February 20, 2007

As required by Section 7(d) of the Budget Transparency and Accountability Act (BTAA), I am confirming that the Budget and Fiscal Plan contains the following elements:

  • The fiscal and economic forecasts for 2007/08, which are detailed in Part 1 and Part 3.
  • All material economic, demographic, taxation, accounting policy and other assumptions underlying the 2007/08 economic, revenue, expenditure, surplus and debt forecasts are also disclosed. In particular:
    • The status quo policy is assumed for federal government transfer revenues, and in particular that equalization revenues will be zero for the 2007/08 through 2009/10 fiscal years. No revenues from the recently announced Canada ecoTrust have been assumed;
    • Similarly, the status quo is assumed for provincial income tax bases that could be impacted by federal government budget decisions, such as a change to policies for income splitting;
    • Funding allocations for Health Authorities in 2008/09 and 2009/10 reflect increases required to fund the costs of settlements negotiated in the recent round of collective bargaining. Funding to reflect service requirements will be added in future budgets pending information from the Conversation on Health. The forecast allowances for 2008/09 and 2009/10 can accommodate future increases within the fiscal plan surplus targets;
    • The capital spending plan includes a capital contingency averaging 9.5 per cent of total taxpayer-supported capital spending. This contingency allowance provides protection against higher-than-expected construction price inflation. This is expected to absorb the potential additional cost of the Vancouver Convention Centre Expansion Project for which a revised project budget is being developed for review by government. The capital contingency also provides an allocation to assist health authorities to finance priority hospital projects in Victoria, Kelowna, Vernon, and Fort St John, pending final approval processes for those projects.
    • Government's new environmental leadership commitments are not all included in the budget as detailed implementation plans will be developed over the next several months. Updates to Budget 2007 released in each of the subsequent Quarterly Reports will include adjustments to the fiscal plan to fully incorporate these commitments as they are developed.
  • The report on the advice received from the Minister's Economic Forecast Council on the economic growth outlook for British Columbia, including the range of forecasts for 2007 and 2008. This is found at the end of Part 3.
  • The 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 financial forecasts of schools, universities, colleges and health authorities/societies (the SUCH sector) have been developed and signed off by the relevant organization, using broad policy assumptions provided by the Ministries of Health, Advanced Education and Education. However, due to the timing of the budget, several SUCH sector organizations submit their forecasts prior to formal development and approval of their annual plans by their full boards. As a result, final approved financial plans may differ from the forecasts included in the Budget and Fiscal Plan.

For full transparency and accountability it is preferable to obtain full board approvals of financial plans, however the sign-off of the board chair alone has been accepted in recognition that some agencies may have difficulty scheduling board meetings in late December or early January. For health authorities, the chairs of the respective boards have signed-off the 2007/08 forecasts, with the exceptions of the Vancouver Coastal and Fraser Health Authorities, where management has provided sign-off. As both of these health authorities have recently had new Board Chairs appointed, their boards did not have sufficient time to review the earlier forecasts in detail prior to the Budget. The new boards of the Vancouver Coastal and Fraser Health Authorities are currently reviewing the authorities' financial plans and expect to submit revised financial plans in early fiscal 2007/08. Due to the interim nature of the 2008/09 and 2009/10 funding targets, which reflect increased funding for the settlement costs of the negotiating framework, health authorities have not provided sign-off on these out-year forecasts.

The accounting policies followed in the Budget and Fiscal Plan 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 2007/08 surplus, is also disclosed. The 2007/08 forecast allowance helps to mitigate against revenue risks such as a sudden fall in energy prices, or unexpected costs such as natural disasters. The forecast allowances in subsequent years also provide cushions against events such as a significant slowing of economic growth, changes in the key lumber and natural gas commodity prices, out-year funding pressures, or the health authority updates noted above, that could have a negative impact on the fiscal plan.

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 my colleagues in the Ministry of Finance. Their professionalism, hard work and expertise were essential to the preparation of this budget.

Tamara Vrooman
Deputy Minister and
Secretary to Treasury Board

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