1995 BUDGET REPORTS
The government financed its deficit using higher-than-expected cash balances at the end of 1993/94, higher net cash receipts in 1994/95 and $200 million from the British Columbia Endowment Fund. Net debt declined $75 million (see Table B4).
Budget Revised Budget
Estimate Forecast Estimate
1994/95 1994/95 1995/96
---------- ($ millions) -----------
Revenue............................... 18,720.0 19,244.0 20,300.0
Program Expenditure................... 18,637.0 18,650.0 19,207.0
-------- -------- --------
Program Surplus (Deficit)............. 83.0 594.0 1,093.0
Management of Public Funds and Debt... 981.0 964.0 979.0
-------- -------- --------
Surplus (Deficit)..................... (898.0) (370.0) 114.0
======== ======== ========
Forests revenue was $245 million or 21 per cent above budget due to higher revenues from timber sales, the small business forest enterprise program and logging tax. The increase in revenue mainly resulted from high lumber prices, the effects of a depreciating Canadian dollar, and the stumpage rate increases, under the Forest Renewal Plan, that took effect May 1, 1994. Although lumber prices fell sharply in the latter part of the fiscal year, they had little effect on stumpage rates because of the lags between prices and stumpage rates. Forests revenue does not include $430 million of stumpage revenue under the Forest Renewal Plan, received by Forest Renewal BC during 1994/95.
Higher (Lower)
$ millions
Higher forest revenue............................................ 245
Higher corporation income tax revenue............................ 125
Higher Established Programs Financing revenue.................... 80
Higher social service tax revenue................................ 64
Higher tobacco tax revenue....................................... 51
Higher petroleum and natural gas revenue......................... 47
Higher other sources............................................. 103
Lower personal income tax........................................ (62)
Lower property transfer tax revenue.............................. (60)
Lower investment earnings........................................ (35)
Lower British Columbia Hydro earnings............................ (34)
---
Revenue increase............................................. 524
===
Established Programs Financing revenue was $80 million or 6.2 per cent above budget mainly due to higher population estimates from Statistics Canada for the 1992 to 1994 years.
The $64-million increase in social service tax revenue resulted from higher-than-expected consumer and investment spending. During 1994, retail sales grew by 9.7 per cent, compared to the budget forecast of 6 per cent.
Revenue from tobacco tax was up $51 million or 11 per cent from budget due to higher taxed consumption volumes. Despite the introduction of lower federal tobacco taxes in central and eastern Canada, enforcement measures introduced by provincial governments have helped curb sales of untaxed cigarettes. Compared to 1993/94, taxed consumption volumes rose by almost 4 per cent, a reversal of the steady volume decline experienced over the previous eight years.
Petroleum and natural gas revenue was up $47 million or 13 per cent from budget mainly due to higher sales and leases of Crown land drilling rights. In 1994/95, this revenue totalled $219 million -- the highest level in 15 years.
Revenue from other sources was $103 million above budget.
Property transfer tax revenue fell $60 million or 16 per cent from budget due to a slowdown in the housing market, caused by higher interest rates. Sales volumes declined about 20 per cent from 1993/94 levels, but were partly offset by a 12 per cent increase in average selling prices.
Investment earnings were $35 million below budget due to lower-than-expected gains from sales of sinking fund investments due to higher interest rates.
The dividend from British Columbia Hydro and Power Authority was down $34 million from budget. The British Columbia Utilities Commission denied B.C. Hydro's application for a 2.8 per cent rate increase effective April 1, 1994. As a result, the drawdown from the rate stabilization account was higher-than-expected.
Over (Under)
$ millions
Ministry of Health................................................ 110
Ministry of Attorney General...................................... 61
Ministry of Forests............................................... 22
Ministry of Education............................................ 16
Ministry of Municipal Affairs..................................... ( 44)
Ministry of Employment and Investment............................ ( 25)
Ministry of Social Services....................................... ( 20)
Debt interest.................................................... ( 17)
Other savings.................................................... (107)
-----
Expenditure decline.............................................. ( 4)
=====
Spending by the Ministry of Attorney General was $61 million above budget mainly due to increased expenditures for provincial correctional services and criminal injury compensation payments.
Ministry of Forests expenditure was $22 million above budget because of higher forest fire suppression costs partially offset by savings in other ministry programs.
Ministry of Education expenditures were $16 million above budget due to higher-than-expected public school enrolments.
Expenditure by the Ministry of Municipal Affairs was $44 million below budget due to lower spending for grants to local governments under the Canada-British Columbia infrastructure works program.
Ministry of Employment and Investment expenditure was $25 million below budget mainly because of underspending in the Build BC special account.
Expenditure by the Ministry of Social Services was $20 million below budget because of a lower-than-expected income-assistance caseload. The number of income-assistance cases increased an estimated 5.4 per cent in 1994/95, down from 10.9 per cent in 1993/94.
Debt interest costs were $17 million below budget. Borrowing requirements were lower and occurred late in the year, offsetting the effect of higher-than-expected interest rates.
Other spending was down $107 million due to reductions in a number of programs and year-end lapses anticipated because of low year-to-date spending.
Revenue for 1995/96 is estimated at $20.3 billion, an increase of 5.5 per cent from the 1994/95 revised forecast.
Expenditure will total $20.2 billion in 1995/96, up 2.9 per cent from both the 1994/95 budget estimate and revised forecast.
Program expenditure, which excludes spending on debt interest (management of public funds and debt), is estimated at $19.2 billion, an increase of 3.1 per cent from the 1994/95 budget estimate.
There will be a program surplus of $1.1 billion in 1995/96, almost $500 million higher than the 1994/95 revised forecast. A program surplus means that government revenues exceed spending on government programs.
Because the program surplus is greater than the debt interest costs on direct debt, the consolidated revenue fund will have a surplus of $114 million in 1995/96. This is the first surplus since 1989/90.
At March 31, 1996, the accumulated deficit of the consolidated revenue fund is expected to total $9,251 million, a decrease of $114 million from March 31, 1995 due to the budget surplus in 1995/96.
The government will complete the wind up of the British Columbia Endowment Fund, announced in last year's budget. Proceeds from the sale of fund assets will help to reduce government direct debt by $414 million in 1995/96 (see Table B4 and Report D -- Government Financing Plan).
This report includes a topic box that provides summary estimates of the combined financial results of the government and its Crown corporations and agencies. In 1995/96, the summary estimates show a combined surplus of $31 million compared to a deficit of $202 million in 1994/95 (see Topic Box at the end of this report).
Budget Revised Budget
Estimate Forecast Estimate
1994/95 1994/95 1995/96
---------- ($ millions) -----------
Consolidated Revenue Fund
Surplus (Deficit)................. (898.0) (370.0) 114.0
Net Receipts (Disbursements) from
Financing and Working Capital
Transactions(1)................... (200.3) (21.0) (100.0)
Decrease (Increase) in Cash and
Short-Term Investments............ 160.0 266.0 --
British Columbia Endowment
Fund Proceeds..................... 300.0 200.0 400.0
-------- -------- --------
Net (Increase) Decrease in
Provincial Government Direct Debt(2) (638.3) 75.0 414.0
======== ======== ========
1 Financing and working capital transactions represent either a source or use of funds, such as the payment or collection of loans and accounts payable/receivable, or non-cash transactions including allowances for doubtful accounts. They do not cause a change in the annual surplus (deficit) but only a change in the composition of the provincial government's assets and liabilities.
2 Includes direct debt incurred for government operating purposes and does not include debt incurred by, or on behalf of, Crown corporations and agencies.
Taxation revenue, the largest source of provincial government revenue, is expected to total $12,753 million in 1995/96, up 7.4 per cent from the 1994/95 revised forecast (see Table B5).
Personal income tax revenue is expected to increase 7.1 per cent to $5,040 million. This reflects growth in personal incomes and federal budget measures such as the elimination of the capital gains exemption in 1994, and the limitation of RRSP contributions for 1996. Because personal income tax revenue is recorded on an accrual basis, current-year revenue is the estimated tax due to the province for the fiscal year regardless of when cash is actually received from the federal government.
Corporation income tax revenue is estimated at $1,325 million, an increase of 33 per cent, mainly due to growth in corporate profits. The forecast is based on the latest federal budget forecast of national corporate taxable income and includes additional tax assessments arising from the refund to British Columbia companies of about $650 million of softwood lumber duties collected by the U.S. government beginning in March 1992. The duty was removed in August 1994, and refunds are still being processed.
Social service tax revenue, estimated at $3,034 million, will increase 5.5 per cent, due to growth in retail sales and investment spending.
Property tax revenue is expected to increase 3.1 per cent in 1995/96, due to increased assessments from new construction.
Fuel tax revenue will rise 2.7 per cent in 1995/96 due to increased consumption volumes. Tobacco tax revenue will increase 1 per cent from the 1994/95 revised forecast reflecting a slight increase in the volume subject to tax.
Property transfer tax revenues will decrease 10.8 per cent as high interest rates are expected to cause declines in housing prices and the number of sales. Corporation capital tax revenue will rise 6.1 per cent because of growth in the tax base as a result of increased investment activity and corporate profits growth. Revenue from insurance premium tax is expected to rise 4.6 per cent, due to higher motor vehicle insurance rates and people buying more insurance.
Natural resource revenue is expected to increase 15 per cent to $2,451 million due to a one-time payment for Columbia River downstream benefits. Forests revenue will increase 8.9 per cent mainly due to higher timber sales under the small business forest enterprise program. The forecast assumes that spruce-pine-fir lumber prices -- the market bellwether -- average $335 U.S. per thousand board feet in 1995. The revenue forecast does not include $430 million of stumpage revenue that will be received by Forest Renewal BC during 1995/96.
Revenue from petroleum, natural gas and minerals will decline by $65 million. An anticipated $86-million decline in sales of Crown land drilling rights from the record levels in 1994/95, and a $14-million decline in natural gas royalties in response to weaker natural gas prices, will be partly offset by a $29-million increase in mineral revenues due to higher copper prices, the re-opening of some mines in 1994, and a modest improvement in coal prices.
Water rental revenue is based on the previous year's water use. In 1995/96, this will increase 3.5 per cent due to increased electricity generated in 1994/95. In addition, the provincial government expects to receive a $250-million payment from U.S. power producers related to the renegotiation of the Columbia River Treaty.
Other revenue is expected to rise only slightly to $1,783 million.
Contributions from the federal government are estimated at $2,343 million, a decrease of 3.7 per cent. Revenue from Established Programs Financing is expected to fall 3.9 per cent, mainly due to the effect of the prior-year payments in 1994/95. Recoveries under the Canada Assistance Plan (CAP) will remain unchanged in 1995/96, reflecting the freeze of the federal government's contribution, announced in its 1994 budget. Other federal contributions will decline by $37 million because of the expiry of the National Training Agreement in 1994/95, the federal government's termination of economic development agreements for forestry and mining and the removal of the federal coastal ferry subsidy from the provincial government's revenue. Beginning in 1995/96, the subsidy will be paid directly to the British Columbia Ferry Corporation.
Budget Revised Budget
Estimate Forecast Estimate Increase
1994/95(1) 1994/95 1995/96 (Decrease)(2)
---------- ($ millions) ----------- (per cent)
Taxation Revenue:
Personal income......................... 4,767.0 4,705.0 5,040.0 7.1
Corporation income...................... 873.0 998.0 1,325.0 32.8
Social service.......................... 2,811.0 2,875.0 3,034.0 5.5
Property................................ 1,212.0 1,212.0 1,250.0 3.1
Fuel.................................... 636.0 660.0 678.0 2.7
Other................................... 1,421.0 1,424.0 1,426.0 0.1
-------- -------- --------
11,720.0 11,874.0 12,753.0 7.4
-------- -------- --------
Natural Resource Revenue:
Petroleum, natural gas and minerals..... 389.0 455.0 390.0 (14.3)
Forests................................. 1,153.0 1,398.0 1,522.0 8.9
Water and other......................... 277.0 278.0 539.0 93.9
-------- -------- --------
1,819.0 2,131.0 2,451.0 15.0
-------- -------- --------
Other Revenue............................. 1,780.0 1,776.0 1,783.0 0.4
-------- -------- --------
Contributions from Government Enterprises. 1,051.0 1,031.0 970.0 (5.9)
-------- -------- --------
Contributions from the Federal
Government:
Established Programs Financing
-- Health............................. 965.4 1,025.1 985.6 (3.9)
Established Programs Financing
-- Post-Secondary Education........... 329.6 349.9 336.4 (3.9)
Canada Assistance Plan.................. 880.0 882.0 883.0 0.1
Other................................... 175.0 175.0 138.0 (21.1)
-------- -------- --------
2,350.0 2,432.0 2,343.0 (3.7)
-------- -------- --------
TOTAL REVENUE............................. 18,720.0 19,244.0 20,300.0 5.5
======== ======== ========
1 Restated to conform to the 1995/96 budget estimates.
2 Percentage change between the 1994/95 revised forecast and the 1995/96 budget estimate.
The budget of the Ministry of Health will increase to $6,643 million, up $252 million, or 3.9 per cent from last year's budget. Significant increases include $82 million for contributions to hospitals, $67 million for community support programs, $42 million for the Medical Services Plan and $26 million for Pharmacare.
Budget Revised Budget
Estimate Forecast Estimate Increase
1994/95(1) 1994/95 1995/96 (Decrease)(2)
------------- ($ millions) ----------- (per cent)
Legislation................................. 24.4 25.4 25.3 3.7
Auditor General............................. 7.6 7.5 7.7 1.3
Office of the Child Advocate................ -- -- 0.6 --
Commission on Resources and Environment..... 4.2 2.8 3.2 (23.8)
Conflict of Interest Commissioner........... 0.2 0.2 0.2 --
Information and Privacy Commissioner........ 2.2 1.9 2.6 18.2
Ombudsman................................... 4.7 4.6 5.0 6.4
Office of the Premier and Cabinet Office.... 22.3 22.3 22.3 --
Aboriginal Affairs.......................... 32.2 27.2 33.7 4.7
Agriculture, Fisheries and Food............. 70.4 70.2 69.7 (1.0)
Attorney General............................ 797.0 857.8 845.1 6.0
Education................................... 3,778.0 3,794.0 3,989.9 5.6
Employment and Investment................... 445.7 420.4 381.5 (14.4)
Energy, Mines and Petroleum Resources....... 67.0 59.8 68.7 2.5
Environment, Lands and Parks................ 251.6 263.7 250.1 (0.6)
Finance and Corporate Relations............. 81.1 78.7 80.3 (1.0)
Forests..................................... 712.2 733.9 711.5 (0.1)
Government Services......................... 95.2 90.0 87.5 (8.1)
Health...................................... 6,390.8 6,500.5 6,642.6 3.9
Housing, Recreation and Consumer Services... 102.7 101.9 105.1 2.3
Municipal Affairs........................... 361.2 317.6 381.4 5.6
Skills, Training and Labour................. 1,598.8 1,586.1 1,632.5 2.1
Small Business, Tourism and Culture......... 112.7 110.7 126.9 12.6
Social Services............................. 2,736.5 2,716.1 2,781.5 1.6
Transportation and Highways................. 685.1 680.7 673.4 (1.7)
Women's Equality............................ 201.5 187.0 212.5 5.5
Other Appropriations:
Management of Public Funds and Debt..... 981.0 964.0 979.0 (0.2)
Contingencies and New Programs.......... 28.3 25.9 57.0 101.4
Amortization of change in unfunded
pension liability..................... (24.8) (24.8) (24.8) --
Anticipated year-end lapses............. -- (60.0) -- --
Other(3)................................ 48.2 47.9 34.0 29.5
-------- -------- -------- ----
TOTAL EXPENDITURE........................... 19,618.0 19,614.0 20,186.0 2.9
======== ======== ======== ====
1 Restated to conform to the 1995/96 budget estimates.
2 Percentage change between the 1994/95 budget and the 1995/96 budget estimate.
3 Other includes the Corporate Accounting System Vote, the Public Sector Employers' Council Vote, the Public Service Employee Relations Commission Vote, the Environmental Appeal Board and Forest Appeals Commission Vote, the Forest Practices Board Vote, the Insurance and Risk Management Special Account, the South Moresby Implementation-Forestry Compensation Special Account and other appropriations.
Expenditure of the Ministry of Employment and Investment is estimated at $382 million, down $64 million or 14.4 per cent from the 1994/95 budget estimate, mainly because of a $60-million reduction in the budget for the Build BC special account.
Ministry of Attorney General expenditure of $845 million shows an increase of $48 million or 6 per cent from the 1994/95 budget estimate, due to higher spending on corrections, criminal justice and courts programs.
Ministry of Social Services expenditure is estimated at $2,782 million, up $45 million or 1.6 per cent. The income assistance budget will decrease 4.4 per cent due to a reduction in the income-assistance caseload and improved administration.
Spending of the Ministry of Skills, Training and Labour is estimated at $1,633 million, up $34 million or 2.1 per cent because of increased funding for colleges and universities, capital debt servicing and Skills Now initiatives.
Ministry of Municipal Affairs expenditure will increase $20 million or 5.6 per cent to $381 million due to increased expenditure under the Canada-British Columbia infrastructure works program.
Expenditure of $127 million by the Ministry of Small Business, Tourism and Culture is up 12.6 per cent from last year's budget in part due to new funding for cultural services, tourism and aboriginal initiatives.
Ministry of Women's Equality spending will increase 5.5 per cent to $213 million due to increased demand for day-care subsidies.
Overview
Since 1981/82, the Public Accounts have provided information on the annual surplus (deficit) of the Consolidated Revenue Fund (CRF) and also on the annual surplus (deficit) of the CRF combined with government organizations and enterprises (Crown entities). This combination is referred to as the Summary Financial Statements.The CRF is the operating account of the government and includes all special accounts and special funds. The annual Estimates and Budget reflect all budgetary transactions of the CRF. This topic box represents the first time budgetary information in respect of the forthcoming fiscal year has been provided on a Summary Financial Statements basis.
Transactions Between the CRF and Crown Entities
CRF budgetary revenue includes taxes, resource revenues, fees and licences, federal transfers and other revenues including dividends and other payments from profitable Crown entities including B.C. Hydro, the Liquor Distribution Branch and the British Columbia Lottery Corporation.CRF budgetary expenditure includes all ministry expenses and other items, such as interest on the public debt. Also included in budgetary expenditures are grants to entities, such as B.C. Transit and B.C. Ferry Corporation, to help offset losses which those entities would otherwise incur.
Some Crown entities provide services to government ministries. These include B.C. Buildings Corporation (BCBC) and B.C. Systems Corporation (BCSC). BCBC and BCSC costs are funded through service charges to government ministries which are fully provided for in ministry expenditure budgets (e.g., rent in the case of BCBC and data processing charges in the case of BCSC). These corporations tend to earn a modest profit, some of which is returned to the CRF as dividends.
Other Crown entities, such as the capital financing authorities for schools, post-secondary institutions and hospitals, and the recently established BC Transportation Financing Authority (BCTFA), have been established to provide financing for long-term capital projects. These entities are funded through dedicated tax revenues, or through budgetary debt servicing grants from the CRF.
Accounting Policy Adjustments
In preparing the Summary Financial Statements, the government makes certain accounting adjustments to the reported results of some Crown entities to ensure consistency with accounting policies for the CRF. These adjustments are primarily to record as budgetary expenditure, certain fixed asset acquisitions. For example, new buildings acquired by BCBC or new highways constructed by the BCTFA are capitalized on the financial statements of those entities but, to be consistent with the government's accounting policy, are fully expensed on the Summary Financial Statements.Fixed asset additions of entities that sell services outside of government (e.g., B.C. Transit, B.C. Hydro) are not written off on the Summary Financial Statements. Consistent with private sector treatment, these revenue producing assets are expensed over the useful life of the assets. Loans made by the capital financing authorities are also not written off on the Summary Financial Statements since these loans are made to third parties (school districts, post-secondary institutions and regional hospital districts) in respect of capital infrastructure owned by those districts and institutions.
For all but two years from 1981/82 to 1993/94 inclusive, the Summary Financial Statements have shown a higher annual surplus (or lower deficit) than the CRF.
The table shows the actual 1993/94 budgetary results on both a CRF and Summary Financial Statement basis. Forecast amounts for 1994/95 and the estimated amount for 1995/96 are also provided.
The increase in net earnings of government organizations and enterprises in 1994/95 reflects the creation of Forest Renewal BC. The firm received $430 million in revenue in 1994/95 , which will be used for long-term investment in the forest sector. The decline in net earnings in 1995/96 primarily reflects increased spending by that corporation in 1995/96.
The increase in accounting policy adjustments in 1994/95 and 1995/96 primarily reflects an increase in the fixed assets acquired by the BCTFA.
1993/94 1994/95 1995/96 Actual Forecast Estimates -------- ($ millions) --------- Consolidated Revenue Fund (CRF) Surplus (Deficit)... (915) (370) 114 ======== ======== ======== Government Organizations and Enterprises o Net Earnings................................... 1,174 1,611 1,417 o Less Earnings Included as CRF Revenue.......... (1,049) (1,031) (970) o Accounting Policy and Other Adjustments........ (114) (412) (530) -------- ------- --------- Net Adjustment to CRF............................... 11 168 (83) -------- ------- --------- Summary Financial Statements Surplus (Deficit)...... (904) (202) 31 ======== ======== =========
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