26 Feb 2015 BC Budget: Surplus… but at what cost?
This past week, the BC Government released Budget 2015, a budget that reinforced the government’s commitment to balanced budgets. Budget 2015 emphasized fiscal prudence and spending discipline and very little in the way of new initiatives or investments.
The budget projects a healthy $870 million surplus in the current operating year (2014-2015) and surpluses in each of the next three years, albeit smaller than that of the current year. BC stands to be among the few (if not the only) province to balance its books in the coming year and in many respects is the envy of other jurisdictions with far less favourable fiscal circumstances.
The budget forecasts that the provincial economy will grow by 2.3% this year and by 2.4% in 2016 and includes conservative growth assumptions on revenue, exchange rates and interest rates. At the same time, expenditures have been contained to an average annual growth rate of 2.5%. As has become customary, the budget has been designed with several layers of conservatism to provide adequate protection against unforeseen economic developments.
In contrast to Budget 2014, there was little mention of LNG and in its place there was greater emphasis on the importance of diversification and the importance of multiple sectors in contributing to the economic health of the province. The importance of diversification, however, was not reflected in any significant spending or investment measures, particularly in light of the projected surplus this year and the overall envelope of a $46 billion budget.
For the BC technology industry, there were only a few items of note in Budget 2015.
More broadly, the budget also provides for an extension of the Training Tax Credit program for an additional three years; support for implementing the Water Sustainability Act; new funding for mining and LNG development; a new initiative to establish an International Maritime Centre and an extension of the BC mining flow through share tax credit to the end of 2015.
While we recognize the importance of balanced budgets, we are concerned that Budget 2015 brings with it an implied opportunity cost, something our colleagues at BC Business Council refer to as an erosion of BC’s competitive position. Budget 2015 does not take adequate advantage of the opportunity to invest projected budget surpluses to reinforce the future competitive position of key sectors of the economy. For the technology industry in particular, the budget did not address the key recommendations outlined in the 2014 KPMG Report Card that emphasized the importance of increased investments in revitalizing access to early stage venture capital and investing in expanding talent availability for the sector.
With a growing base of promising new technology companies and a robust entrepreneurial ecosystem, the BCTIA believes it will be ever more important to make the strategic investments necessary to fully capitalize on the opportunity for the BC technology sector. The importance of economic diversification in British Columbia is clear and the technology sector will be an essential part of the mix. Ensuring that it stands to maximize its contribution to all sectors of the BC economy is in the interest of all British Columbians.
A full copy of BC Budget 2015 can be found here.