Ministry of Finance and Corporate Relations Honourable Andrew Petter, Minister

For immediate release
March 25, 1997

VICTORIA - Additional funding to protect health care and education, a jobs strategy to support creation of 40,000 new jobs, and a cut in overall government spending for the first time in almost 40 years highlight the 1997 provincial budget brought down today by Finance Minister Andrew Petter.

"This budget shows real progress in placing the province's finances on a sound, sustainable path," said Petter. "It is based upon prudent economic assumptions, and is consistent with the priorities of British Columbians."

Overall spending is down for the first time since 1958 -- by more than $100 million. The projected 1997/98 provincial deficit is $185 million, less than half the 1996/97 deficit, and smaller than any this decade.

While overall spending is down, spending for health care and education is up. The budget provides $300 million in additional resources for health care, $63 million in new resources for kindergarten to grade 12, and 2,900 new spaces at colleges and universities.

There is additional support for working families, with a further two-per-cent income tax cut on top of the two-per-cent tax cut last year. Combined with continued freezes on BC Hydro rates, ICBC premiums, and college and university tuition fees, Petter said it means more than $500 in savings this year for the average family.

"We're confident the road we've chosen -- to protect job creation, health care and education while reducing the deficit in a careful, prudent way -- is the right one for the people of British Columbia," said Petter.

The budget also sets out a financial management plan to reduce the deficit this year, balance the budget in 1998/99 and achieve a significant surplus the following fiscal year. The plan will cut taxpayer-supported debt as a percentage of the economy over the coming years, ensuring B.C.'s provincial debt costs remain among the lowest in the country.

Some 200,000 low- and modest-income families get further help through the BC Family Bonus program -- a total of $235 million to help with the cost of raising their children.

"This groundbreaking program has become the model of choice in the fight against child poverty in Canada," Petter said.

Health care and education protected

"British Columbia has one of the best health systems in Canada," Petter said. "This budget ensures it will stay that way."

As part of the province's increased health investment of $300 million, funding for hospitals across B.C. is up by more than $80 million, including $28 million for new equipment. Funding is up for physician services, ambulance services, mental health and continuing care, and a particular priority will be further reductions to wait lists for heart surgery, cancer treatment and kidney dialysis.

Petter said B.C. faces a number of health care funding challenges: a growing and aging population, increasing costs and large cuts in federal transfer payments.

"Other provinces have chosen to meet these challenges with funding cuts and reductions to services. That is not our choice," he said. "Our health care spending per person leads the country.

"At the same time, to sustain our standards and our system's affordability, we must find savings in the system and reallocate them to front-line services so that new pressures can be accommodated and all our needs can be met."

Funding for the kindergarten to grade 12 school system is up by $63 million. Since 1991, B.C.'s support for education has risen 5.5 per cent per year -- more than double the national average.

"Our investment in each student in B.C. remains well above the national average," said Petter.

Grants to universities and colleges are maintained. And B.C. is increasing access for young people to post-secondary institutes -- tuition fees remain frozen and 2,900 new spaces will be added. Petter noted this is in marked contrast to other provinces, such as Ontario, where last year tuition fees rose 15 to 20 per cent.

A jobs strategy to build on Canada's best job creation record

"Over the past five years British Columbia has had the best job performance record in Canada, creating more than 200,000 jobs," said Petter. "This is an impressive record but we are determined to do even better."

The budget contains a jobs strategy to create new jobs across B.C. that includes:

• $23 million to the Guarantee for Youth program will create 12,000 new jobs for young people.

• $20 million to the YouthWorks initiative to replace welfare with training and work experience will help 40,000 young people this year.

• Capital spending of more than $1 billion annually in schools, hospitals and transportation infrastructure over the next few years will directly create more than 13,000 jobs across the province each year.

As part of this jobs strategy, Petter said the government will also:

• Pursue a framework agreement for a Jobs and Timber Accord with the forest industry with the goal to create 21,000 new forest sector jobs by 2001.

• Continue the small business income tax cut and the income tax holiday for eligible new small businesses which reduce costs for small business by about $29 million.

• Establish a new agency with dedicated revenue to promote tourism throughout the province, in partnership with industry.

• Phase in an international jet fuel tax rate reduction to keep the airline industry competitive and attract new carriers and employment.

• Work with B.C.'s high-growth film industry to expand opportunities and, in particular, find ways to encourage Canadian productions.

• Work with all partners to develop a made-in-B.C. vision for the future of the fishery and create Fisheries Renewal BC to reinvest profits, protect the fish resource and protect jobs.

A prudent financial management plan

Petter said that as part of his consultations for developing the budget, he met with independent experts to get their views on B.C.'s economic prospects. Their average forecast is for 2.4 per cent real growth in the B.C. economy this year, reflecting a consensus that 1997 will be a better year than 1996.

Petter said that consistent with this, the ministry of finance forecast for 1997 is for economic growth of 2.2 per cent. However, he is basing his budget on a lower rate of growth.

"I have chosen to base the budget's revenue forecast on a prudent economic assumption of 1.6 per cent growth," he said. "We are determined to meet thespending and deficit estimates presented in the budget. In addition, we will monitor performance against budget and take corrective actions as they are required.

"Some may argue that we should have cut deeper to ensure a balanced budget this year," said Petter. "But unlike some other provincial governments, we are not prepared to sacrifice our commitment to protect health care and education. And we are determined to maintain an environment for future investment and job growth.

"We must be careful government does not withdraw too much purchasing power from the economy, undermining the return of business and consumer confidence," Petter said. He noted it was for this reason the Business Council of B.C. cautioned the government not to go too far too fast in reducing the deficit.

In consultation with its private sector advisory group, Petter said the government is setting forward a plan to cut taxpayer-supported debt as proportion of GDP to 20 per cent within three years, and to 15 per cent by the year 2015.

"This budget cuts the deficit by more than half of what it was last year," said Petter. "This places us in position to put the budget in balance next year, and to achieve a significant surplus in the year that follows."

Revenue measures

Federal government cuts to transfer payments mean a loss to B.C. of $200 million for 1997/98, on top of $400 million lost last year. Provincial corporate income tax payments are also expected to be down by more than $300 million.

To offset this, Petter said the province has sought ways to enhance revenue while maintaining its tax freeze for individuals and families, including:

• disposing of some government assets which are no longer needed.

• seeking higher returns from Crown corporations through increased efficiencies and income, disposal of unneeded assets and revenue from already-announced gaming expansion.

• greater cost recovery from those who benefit from government services, rather than from the general taxpayer.

• improving tax enforcement and ensuring all tobacco products are taxed on the same basis.

"We've had difficult choices to make," Petter said. "But we have accepted our responsibility to meet the needs of British Columbians in a fiscally responsible way. We have reduced spending for the first time in almost 40 years, and cut the deficit to its lowest level this decade. At the same time, we are protecting health care, education and job creation.

"With an anticipated improvement in the economy this year and next, and a federal commitment not to further reduce transfer payments, we are establishing a solid foundation for the future."

BC Ministry of Finance and Corporate Relations

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