Balanced.
Balanced is "a condition in which different elements are equal or in the correct proportions," or, "to offset or compare the value of one thing with another."
This was the word that struck me as key to the budget presentation by Finance Minister Mike de Jong this past week. Balanced - as in a "balanced budget" - seemed to be a theme in his speech. But how can a budget be balanced if there is a surplus?
If revenue exceeds expenses then you do have different elements that are not equal or in correct proportions. If the value of revenue is greater than expenditures, then the values do not offset one another.
Shouldn't the minister have stated we have a surplus budget to the tune of $264 million? Should he not have stood in the house and proclaimed the government is planning to over-tax everyone to a significant extent?
Sure, it represents only about 0.5 per cent of the overall budget. Sure, the government's economic projections could be off by much more than that at year end. But the government is planning on running a surplus which makes this budget more puzzling than previous years.
To put it simply, the government decides both how much they are going to pay to the various ministries and how much they are going to collect from the various sources in taxes and fees. The former is, to a large extent, determined by labour costs and other such factors while the latter is determined by what can be reasonably expected as a percentage of the Gross Domestic Product.
But in a business model, the government controls both sides of its revenue model - both income and expenses.
Most business people would love to be in that situation.
And the government had a number of options besides planning a surplus budget.
They could have chosen to collect less revenue by announcing another tax break for earners. Personal income tax is a relatively small portion of the budget - $8.2 billion in a total of $47 billion - but the government could have applied the $264 million against that number. Spread evenly, it would have amounted to a little more than $100 per worker in the province.
If the government still believes lower taxes are the way to economic prosperity, this would have been a signal we are on the right track.
Or it could have used the money to prop up some of the ministries where funding is needed. Yes, the budget did contain more money for the Ministry of Children and Family Development, but it was far short of the $100 million per year increase the system needs. The government's plan doesn't compensate for the 28 per cent decrease in revenue over the past 10 years which has seriously put children at risk.
They also plan to put another $60 million into education but that is only a one per cent increase and will not cover the costs associated with inflation.
The result can be seen locally with the school district predicting a $1 million shortfall.
It appears the government still believes there is "fat on the bones" at the Ministry of Education which will allow the school districts to absorb what amounts to a decrease in funding. But at this point, I would think any reasonable person would realize cuts mean closures since there is little room to manoeuvre any more.
And I suspect if asked the simple question: "Would you like a tax decrease of $100 per year and school closures or forego the tax decrease and keep a few more schools open for your kids?" most of us would forego the tax saving.
Or they could apply the $264 million surplus against provincial debt. Our debt has blossomed over the past 15 years. Total provincial debt is forecast to be $65.29 billion for this fiscal year and to increase to $67.69 billion next year. Put another way, the government plans to increase the debt by $2.4 billion or about ten times the amount it is claiming as a surplus.
I am sure there is some accounting principle which can explain this but in everyday finance, no one who is maxing out their credit cards to cover their living costs would be then claiming to have extra money lying around.
Any of these options would make sense - particularly because the government has built in more than
$350 million in contingency funds in case its forecasts are off.
That totals to more than $600 million in unallocated funds.
But what in the end did de Jong and the B.C. Liberals do?
They allocated $100 million to the BC Prosperity Fund. What is it intended to do? "The BC Prosperity Fund will be a long-term legacy intended to... preserve a share of today's prosperity for future generations."
Really? When we have so many people living in poverty, this is what we are going to do?
