September 14, 2005
As required by Section 7(d) of the Budget Transparency and Accountability Act (BTAA), I am confirming that this September Budget Update contains the following elements in support of the forthcoming Estimates debate:
— The fiscal and economic forecasts for 2005/06, which are detailed in Part 1 and Part 3.
— All material economic, demographic, taxation, accounting policy and other assumptions underlying the 2005/06 economic, revenue,
expenditure, surplus and debt forecasts are also disclosed. We have disclosed key assumptions regarding ongoing or anticipated
negotiations. In particular:
— For budget planning purposes the status quo is assumed to prevail in the U.S. lumber dispute;
— No equalization revenues have been assumed beyond 2005/06. The federal government has indicated they will determine a new
mechanism for allocating equalization funding among provinces by March 2006, based on the advice of an independent panel.
Given the uncertainty, government made a prudent assumption that there would be no equalization revenues in 2006/07 or 2007/08;
— The current compensation mandate that has been in place since January 2002 will remain unchanged until March 31, 2006. As
the next mandate is still under development, no compensation increase has been assumed in the fiscal plan. Details of the
next wage mandate that commences April 1, 2006, will be released by the next budget in February 2006. The forecast allowances
included in this fiscal plan cover the potential costs of future public sector wage settlements, in addition to revenue risks
such as a sudden fall in energy prices, or the costs of natural disasters.
These and other major areas of risk to the plan known at this time are disclosed in the risks section in Part 1 and in the
material assumption tables in the appendix.
— The report on the current advice of the Minister's Economic Forecast Council on economic growth, including the range of
forecasts for 2005 and 2006. This is found at the end of Part 3.
The September Budget Update reflects the ministry responsibilities announced on June 16, 2005, including the assignment of Land and Water BC activities
among various government ministries effective September 30, 2005. BC Buildings Corporation will be converted to ministry status
in 2006/07. Therefore, BC Buildings Corporation has been incorporated in the budget update on a status quo basis, as plans
for its integration have not yet been finalized.
Some post-secondary institutions have forecast deficits. Government has not approved these forecasts since a funding review
is currently underway and will be completed later this fall. Upon completion, it is expected that revised forecasts with balanced
budgets will be submitted by the institutions reflecting the results of this review. These forecasts will be included in Budget 2006.
The accounting policies followed in the September Budget Update comply, in all material respects, with generally accepted accounting principles (GAAP) for senior governments as prescribed
by the Public Sector Accounting Board (PSAB).
As required under section 7(e) of the BTAA, the forecast allowance, which is an adjustment to the most likely forecast of
the 2005/06 surplus, is also disclosed.
I would like to thank staff in all government ministries, Crown corporations and the SUCH sector for their work in developing
the plans and preparing these multi-year economic and financial forecasts. I would like to especially acknowledge the hard
work and dedication of my colleagues in the Ministry of Finance for their efforts in preparing this updated fiscal plan and
a second set of Estimates for the 2005/06 fiscal year.
Deputy Minister and
Secretary to Treasury Board
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