THE BUDGET 2000 CONSULTATION PROCESS

Introduction

The Minister of Finance and Corporate Relations has traditionally undertaken a pre-budget consultation process. In the past, this process has included meetings with key stakeholders representing business, labour, communities, youth, environmental groups and others.

In 1997, then Minister of Finance Andrew Petter added another element to the process by initiating an economic forecasting conference with British Columbia's and Canada's leading private sector economic forecasters. The conference provided government with advice on the expected level of economic growth for the coming year. In 1999, legislation was passed to make the Council a formal part of the minister's budget planning process.

In September 1999, the budget process review panel, chaired by Doug Enns, recommended greater public involvement in the budget consultation process. While a number of options to increase public involvement were currently under consideration for the 2000 legislative session, Finance Minister Paul Ramsey chose to open up the process immediately with a discussion paper called Budget 2000 -- Choices and Challenges.

The public was able to provide feedback on the Choices and Challenges discussion paper in a number of ways:

• A 1-800 line, where comments were taken by phone;
• A questionnaire included with the discussion paper, mailed or faxed to the ministry;
• A Web site, with a questionnaire sent to the ministry by electronic mail.

The ministry received about 300 responses by mail (69), fax (158), e-mail (51), and telephone (1-800 line). An additional 45 verbal and written submissions on the budget were also presented to the Minister.

The Minister also visited a number of communities as part of the pre-budget consultation process, including Trail, Dawson Creek, Nelson, Revelstoke, Campbell River, New Westminster, Kamloops, Prince Rupert, Nanaimo, Castlegar, Penticton and Prince George. The Minister met with local chambers of commerce and distributed copies of the discussion paper during these regional stops. Consultations took place from December 1999 to February 2000.

Choices and Challenges questionnaire results to February 18, 2000

Overall, responses to the Choices and Challenges survey supported protection or improvement of services in the areas of health care, education, and social services. Respondents supported increased spending in these areas and clearly value the services they receive. However, about one-half of the multiple choice and written respondents also advocated faster reduction or elimination of the deficit, along with cuts in corporate and personal income taxes.

Deficit Reduction

Respondents were evenly split between wanting to maintain the deficit and reducing the deficit faster. The remaining 10 per cent thought the deficit should be reduced more slowly.

* Note: Not every respondent answered or provided comment on every question. Percentages have been rounded. Numbers in brackets indicate number of responses to each question.

Program Spending

Respondents were in favour of maintaining or increasing spending in health, education, social services, natural resources and justice. In the written comments on program spending, many respondents said they believe there is some waste in how government dollars are spent, and they would like government to keep a closer eye on administrative spending in the public service.

A large number of respondents advocated increased spending in health care to: shorten waitlists; spend health dollars more effectively and efficiently; invest in preventative health care measures; direct more dollars to patient care and less to administration; and provide more money for long-term care beds.

Reflecting public concern for the welfare of children and families, over 100 written respondents advocated an increase in spending for child care, while a smaller number advocated more spending for other social services, including early intervention programs for families at risk. There was also strong support for improvements in K-12 education and services for youth.

An overwhelming majority of respondents wanted spending on health care facilities, educational institutions and public buildings either increased or maintained at current levels. Significantly, while over 50 per cent of respondents to this question wanted capital spending on transportation to be maintained or increased, almost half wanted a decrease in spending in this area.

Written responses largely focused on concerns about spending on fast ferries. Some respondents suggested that the fast ferries should be sold, while others suggested the "user pay" principle for those that use ferries.

Rate and Tuition Freezes

Respondents were divided between wanting to keep freezes on tuition and car insurance rates and eliminating them. Over one-half wanted to eliminate tuition and ICBC rates freezes, and almost 60 per cent of respondents to this question wanted to eliminate the BC Hydro rate freezes.

Written responses also strongly advocated an end to all the freezes, and a number of respondents advocated the privatization of ICBC and BC Hydro.

Economic Development

Respondents were evenly divided whether they agreed or disagreed with corporate tax cuts, targeted tax cuts, or across-the-board tax cuts. There was no clear division in the area of corporate tax cuts. Half wanted further cuts across-the-board to corporations, half do not. Similarly, half wanted targeted cuts such as film tax credits, while half did not.

Tax Rates

Two-thirds of respondents wanted personal income taxes to be reduced, while respondents were split more evenly on reducing or maintaining the sales tax.

Several written responses advocated elimination of the corporation capital tax, while a small number said corporate tax rates should stay where they are or be increased. Opinions on the provincial sales tax (PST) were more varied -- some wanted the tax eliminated or harmonized with the federal goods and services tax (GST), while others wanted the PST rate increased or decreased.

Suggestions for new tax measures included: tax credits on new investment; an increase in fuel taxes to get people out of their cars; a green tax shift; and a move to tax on income.

Other verbal and written submissions

Most business and professional organizations consulted said that the province's taxes were hindering investment, economic development and job creation. They believed that it was important to reduce both personal and corporate taxes, and that the investment and tax climates in Alberta and Washington State were important standards of comparison because of the increasing mobility of capital and labour.

Businesses that depend on investment and being able to attract and retain highly-skilled workers tended to favour personal income tax cuts for higher income earners. Other businesses (especially in retailing and construction) advocated tax cuts for low and middle-income earners to increase consumer confidence and disposable income. Capital intensive industries, such as logging, mining and manufacturing, strongly supported a PST exemption for machinery and equipment, and elimination of the corporation capital tax.

Single industry associations proposed a wide variety of measures targeted specifically to their industry (e.g. tax credits), whereas tax professionals and business organizations with a broad membership base opposed sector-specific corporate tax breaks and stimulus, favouring instead across-the-board cuts to tax rates.

Besides numerous technical and administrative concerns raised by specific groups, six recommendations were heard repeatedly from a variety of business groups:

• The province needs a credible long-term plan to slow the growth of, and ultimately reduce, the provincial debt;
• Reducing personal and corporate income tax rates would help the provincial economy;
• The province should reduce the corporation capital tax, or at a minimum, harmonize it with the federal large corporation tax;
• The province should reduce or eliminate PST on business purchases of machinery and equipment;
• The province should consider placing limits on the ability of municipal governments to apportion the local property tax burden and set their own tax rates on different property classes (business, residential, etc.); and
• The province should reconsider harmonizing PST with the federal GST.

Groups that represented social concerns did not support tax cuts at the expense of program spending. They were concerned that a harmful inter provincial "race to the bottom" is developing for the lowest tax rates and level of public services.

As of March 3, 2000, verbal and/or written submissions have been received from the following:

• Advanced Education Council of B.C.
• Air Transport Association
• Alliance of Manufacturers and Exporters
• Association of Book Publishers of British Columbia
• B.C. and Yukon Hotels Association
• B.C. Agriculture Council
• B.C. Automobile Association
• B.C. Automobile Dealers Association
• B.C. Chamber of Commerce
• B.C. Federation of Labour
• B.C. Lodgings Association
• B.C. Teachers' Federation
• B.C. Technologies Industry Association
• B.C. Truck Loggers' Association
• B.C. Trucking Association
• B.C. Wine Institute
• Business Council of B.C.
• Canadian Bankers Association
• Canadian Centre for Policy Alternatives
• Canadian Federation of Independent Business
• Canadian Home Builders Association of B.C.
• Canadian Life and Health Insurance Association Inc.
• Canadian Property Tax Association
• Canadian Taxpayers Federation, B.C. Division
• Certified General Accountants Association
• Coal Association of B.C.
• Commodity Tax Group
• Council of Forest Industries
• Council of Tourism Associations
• Craft Brewers Association of B.C.
• Economic Development Association of B.C.
• Greater Victoria Chamber of Commerce
• Insurance Bureau of Canada
• Joint Taxation Committee of the Institute of Chartered Accountants of B.C. and the Canadian Bar Association
• Mining Association of B.C.
• New Media B.C.
• Private Forest Landowners Association
• Prospectors and Developers Association of Canada
• Retail Council of Canada
• Retail Merchants' Association of B.C.
• Social Policy and Research Council of B.C.
• Tax Executives Institute
• Urban Development Institute
• Vancouver Airport Authority
• Vancouver Board of Trade
• Western Brewers Association

Conclusion

The results of the various budget consultation processes reveal a common theme. British Columbians want government to reduce the deficit and debt, while also cutting taxes, but not at the expense of health care, education and social services. However, these areas make up over 80 per cent of ministry spending, and funding would need to be reduced significantly in other areas in order to balance the budget, and cut taxes at the same time.

The challenge for government is to balance these priorities in a way that best meets the needs of British Columbians.