British Columbia's budget back on solid ground if cost growth can be contained

B.C.'s per student spending higher than most most provinces. (CNW Group/Conference Board of Canada)

OTTAWA, Aug. 6, 2014 /CNW/ - British Columbia's balanced budget in fiscal year 2013-14 will be just the first of several in a row—if the province can rein in growth in spending on health and education, according to The Conference Board of Canada's first British Columbia Fiscal Snapshot.

"B.C. was one of only two provinces to report a budget surplus in fiscal 2013–14, along with Saskatchewan," said Matthew Stewart, Associate Director, Canadian Outlook. "As the latest budget indicated, fiscal restraint is the new norm in British Colombia. Strong economic growth will boost revenues over the next four years, setting the province up to run surpluses through 2017. To maintain the budget in a surplus position, however, B.C. will need to keep growth in program spending in check."

HIGHLIGHTS

  • B.C. was one of only two provinces to post budget surpluses in 2013-14 (along with Saskatchewan), a trend we project to continue through 2017.
  • B.C.'s health spending per capita is much lower than most other provinces, but education spending is, on a per-student basis, above the national average.
  • Economic growth has been soft in B.C. in recent years, but is expected to surpass the national average in 2014 and 2015.

Economic growth has been soft in British Columbia over the past few years, but the province's  real gross domestic product will advance at a slightly faster pace than the national average in 2014 (2.3 per cent) and 2015 (2.9 per cent). The forestry sector is benefiting from renewed demand for housing in the U.S. and from its ability to capitalize on growing markets for wood products in China. The mining sector will continue to boost B.C.'s economy, but growth is set to decelerate over the near term.

The latest provincial budget indicates that the government plans to keep growth in health care expenditures to a modest 2.6 per cent annually on average—a task that will require significant reforms and efficiency gains in the sector. The Conference Board's projects that without reforms, health care spending in B.C. would have to grow by an average pace of 4.3 per cent per year over the next three fiscal years just to keep pace with inflation and demographic changes in the province.

This same holds true for program expenditures on education. In its 2014 budget, the government announced its intention to cap education spending growth at just 0.6 per cent per year over the forecast period—a rate of growth that has only occurred once in the last 10 fiscal years.

The Conference Board projects that education spending, based on average real spending per student, projections for enrolment, and inflation in the education sector, would need to increase by an annual average rate of 2.7 per cent to maintain real spending per student. The difference in growth rates between our analysis and the government's budget projection translates into $1.6 billion more in education expenditures for the next three fiscal years. To close the projected funding gap, changes would be required in how public education is delivered. 

After adjusting the data to account for B.C.'s demographic composition, health spending per capita is much lower than in most other provinces. The province's education spending on the other hand, on a per-student basis, is above the national average.

If the province is successful in its expenditure control, the Conference Board forecast suggests that the surplus achieved in 2013–14 will continue to increase to nearly a billion dollars annually by fiscal year 2016–17.

British Columbia Fiscal Snapshot: Back on Solid Ground is the first such publication from the Conference Board's Forecasting and Economic Analysis division.

SOURCE Conference Board of Canada

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