Today, the provincial government released its budget for fiscal 2005/06. During the lockup, Finance Minister Colin Hansen answered reporters' questions about that document and the spending plans contained therein, including an election slush fund that's been setup at the Ministry of Small Business and Economic Development. The following is a rush transcript of that news conference.
Media Minister, in Minister Les's budget, he's got a new fund that's going from $18 million to $236 million. Would we be wrong or cynical to characterize that as sort of an election slush fund?
Minister Hansen Actually, I recall a minister in the previous government who made a comment - something to the effect of that their government made announcements for which there was no funding. What we have, in today's budget, is there's actually some funding for which there are not announcements. We are going to be seeking the legislature's approval to allow for spending. And, by the time those issues get before the house, the details of those will be out. But they are actually earmarked in a couple places in the budget documents to give a sense of what they are. They're around economic development initiatives and other facilities in the province that will benefit primarily in an economic development sense.
Media Before the writ issued?
Minister Hansen I can't answer that specifically. I believe the answer to that is yes. I believe all those announcements will, in fact, be out before the writ.
Media Minister, the last three years have been marked by tax cuts, layoffs. With all this good news, was the restraint worth it? Was the pain worth it?
Minister Hansen Well, I think it has been a pretty profound restructuring of how government operates in British Columbia. But, I think, as we look at places where there were changes in the last three and a half years, we've been able to get costs under control. A lot of times, when you hear from certain groups complaining about so-called cuts, what they're really complaining about is not the actual services to the people being impacted but their impact on those delivering the services. And I won't minimize the fact that those were significant, in some cases. But when it came to actually delivering services, we did our best across all ministries to protect those services. But given the $3.8 million structural deficit we inherited, we had to get the affairs of government under control or we would not be seeing the benefits of it as we are today.
Media Was there any other way to get to today - today's good news - apart from all the cuts you made?
Minister Hansen Well, I would take issue with the impact of those cuts, particularly if you look at healthcare and education where, in fact, we saw an increase in every single year in those budgets. We saw, in other ministries, yes there was some re-alignment. But if you look at the actual impact on people who needed services and depended on services, I think you will find those impacts are a lot less than some groups in society are pretending they are today.
Media Minister, can you please explain why the forecast allowances and contingencies are so large for the three budget years starting next year?
Minister Hansen Well, if you go back and look at the fiscal panel that reviewed the financial affairs of the province when we first came into government, they actually recommended a cushion in government to the tune of about a billion dollars a year, with the size of budget and economy we have. That is made up of a forecast allowance, a contingency fund and a surplus. So, if you look in the third year of budget 2005, you actually see that we hit what they had been projecting. So we have volatilities in certain aspects of the economy. I think we've got the good fortune of having a very diverse economy. And we also have the very good fortune of seeing the economic recovery happening across almost all sectors of that economy. So the forecast allowance allows us to handle whatever fluctuations might come at us in the future. And, as I noted in my earlier presentation, we also do have to allow for a wage mandate to be established for the period after next March, or a year March.
Media Mr. Minister, in your notes that you provided us, you remind us that in your first year of office - your first day of office - you initiated tax cuts to British Columbians. Those were followed fairly quickly by increased service fees, user fees, other charges. So the perception for many people was that they didn't wind up with a great deal more money in their pocket. Can you offer any reassurances to British Columbians today that the same thing won't happen on these cuts?
Minister Hansen I think what's important is to look at the chart that we've got in the back of the budget document - I think it's table A5 but I may be wrong about that - it's the one that sets out the six different families that have been tracked for I don't know how many years. I know it goes back at least the nine years I've been an elected official. In fact, what I did, I went back to 1999, which happened to be Joy MacPhail's budget, and then looked at 2001 - the Paul Ramsey budget prior to the election - and compared that to today's budget. And, in every single category, the total provincial taxes payable are less today then they were in either 1999 or 2001. So that's, I think, the bottom-line. What is the total tax mix. And there's a significant saving. You take a senior couple with $30,000 a year in annual income. They will realize $900 a year in saving compared with 2001. A family of four with $30,000 a year in income. They will realize a $1,300 saving per year. So it's pretty substantive.
Media Minister Hansen, you have the debt-to-GDP ratio coming down through the three year plan at the same time the total debt is projected to rise to the level of last year's budget. What is the plan to bring the overall debt down?
Minister Hansen Well, I think the debt-to-GDP ratio is certainly the one that the international investors - the bond rating agencies - focus on. And they're quite pleased with the progress we've made. And I have no doubt they'll be exceptionally pleased with what's in budget 2005. But it's also important to take note of the debt from government operations which you will see has come down - not only as a percentage of GDP but it's also coming down in real dollars as well. So yes, we are investing in infrastructure. I would argue that there was an infrastructure deficit we inherited - particularly underscored if you look at road maintenance during the 1990s where the highway system in the province was allowed to deteriorate. We have to re-invest. The other side of it is, if you look at the dynamism which we're starting to see in the economy today, if we want to be sustained going forward, if we want to achieve the number of five of the great goals that were set out in the throne speech - of having the best job creation record of any jurisdiction in Canada - we have to build the infrastructure for that. We need the road system, the transportation system, the port system. And that is going to result in an increase of our total government debt. But it is an investment in our future.
Media Minister, I'm wondering if you think Gary Collins quit a year early?
My serious question, you mention the cuts that have taken place were actually more to those people who delivered services than the delivery of services. But the three so-called ministries of misery - the ministry of human resources, the ministry of family and community, aboriginal and women's services - have been cut from 2001 to 04/05 by $881 million. I wonder whether you have any qualms about that? And also, given the size of the surplus women's centres across British Columbia were cut by about $1.5 million. I wonder if you would commit $1.5 million to restore that and if not, why not?
Minister Hansen I'll deal with the last one first. In terms of funding to women's centres across the province we did reduce funding to women's services, women's centres. We felt that those dollars could better be focused on other aspects of meeting the needs of women in our society. And the case in point is the new additional investment of $13 million a year for transition houses and other supports for women facing violence in our society. So yes, we have re-allocated dollars that, in the past, were spent in certain areas. Now we're spending them in other areas to meet the same or additional needs that had been provided for in the past. You mentioned funding changes to human resources in B.C. And there, yes we have seen a decline in the caseload in British Columbia. But if you look at the mix of caseload, we actually see today that there were more British Columbians who were eligible for classification as disabilities, whether it's physical or mental disabilities. And they are receiving more support. Those who were employable that were on welfare rolls four years ago have been provided with job training programs and job placement programs. And we're starting to see a tremendous success story evolving out of that. So I take pride in the work that we've done as a government to provide opportunity and training to individuals who previously had to depend on welfare. And yup, you see a decline in the budget as a result of that. But that's a pretty good news story in my book.
Media Do you think there's less people on the street now then there were four years ago?
Minister Hansen Certainly homelessness continues to be a problem in British Columbia, as it does in other jurisdictions - if you look at Toronto, other major cities in Canada. That's part of the reason why we've dedicated an additional $48 million in this budget to address homelessness issues in the province.
Media Minister, you've mentioned your wage mandate now twice. Is it the intention of government, if you're re-elected, to again do an across the board wage mandate? And, if so, will it be a political decision or a financial/fiscal decision?
Minister Hansen I think we have to live within the means of the province and, as I've set out, with more transparency than we've ever done in the past. So we will develop a mandate that will be generally applicable across the public sector in British Columbia as we did in the past. But we also recognize there are areas where there are some market pressures. We do not believe that British Columbia needs to be a wage-leader in all of Canada - whether it's on the wages side or the benefits side. In terms of total compensation, we need to make sure it's affordable - relative to other jurisdictions in Canada. Now we recognize there are some individuals in the public sector who may be falling below what the market rate would be. And we will have to address those on a case-by-case basis and on an employer-by-employer basis. But, generally-speaking, there will be wage mandate which will be comprehensive.
Media Comprehensive - and how will you determine that comprehensive wage mandate? Again - politically or is it going to be based on your figures?
Minister Hansen It'll be a decision that will be made by cabinet ultimately. But it will be based on the fiscal realities of the province. And it will also be based on what our public sector employees are paid in wages and benefits, vis-a-vis other jurisdictions in Canada. So we will take all of that into consideration.
Media Minister, you're putting $1.7 billion against the debt - the biggest debt pay-down in history. But the debt's going to go up about $3.5 billion over the next few years. Could you just explain that?
Minister Hansen Well, the debt pay-down is actually a minimum of $1.7 billion. We'll see whether we have to use that remaining $330 million forecast allowance in these remaining six or seven weeks in the fiscal year. But we are seeing a continued decline in the absolute dollars that result from operations of government. And we will continue to reduce that over the course of this fiscal plan. We will also see an increase in spending on capital projects and infrastructure. So we are seeing an increase in the overall debt as a result of those capital investments.
Media Also regarding debt: you've got a structural surplus you say. And you're projecting surpluses as far as the eye can see. There doesn't seem to be any structural or mandatory requirement to pay down debt. Any government can do whatever it wants with the surplus. Did you think about mandating future debt pay-downs? And if you did, why didn't you put that in?
Minister Hansen Well, actually, in the Budget Transparency and Accountability Act, there is a provision that government has to - at a minimum - pay down debt to the tune of 50 percent of the budgeted surplus in each year. So yes, there is that obligation that's on the books. And we will live up to that obligation.
Media I had the same question as the last one. I'll ask it again because I didn't get the answer. Your government, when you were in Opposition, you beat up on the NDP government for its debt management plans. And yet, you have no debt management plan other than the obligation you just mentioned. Debt is going up. Why didn't you bring in a debt management plan to show British Columbians we are actually wrestling down the debt? Cause it's not being done now.
Minister Hansen Well that is exactly what is set out in these budget documents. If you go back to the previous government, what they presented to you in budget day of each year was a budget plan for one year. And then they would also, on top of that, put a topic box later in the budget documents that would have a debt-management plan - or they had different titles for it. I think there were six or seven of them over the course of that administration. And they were never lived up to once. So what we have set out in our budget documents is not a one year budget but a three year budget that actually shows for every line item in government how we will manage the expenditures and revenues of government over a three year period to ensure that we are achieving surpluses in the operation of government and that a minimum of 50 percent of those surpluses will go to paying down debt.
Media Given the fact the government failed to fulfill its 2001 promise to create 5,000 long-term care beds, I thought I'd see some specific targeted funds for that. What money will you put towards fulfilling that promise?
Minister Hansen Well, what you see in the budget is about a billion dollars that will go to regional health authorities around the province. And health authorities have an obligation to meet the healthcare needs of citizens in those areas. So, built into that, are the monies that they're going to need to allocate to ensure that target gets met by the end of 2008. Basically every health authority is in a very different position when it comes to where they're at and where they have to get to. And it's something we've learned over the last two and a half years is that what works in Dawson Creek isn't necessarily going to work necessarily in downtown Vancouver or vice-versa. So we have provided that flexibility. It's one of the regions why the regionalized health structure we have today is working for British Columbians. So the dollars we've talked about are built into those allocations.
Media So again, that's $1 billion for the remaining 4,800 beds?
Minister Hansen No. What I said was that there's about $1 billion built into the budget for additional funding for health authorities.
Media To create those remaining beds?
Minister Hansen For all of their needs. Let me just add to that a bit. Because there's a variety of ways that health authorities and other agencies - it's not just health authorities - are meeting the needs of seniors housing in the province. And seniors housing with care components to it - which is what we're talking about in the 5,000 beds commitment. So it's not just a case of government going out and borrowing capital and building a building and then hiring staff to operate it. The tradition in this province has always been one of working with the not-for-profit sector and the private sector to meet the housing needs of seniors. And the government has come to the table to provide support for those with lower incomes that can't afford the market rates for those kinds of facilities. We also come to the table to provide the necessary healthcare supports in those facilities. So there's a variety of ways of doing that. So we're not saying, "Here is a recipe that's dictated out of Victoria on how to do that." We're actually sitting down and working with local providers to see how that can best be met.
Media What would you say to British Columbians who might think it's more important to put more money into reducing surgical waitlists and increasing acute care beds as opposed to paying down the debt?
Minister Hansen Actually, if you look at the study that came out of Stats Canada last summer, it actually shows that B.C. has the lowest Median wait times for access to specialists, the lowest Median wait times for access to diagnostic services and is the third lowest - but significantly improved over 2001 - when it comes to access to elective surgeries. That's the study I think that's the one that counts the most. Because it actually goes out and interviews individual Canadians and asks them what experience they've had in accessing wait times. We've increased the number of surgical procedures in British Columbian by 68,000 in the first two years of our government alone. And we will continue to increase access in this budget. So I think the answer to your question is that it is a very high priority. And we are delivering on that priority.
Media I hate to harp on this. But the surpluses in the next three years are all in the neighborhood of $200 million. But the contingencies are in excess of $600 million. And I think you just said that it's only on the surplus that there's any debt repayment requirement. Can you tell me how you arrive at which part of it is surplus and which part of it is contingency?
Minister Hansen We are looking at really what we know is sustainable. So, coming out of this last year, we recognize that we can project - in this coming year - an increase of about $2.2 billion in revenue to government. In the year after, I think it's another $2.2 billion. And then it's about $1.8 billion in the third year of the plan. And from that, we are able to reduce taxes, expand programs that deliver services to the public and build in those cushions that we're going to need for whatever comes at us that cannot be anticipated at this point. So the surplus is one that is sustainable going forward. We're very confident we can meet that target. And yet, we still allow ourselves a healthy forecast allowance to deal with other unforeseen events. People pointed to volatility in commodities markets. We think we've got some pretty solid numbers when it comes to the forecasting that we've put in place. But the potential is always there. There's always the potential for a major occurrence as we saw in September of 2001 that will impact us. And that was actually the last time we had to dip into our forecast allowance in a significant way. Those were obviously unforeseen events. But we need that cushion there.
Media Why not put in a provision then that whatever's left of the contingency be mandated to debt repayment?
Minister Hansen In terms of contingency or forecast allowance?
Media Not the forecast surplus, which you already have to put 50 percent of that to the debt. But what's left of the cushion that doesn't have to be used.
Minister Hansen It's a good suggestion. And one which I will take back and consider fully.
Media Minister, can you be more specific on why the forecast surplus is so much smaller for the next fewer years than it is for the actual surpluses this year? And I believe that was the case last year as well, if I'm not mistaken - it was forecast around $100 million and it’s come up to around $1.44 billion.
Minister Hansen Yup, that's right.
Media Why the discrepancy? Why? Do you actually expect revenue to go down that much? Or is it because you are spending more money on programs that you're expecting less?
Minister Hansen We are allocating it. So, if you look at the current year, we have increased spending or there will be a supplemental estimate brought into the house to give legislative approval to an increase in spending in the current fiscal year of $452 million. So, if you look at the total additional available revenues that we have to government in the current fiscal year of 04/05 it totals up to about $2.2 billion. So if you take that forward to next year - if you take the $2.2 billion of additional revenue - you can add on top of that the surplus that had been forecast for this coming fiscal year in last year's budget. And that's really the fiscal room that we have to deal with. Now out of that, you can subtract $1.37 billion for increased program spending in next year's budget. You can also subtract from that $484 million that goes to fund the tax changes that are included in this budget today. And the remaining amount is the cushion that we need in terms of forecast allowance services.
Media So this isn't an overly conservative look at what you might have left over next year? I mean, there's people who would suggest you're being overly conservative to make next year's news better.
Minister Hansen Well, I think you can go through and pull apart all of the elements of our forecast. You can look at what we relied on in terms of GDP growth. You can look at local forecasting for natural gas prices in British Columbia and how we arrive at the numbers that are used in the budget. It's not a case of pulling numbers out of the air that happen to look good to me. We saw that ten years ago. You don't see that anymore because of the rigor that goes into the forecasting. And it's only through all of that forecasting that we actually drive the numbers that determine what we can anticipate as revenues to government. So I challenge anybody to come up with flaws in that forecasting model cause it's one that I think we have a lot of reason to be proud of.
Media Minister, you're proposing about $266 million in forest revitalization and other projects over the next three years. I'm wondering if you can just talk a little bit about why you need to spend that money - what the liabilities are for small communities around British Columbia if you don't spend it or even spend a little bit.
Minister Hansen Well, I think the biggest challenge we have coming at us today in forestry today in the province is the pine beetle infestation. We've got ten years to salvage marketable wood in those regions. There's going to have to be a tremendous effort to salvage as much of that wood as we possibly can. That we have the capacity to salvage. And then we have a mammoth reforestation project that has to be undertaken to make sure that those forests can be regenerated for the future. But, in the meantime, we're going to have to work closely with those communities to make sure we manage the economic stability of those communities - both in the short-term where they're going to see some more economic activity because of the salvage and because of the reforestation. But it's also going to take a number of years before we're going to be able to harvest those forests again and again create the kind of stable forestry jobs in the future. So, in the budget, we've built-in both the economic development initiatives, as well as the forestry initiatives, to start that long-term planning. This is not just about getting through the next three years. It's about the next 20 years.
Media One of the budget documents talk about the amount of money that went into mining and mineral exploration and investment in British Columbia last year - I can't remember whether it was $130 or $150 million. By some accounts, at the mining conference last month, only about $10 million of that went into new exploration and the rest went into the revivication of existing mining projects. I'm just wondering, under the circumstances, if you can justify the decision to extend that flow-through share program and assert that it's going to be sufficient to bring more new exploration to the province?
Minister Hansen Well, I think that if look at just what's happened in the last four years, there's been about an over 400 percent increase in the amounts spent on exploration in British Columbia. And my understanding is that a lot of that renewed interest in B.C. comes as a result of the tax credit system that's in place that was due to expire next year. So, by extending it to 2016, we want to send a really strong message to industry that we want to encourage development, that B.C. is open for business. And, we as a government, are prepared to put measures in place to encourage it.
Media Minister, when we look at what you choose to highlight in your budget speech, we see things about green energy, helping battered women, more money for education, health - I'm just trying to get a sense of what kind of image you're trying to project going into this election with this budget.
Minister Hansen I think it's a simple message - that we came into government three and a half years ago with a plan to turn this economy around, to turn the province around. And I think that we have done it. It's been tough. And there's been some pretty gritty meetings that we've gone through to determine how best we can turn that ship around and put it on a proper course. But I think the message is that we're there. And now, as a result of some of that hard work that's been done over the last three and a half years, we can now re-invest some of the benefits of that. And we can actually show to British Columbians in all sectors - in health, education, the social safety net, community development, the arts, sports - that by building a strong economy, we can once again actually afford the benefits that people count on in communities around the province.
Media We've heard a bit about trying to make the Liberals look a bit more like Liberals - is this it?
Media Good luck.
Minister Hansen Actually, I think if you look over the past three and a half years as a government, we've had to make some changes. And they've been done with the utmost of sensitivity. And they've not been easy challenges obviously. But I think, as I said the day it was first announced that I was going to be the finance minister, "For me, balancing the budget and restoring economic heath to the economy are not the ends and the results." What that means is that you have a stronger economy to support families and you've got revenues to government that actually can provide for the kind of social programs that make a big difference in people's lives.
Media When I look in the blue book, which is the details where you've got the ministries spending, after the health ministry the biggest jump in spending in a ministry is small business and economic development. Can you just explain how we go from talking about green energy and battered women to economic development?
Minister Hansen Well I think those are the two dimensions of what government's obligations are. On one hand, you've got to make sure that you provide dollars, to the extent possible, for social programs in our society. But, at the same time, you've also got to make sure that you're putting in place the kind of investments and economic growth that's going to fund the social programs of the future. So I think we've tried and find a balance in that with new supports for families and individuals in the province but also funding going into economic development initiatives that will make sure we continue to have a dynamic economy ten, 15 and 20 years from now.
Media But when you look at where you're actually putting money into, it's not, in terms of increases, it's not the programs you're highlighting in the budget speech. It's more along the lines of perhaps what you can spend during the election campaign.
Minister Hansen Well, as I say, there are still some announcements that still need to be made. Our obligation, as far as budgeting, is to make sure that we go forward to the legislature and get the permission to spend - that we cannot be making commitments of government and assume. We cannot take the legislature for granted. So we are seeking the legislature's support for those spending initiatives over the next few weeks. And you'll get all the details on those economic development programs.
Media Actually, I was trying to figure out this fund as well minister. Enhancing economic development throughout British Columbia. I tried to work out the percentage increase but it exceeded the capacity of my calculator.
But it goes from $18 million to $236,762,000. Can you tell us how you arrived at that number? Is that all approved already by treasury board? All those projects?
Minister Hansen This whole spending plan has been approved by treasury board and by government. There are, in some of those allocations, projects that still have yet to be finalized. And we are working with organizations around the province to get the details in place so that we can announce the details. But, in some cases, those are allocations of funds for which the ministers responsible probably, at this point, have a pretty good idea of how they will be allocated. But final decisions on some of those have yet to be made.
Media Can you tell us why we can't get a list, at least, of roghly what they are?
Minister Hansen If you look at what this whole process is about - in terms of the spending 04/05 - we're going into the house for supplemental estimates. There's good detail, I think, in the documents on that. But, if you look forward, that's the purpose of the legislature. When we get into the estimates process, private members in the house can ask any questions and ask for any detail they want about how individual ministers will be spending their allocations. But what the budget process is all about is making sure we provide appropriations to the ministries that allow them to do their job. And so each of those areas, they've come to treasury board. They've had to defend their spending plans. And, in some cases, they're allocations that can fund specific projects. And, in many cases, those specific projects have not been finalized by the ministers.
Media But I mean government comes to us with a stack of documents today saying this is what we plan to spend all the money on, and it's still dependent on the legislature approving it. But it's not like you lack the votes. I'm wondering why these particular projects, alone among anything in this budget, are being withheld? Is it because you don't know or because you're hoping to make the announcements closer to election day?
Minister Hansen No. It's because the details in terms of the partners that we would be partnering with have not yet been finalized. So, in some of these cases, these are projects around the province...
Media Can you give an example? What kind of stuff are we talking about?
Minister Hansen Well, in some cases, it may be municipal infrastructure. We're working with the local municipalities on a particular project and the details are not yet finalized. The city's not yet ready to announce it. So we're trying to work with them and get it to a point where it can be announced.
Media You know it's exactly $236,762,000.
Minister Hansen Well that's a compilation of several different elements...
Media But it's a provincial contribution. You've already said what it is here right?
Minister Hansen In terms of the total budget for those allocations.
Media So why can't the public be told about what the provincial money is going to?
Minister Hansen Well, I think part of it is that we want to work with those local municipalities or other organizations to determine details. And, in many cases, it's not just up to us to announce things as we see fit. It's when you've got other partners in some of these projects - we've got to work with them.
Media Minister, why would you give a tax break for people who buy hybrid vehicles on one hand and a tax break to people who buy larger, gas-guzzling vehicles on the other? Don't they sort of cancel each other out?
Minister Hansen Increasing the threshold for the vehicle tax to $49,000 a year is really in recognition that, in a lot of industries, vehicles that are needed on the worksite push into those levels for basic vehicles that people need not for just driving on their summer vacation but need them for their work. So, in recognition of that, we may a modest increase in the threshold. The hybrid vehicle change - we see that as the way of the future. And, as a government, we want to send out signals that we want to encourage it. And we're prepared to give up to a $2,000 tax break to encourage it.