forecasts have been trimmed, with tax revenue and natural-resources revenue dropping as a result.

To compensate, the government cut capital spending and dipped into contingencies. At the last fiscal update, a thin surplus of $165-million was forecast. For the coming year, the outlook is a little rosier and Mr. de Jong has a little more breathing room – private-sector forecasters predict 2.3-per-cent growth.

Fiscal cushions

The province plans for things to go wrong – the government loses a lawsuit, social assistants caseloads swell, natural disasters strike – with contingency funds. Had his government accepted last month's B.C. Supreme Court judgment on the teachers' contract, that one ruling alone would have left the province facing as much as half-a-billion dollars in retroactive costs. But Mr. de Jong left himself a small cushion this time around, a total of $325-million for this year. Jock Finlayson, chief economist for the Business Council of B.C., said prudence dictates a bigger fiscal cushion – as much as three per cent of the total budget. That would require a contingency fund closer to $1-billion.

Transforming natural gas into gold

A year ago, the B.C. government unveiled its natural-gas strategy to land five or more LNG processing plants. Since then, the government has struggled to devise a tax regime that would deliver the promised revenues without scaring off investors. The legislation is still not complete. However, Mr. de Jong is expected to announce the fiscal framework for LNG on Tuesday, even though it has no financial implications for this year's budget.

Payroll predictions

The public-sector payroll chews up roughly half of the entire provincial budget – about $24-billion for 372,000 workers. The finance ministry is careful not to give away the provincial bargaining expectations, but a careful read of the assumptions could offer some insight. An increase of one per cent in total compensation for all public-sector employees would cost roughly $240-million. The government's bargaining mandate has changed this year from the past "net zero" guidelines. Now, public-sector unions can negotiate longer-term agreements with modest wage increases but the prospect of more if the economy performs better than expected. Through the "economic stability dividend" program, employees can see a wage lift of 0.5 per cent if economic growth is one percentage point above the forecast. So far, labour deals that cover about 20 per cent of the public sector have been signed under these terms.

The public-asset selloff

The balanced-budget plan for the fiscal year that ends in March included tax hikes for corporations and high-income earners, but it would still be in the red if not for the plan to sell off $800-million in public assets. Mr. de Jong's budget on Tuesday should include an update on how that selloff has progressed, but it will also reveal if there is more heading to the auction block.