What Budget 2002 Means to You
The 2002/03 provincial budget delivers on three major
- To restore sound fiscal management;
- To revitalize the economy; and
- To put patients and students first.
The government's first full budget protects funding for
health care and education. It's also a major step toward balancing the budget
and maximizing the province's opportunities for new growth and increased
Reasonable, responsible, affordable and realistic, Budget
2002 sets out a plan to build a strong, vibrant economy and to serve British
Columbians well by getting government right. Ultimately, it is a clear,
three-year path to renewed hope and prosperity.
RESTORING SOUND FISCAL MANAGEMENT
A First in Detailed, Three-Year Service Plans
- Budget 2002 is the first to include three-year service plans for
ministries and Crown corporations. These will be reviewed and updated
annually to reflect progress and changing economic and financial
- The three-year fiscal plan is based on two main strategies: building a
strong, vibrant economy and eliminating the deficit.
Responsible, Accountable Management of Tax Dollars
- As required by legislation, a balanced budget is forecast for 2004/05.
This will follow forecast deficits of $4.4 billion in 2002/03 and $1.8
billion in 2003/04.
- After 2002/03, revenues will increase by $2.3 billion and spending will
decrease by $1.4 billion, combining to reduce the deficit to zero by
- The fiscal plan is based on most-likely economic and revenue forecasts.
The government is forecasting B.C.'s economy to grow 0.6 per cent in 2002,
2.8 per cent in 2003, 3.1 per cent in 2004 and 3.0 per cent in 2005. These
figures are slightly lower than those of the independent British Columbia
Economic Forecasting Council.
- Funding will be preserved for health and education. All other ministry
spending will be cut by 25 per cent over three years.
- To show leadership in controlling government's costs, all government MLAs
are taking a five per cent pay cut, and the government caucus budget has
been reduced by 25 per cent.
- Starting April 1, the Premier and cabinet ministers will be collectively
and individually accountable for spending control. They will incur cabinet
salary penalties of up to 20 per cent if they fail to meet specific budget
or performance targets.
Why We Have a Deficit
The $4.4 billion deficit for 2002/03 results from a
number of factors, including:
- An underlying, structural deficit;
- Weak revenues that reflect the global economic slowdown and lower
- Ongoing investment in a competitive personal and business tax structure;
- One-time costs associated with restructuring government (e.g., severance
and lease termination);
- Increased compensation costs associated with recruiting and retaining
health-sector workers and professionals for whom demand is high that are
offset by specific revenue measures;
- The first phase of three-year spending cuts; and
- A $750 million forecast allowance to protect budget targets against
economic risks and revenue shortfalls.
Total government debt is expected to increase over the
next three years. Eliminating the deficit, as quickly as possible, is essential
to avoid burdening future generations with escalating debt-interest costs. Once
the budget is balanced in 2004/05, the ratio of taxpayer-supported debt to GDP
is expected to decline.
An Improved Capital Plan
- Capital funds are no longer allocated through a separate budgeting
process. Instead, integrated operating and capital budgeting decisions will
be driven by service plan objectives and ministry operating budgets.
Ministries must meet all operating, maintenance, amortization and
debt-interest costs associated with capital facilities.
REVITALIZING THE ECONOMY
A Better and More Competitive Tax System for B.C.
- Budget 2002 builds on the new competitive tax system the government began
introducing last summer, by expanding the range of machinery and equipment
parts exempt from PST and increasing the threshold for the small business
income tax rate to $300,000 from $200,000. In 2002/03, these measures will
return about $25 million to B.C. businesses.
- Streamlining measures in the budget include rewriting legislation to
reflect the elimination of corporation capital tax on non-financial
- To improve fairness, disability-related credits will be increased to
reduce income tax for persons with disabilities and their caregivers. These
credits will be indexed annually for inflation.
- Budget 2002 also implements a New Era commitment by refunding PST on
school purchases made with funds raised by parent advisory councils.
- Last year, government cut provincial personal income tax by at least 25
per cent for all taxpayers and by 28 per cent for those in the lowest tax
- British Columbians now pay the lowest rate of provincial personal income
tax on their first $60,000 of income and enjoy the second-lowest top
marginal tax rate in Canada. For businesses, the corporation income tax rate
fell to 13.5 per cent from 16.5 per cent on Jan. 1, the corporation capital
tax on non-financial corporations will be eliminated September 1, 2002, and
a new provincial sales tax exemption was introduced for production machinery
and equipment on July 30, 2001.
B.C. is Back
Budget 2002 reaffirms government's commitment to maximize
the value of B.C.'s resource sector while encouraging emerging industries that
offer significant potential for growth. This means:
- Revitalizing the forest industry by moving towards a market-based stumpage
system, introducing tenure reforms, providing greater certainty through a
working forest base, and streamlining the Forest Practices Code;
- Accelerating development of the energy sector through a new royalty and
regulatory structure to encourage the development of coalbed methane,
infrastructure projects to improve land access, and a single-window process
to speed up and streamline the granting of energy permits;
- Reducing the regulatory burden and levelling the playing field for
investment by eliminating business subsidies;
- Supporting mineral exploration and development;
- Working with the Premier's Technology Council to make B.C. one of the
world's leading technology centres;
- Encouraging a greater private-sector role in providing public
infrastructure and services through P3s and alternative service delivery
- Realizing economic benefits by promoting B.C. to the world through the
2010 Olympic bid and a new effort to brand the province; and
- Fostering growth in other sectors, including agriculture and aquaculture,
as well as film and television production and new media.
PUTTING PATIENTS AND STUDENTS FIRST
Increased Compensation for Our Health Professionals
- Budget 2002 includes several revenue measures to pay for compensation
increases in the health sector and thereby ensure the recruitment and
retention of nurses, doctors and other skilled workers.
- To pay for the nearly $800 million in compensation increases in 2002/03,
effective February 20, 2002 the provincial sales tax (PST) rate will rise to
7.5 per cent from 7 per cent and the tobacco tax rate will increase by $8 a
carton. In addition, MSP premiums will increase by 50 per cent on May 1,
- To protect low-income earners, MSP premiums will decrease or be eliminated
for 230,000 people, and the refundable B.C. sales tax credit will rise to
$75 a year from $50.
Improving Patient Care Through Better Fiscal Management
- Budget 2002 increases the budget for the Ministry of Health Services to
$10.2 billion from $9.5 billion to help pay for the cost of recruiting and
retaining high-demand health sector workers.
- As a result of the streamlined governance structure introduced in 2001,
health authorities will be able to reduce administrative costs, realize
economies of scale and maximize the value patients receive for every
Improving Learning Conditions
- The Ministry of Education's budget is $4.86 billion, and the Ministry of
Advanced Education's budget is $1.9 billion, consistent with 2001/02.
- Lifting the six-year tuition freeze will help colleges and universities
access the resources they need to meet growing demands while protecting
B.C.'s high quality of education.
- Initiating a $45 million partnership with the private sector to establish
20 research chairs— in the fields of medical, social, environmental and
technical research— will help attract the expertise B.C. needs to compete
and lead in the knowledge-based economy.
- Budget 2002 supports government's commitment to double the number of
graduates in computer science, electrical engineering and computer
engineering in the next five years, to promote growth of the high-tech
- The government will also work with B.C. universities to increase the
number of medical school graduates and will increase the number of student
spaces for nurses and residential care aides over the next three years.
Third-Quarter Results for 2001/02
The deficit for 2001/02 now is forecast to be $3.4
billion, excluding the one-time pension adjustment of $1.4 billion, consistent
with the second-quarter update.