Highlights<\/strong><\/p>\n The B.C. government set out to prepare Budget 2024<\/a> from a weaker starting point than originally planned after wildly underestimating the surplus in fiscal 2022-23. The realities of an upcoming election<\/a> amid softening economic growth didn\u2019t help the government\u2019s recourse either. In fact, estimates for the 2023-24 bottom line drifted further from balance and a deeper deficit is now projected in fiscal 2024-25. It\u2019s more than twice the amount projected in last year\u2019s budget (from $3.8 billion to $7.9 billion).<\/p>\n Though revenue shrunk in the last fiscal year, expenditure continued to barrel through\u2014widening the wedge (and the deficit) between the two. As in the 2023 budget, the B.C. government\u2019s fiscal plan stays far from balance and keeps the net debt-to-GDP ratio on an upward trajectory.<\/p>\n Expenditure is set to outgrow revenue for a third consecutive year, up $6.2 billion (7.4%) in 2024-25. New spending measures are heavy on the affordability front where housing and other cost pressures took centre stage.<\/p>\n An additional 25% bonus on payment per child (starting July 2024) for families already receiving the BC Family Benefit and increases to the climate action tax credit (from $447 to $504 per adult) are among the more costly measures put forward. This amounts to $470 million and $747 million, respectively in fiscal 2024-25.<\/p>\n The renter\u2019s tax credit<\/a> (announced in last year\u2019s budget) also made it to the income statement this fiscal year, representing another $267 million in costs. But with housing top of mind, this isn\u2019t where the affordable housing measures end. The province\u2019s new BC Builds<\/a> program made its debut\u2014aimed at expanding housing supply. The program intends to use underutilized land as well as low-cost financing and grants. The program is set to cost $150 million in additional operating expenses over three years and has already secured $2 billion in financing from the federal government.<\/p>\n Despite slower economic growth, the boatload of tax credits and rebates offered in this year\u2019s budget won\u2019t prevent B.C.\u2019s revenue from rising 5.4% in the 2024-25 fiscal year. Tax revenue is set to lead the pack in terms of growth (6.5%), followed by income from crown corporations (5.4%). This should bring total revenue back to where it was in fiscal 2022-23 ($82 billion) after a particularly low year for tax revenue due to a shrinking corporate tax base and lower natural gas royalties.<\/p>\n However, the new tax credits and rebates to support housing and affordability will keep the wedge between revenue and expenditure from narrowing. Measures including the one-time electricity rebate (which offers about $100 per year in residential bill savings starting April 2024) and changes to the employer health tax exemption threshold (from $500,000 to $1 million starting in the 2024 calendar year) are set to cost the government an estimated $370 million and $108 million, respectively in lost revenue this year.<\/p>\n Increases to the first-time home buyers\u2019 exemption (from $500,000 to $835,000 starting April 2024) and newly built home exemption threshold (from $750,000 to $1.1 million starting April 2024) are set to cost an additional $100 million in lost revenue in fiscal 2024-25.<\/p>\n The province\u2019s new anti-flipping tax\u2014which subjects all properties that are bought and sold within two years to a capital gains tax (effective January 2025)\u2014was among the few revenue-generating initiatives to address housing affordability by discouraging short-term speculation in the market. It\u2019s expected to generate $11 million in tax revenue this fiscal year and $43 million in fiscal 2025-26.<\/p>\n B.C. topped its previous record in this budget after tabling the highest taxpayer supported infrastructure spending plan ever in 2023. It\u2019s committing $43 billion over the next three fiscal years. Much needed investments in transportation and healthcare made up the lion\u2019s share (again), using up $15 billion and $13 billion of capital expenditure, respectively. Most of these projects are intended for capacity enhancements and redevelopment.<\/p>\n BC Hydro will claim the vast majority of the self-supported capital plan ($13 billion) at $12 billion, a portion of which will go to fund construction for a third dam and hydroelectric generating station to meet growing demand.<\/p>\n The taxpayer-supported debt profile is set to grow from $72 billion to $89 billion (23%), ballooning to more than $125 billion over the next three years. With modest growth projected in the years ahead, net debt is set to reach 21% of nominal GDP this fiscal year\u2014the highest ratio in more than 40 years.<\/p>\n Although some modest improvements were made to the net debt-to-GDP position over the last two fiscal years, these improvements will be more than offset by a rapid increase in the province\u2019s debt burden over the remainder of the plan. Indeed, the debt burden is set to reach a new record of 28% of GDP in fiscal 2026-27\u2014 nearly double the pre-pandemic average of 15%.<\/p>\n Even though B.C.\u2019s net debt burden is still among the lowest in Canada, we\u2019re disappointed to see the province\u2019s net debt-to-GDP position change so dramatically. The spending plans laid out in Budget 2024 represents a continued departure from the sustainable path the province had been tracking, and coming at a time when the economic situation isn\u2019t exactly dire. The interest bite is still manageable (for now), but economic stagnation in the near term and modest growth in the out years of the plan could bring this trend to concerning levels if it persists over the longer term.<\/p>\n Addressing the housing crisis requires long-overdue support from all levels of government including provincial, and is expected to take a toll on B.C.\u2019s fiscal position. The government may want to follow other Canadian provinces by committing to clear fiscal anchors to ensure deteriorating trends don\u2019t get out of hand in the longer term.<\/p>\n\n
Gap between revenue and expenditure widen<\/h2>\n
Housing and affordability drive up expenditure<\/h2>\n
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\n \nBritish Columbia’s Consolidated Fiscal Plan<\/th>\n<\/tr>\n<\/thead>\n \n ($ billions)<\/td>\n Estimate<\/td>\n Forecast<\/td>\n<\/tr>\n \n <\/td>\n 2023\/24<\/strong><\/td>\n 2024\/25<\/strong><\/td>\n 2025\/26<\/strong><\/td>\n 2026\/27<\/strong><\/td>\n<\/tr>\n \n Total revenues<\/strong><\/td>\n 77.3<\/td>\n 81.5<\/td>\n 82.8<\/td>\n 86.4<\/td>\n<\/tr>\n \n Total expenditures (before provisions)<\/strong><\/td>\n 82.2<\/td>\n 89.4<\/td>\n 90.6<\/td>\n 92.7<\/td>\n<\/tr>\n \n Contingency\/ disaster assistance\/ COVID-19<\/strong><\/td>\n 1.0<\/td>\n 0.0<\/td>\n 0.0<\/td>\n 0.0<\/td>\n<\/tr>\n \n Surplus\/(Deficit)<\/strong><\/td>\n (5.9)<\/td>\n (7.9)<\/td>\n (7.8)<\/td>\n (6.3)<\/td>\n<\/tr>\n \n Source: British Columbia Ministry of Finance, RBC Economics<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Tax credits and rebates keep revenue from catching up to expenditure<\/h2>\n
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\n \nEconomic growth assumptions<\/th>\n<\/tr>\n<\/thead>\n \n <\/td>\n 2023<\/td>\n 2024<\/td>\n 2025<\/td>\n 2026<\/td>\n<\/tr>\n \n Real GDP growth (%)<\/strong><\/td>\n<\/tr>\n \n Budget 2024<\/td>\n 1.0<\/td>\n 0.8<\/td>\n 2.3<\/td>\n 2.3<\/td>\n<\/tr>\n \n RBC<\/td>\n 0.5<\/td>\n 0.3<\/td>\n 1.9<\/td>\n <\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n Nominal GDP growth (%)<\/strong><\/td>\n<\/tr>\n \n Budget 2024<\/td>\n 3.2<\/td>\n 3.3<\/td>\n 4.4<\/td>\n 4.5<\/td>\n<\/tr>\n \n RBC<\/td>\n 2.5<\/td>\n 2.3<\/td>\n 3.1<\/td>\n <\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n Source: British Columbia Ministry of Finance, RBC Economics<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Transportation and healthcare remain investment priorities<\/h2>\n
Net debt burden to grow by 50% in three years but still among lowest in Canada<\/h2>\n