Finance minister Mike de Jong has unveiled his fourth consecutive balanced budget – and once again, the message is ‘stay the course.’
That’s not to say it’s a boring budget, with several key measures that will certainly get B.C. talking.
Housing relief is on the way, with the property transfer tax being dropped for new homes under $750,000, and a new tax on luxury homes on the way.
The government is also taking steps to track foreign ownership.
The much maligned MSP premiums aren’t being scrapped – but are seeing some significant tinkering with both winners and losers.
The beleaguered Ministry of Children and Family Development is also in line for a big funding boost.
The province is projecting a thin surplus of $264 million on revenues of more than $48 billion.
Despite this, the provincial debt will grow by more than $1.5 billion this year, to 67.7 billion, thanks to new capital expenditures.
It’s expected to grow to nearly $72 billion by 2017/18.
Health care continues to take the biggest bite out of spending – just shy of $17 billion this year – more than half of ministry spending.
With Metro Vancouver’s skyrocketing housing prices dominating headlines, it’s no surprise the province has introduced measures to address the issue.
The biggest change – an exemption of the property transfer tax on newly built homes under $750,000 – provided the buyer is a Canadian citizen or permanent resident, and lives in it for a year.
First time homebuyers will still qualify for the existing exemption on homes under $475,000.
The province is paying for the change with a new 3% ‘luxury tax’ on homes worth more than $2 million.
The province says it hopes the move will help stimulate new housing supply, while making homes more affordable to buyers.
Property transfer tax also remains a key revenue source for the province, bringing in almost $1.5 billion last year and forecast at $1.2 billion this year.
Finance minister Mike de Jong says the province will also hold talks with municipalities in coming weeks regarding highlighting “hidden” development costs, warning the province could use legislation to force them to do so.
The ever hot issue of foreign ownership also got some ink in this year’s budget, with the province taking steps to gather data on exactly who is buying B.C. properties.
Buyers will now have to indicate if they’re a Canadian citizen or permanent resident, and if not, disclose their citizenship.
The province has also taken steps to close a loophole regarding properties held in “bare trusts.” Buyers will have to disclose if the property is being held as a bare trust, along with information on the settlor and beneficiaries of the trust.
Earlier this month, the premier tasked BC Housing with collecting data on foreign ownership in the province.
“Tinkering around the edges”
“I’m pleased that we’re finally going to have some data on what’s going on in the housing market, not just in the lower mainland, but across the province. But talk about coming late to the game.”
That, from Opposition leader John Horgan, who says the new measures tinker around the edges of the problem without doing anything for young people and families, the so-called “life blood” of our cities.
“Good news if you’re a condo developer, but the majority of the houses moving in the market are resale, so there’s no impact there. I think for young familes, certainly outside the Lower Mainland, that 750 figure is a little bit beyond what you’re going to find in Kelowna or even in Victoria. So it’s targeted at vancouver and its targeted for the new housing market, and that’s good news for the Liberal Party.”
Horgan comments echo calls for more radical tax action to cool the market.
Vancouver Mayor Gregor Robertson has been pitching a tax on speculators to try and keep spiraling prices under control. And a group of UBC economists has suggested the province implement an empty home tax to dissuade speculators while providing affordable housing.
Premier Clark as repeatedly insisted her government will take no action that could drive prices down and cut into homeowners existing equity.
The changes come as debate about the housing market reaches fever pitch in the wake of allegations realtors are shadow flipping homes and driving up prices.
Also included in today’s budget was the previously announced $355 million for affordable housing.
The first $50 million of the plan flows this year.
Tony Roy, CEO of the BC Non Profit Housing Society says it’s a good start, but falls short of addressing the city’s rental crisis.
“There’s this new asset transfer program which is going to create some money to invest in social housing. But things are going to get worse before they get better. So it’s probably going to take years and years to get that new housing online. And meanwhile, need is going to grow faster than we’re even building.”
Roy says he’d like to see the the province’s new property transfer luxury tax go to funding affordable housing.
The total amount is spread across five years and will go to build 2,000 new units.
MSP and health
Big changes are coming to MSP premiums next January – but they fall short of abolishing the program, or rolling them in to the general income tax process.
de Jong says premiums will stay on the books, because they communicate the cost of healthcare to British Columbians.
“I fear it creates the illusion that health care is free. It is not.”
And while the budget stops short of tying MSP directly to income – the changes do create clear winners and losers depending on how much you make.
There are two core changes to the way MSP will be calculated.
First off, kids are now completely exempt from the program, meaning only adults in the home will pay.
Couples will no longer be charged as a pair, but rather as two single individuals – which will mean an increase.
Discounts for some
There is MSP relief on the way for some.
The government is putting $70 million into the premium assistance program, boosting the range of incomes that qualify for partial or full discounts.
Who qualifies – and for how much – depends on whether you’re single or have kids. You can find out if you qualify and for how much HERE.
Premiums up… again
On the flip side, premiums are going up for everyone else – 4%, or about $3 a month.
The changes will put an extra $77 million in government coffers next year.
MSP premiums will bring in more than $2.5 billion this year, growing to nearly 2.8 billion in revenue by 2081/19.
NDP leader John Horgan calls the changes a tax grab, and that the province should have committed to more serious reform.
“This is the first budget that I’ve seen in 10 years that the revenues from Medical Services Premiums are higher than the royalties from forestry, mining, and natural gas combined.”
BC Nurses Union president Gayle Duteil says while the relief for some is good, the premium increases will hit middle income families hard.
“People with not very much more income – I think the breakdown is 51,000 for couples – will be paying substantially more. That’s 20 dollars more per couple per month, That’s over a million people. Paying a lot more.”
MSP premiums already climbed a 4% to kick off 2016, to $75 for one person and $150 for a family of three.
Critics, including Green Party leader Andrew Weaver call the program a “head tax” which unfairly charges low income and wealthy British Columbians the same fee regardless of income. Earlier this month a petition to fold the collection of health care premiums into the income tax process drew 62,000 signature.
While the government has said in the past that the premium system is in place so that British Columbians don’t forget that healthcare isn’t free, the premier admitted last week that the collection system is “antiquated” and doesn’t make a whole lot of sense.
Kids in care
2015 was a devastating year for the Ministry of Children and Family Development, from a scandal over the ministry returning children to their pedophile father to a string of deaths linked to youth in care.
Now, two ministries dealing with children in care are getting a big boost in today’s budget.
$673 million over three years in new money is on the way for the troubled Ministry of Children and Family Development, along with the Ministry of Social development.
It’s more than was recommended in last fall’s Plecas report, which had called for a $50 million boost this year.
The MCFD will instead get $65 million net new budget dollars this year.
The new money will allow the ministry to bring on 130 new staff, including 100 front line social workers.
Digging “out of a hole”
But B.C.’s Children’s watchdog says she doesn’t have confidence in those numbers.
She says the government is already behind on its commitments – having promised in 2014 to hire 200 more social workers. She says so far, they’ve only hired 86, meaning they’re already behind on 114 positions.
“They’re in a hole and the hole hasn’t been filled. This will help.”
She says that means the government really needs to hire about 250 workers, not 130.
She says she’ll be carefully monitoring how the money is rolled out.
Nearly $240 million of the increase will also go to programs and services for children and youth, child care centres, and for kids with special needs.
A report last fall by former civil servant Darryl Plecas found the ministry was chronically under resourced and recommended a cash infusion of $50 million in this budget, followed by further investments over a four year plan.
Plecas had called for the ministry to immediately raise wages and benefits for child protection social workers, while bringing on the equivalent of 20 full time employees to boost staffing, training, quality assurance, and programs.
The biggest news on the gas front was actually announced yesterday, with the creation of the LNG prosperity fund.
That’s despite not a single cent of LNG revenue in the fund – or forecast in the province’s three year projections. There are also no projected deposits into the fund for the next two years.
The budget says half of the fund will be earmarked for debt reduction.
Beyond that, the budget paints a rosy picture for the industry – projecting high future demand for NG despite sinking global prices and a glut of supply.
Those tanking prices have also taken a bite out of revenues, with natural gas royalties coming in almost $300 million below last year’s forecast.
Earlier this month, the government admitted in its throne speech that it would not meet its timeline for LNG development. That plan had called for one LNG plant to be in operation by 2015 and three by 2020.
It came on the heels of news Shell is postponing its final investment decision on its $50 million LNG Canada Kitimat plant until at least December.
The Liberals campaigned in 2013 on the industry as a potential savior for the province, creating 100,000 jobs and a “debt free BC,” with a $100 billion LNG prosperity fund.
Sales tax review?
No, we won’t see a return to the dreaded HST, but the province is re-opening the Pandora’s box of tax reform.
Included in the budget are plans for a Commission on Tax Competitiveness, which will review the province’s tax regime from the point of view of ensuring businesses stay competitive and continue to reinvest.
The terms of reference, chair, and membership of the committee haven’t been announced – but de Jong was clear on one point: the HST is not on the table.
The move is good news to Jon Garson, president of the B.C. chamber of commerce who says B.C. businesses were hit hard – to the tune of $1.5 billion, when the HST was scrapped and the PST reinstated.
“The HST was a particular model that expanded the tax base as well. We don’t necessarily need to look at that. But looking at how businesses can recapture their inputs through the tax system is critical for us to be able to invest in machinery, equipment – all the things we need to be successful as an economy.”
The commission will report back next fall.
The province sis boosting social assistance for people with disabilities.
Payments are jumping by $77, from $906/mo to $983/mo.
Though that jump won’t be absolute for everyone.
The province is also changing its transportation allowance for persons with disabilities. Currently about half of people on assistance receive a monthly bus pass worth $52, while half don’t – which de Jong calls unfair.
Under the new rules, everyone will get the $77 boost – but those who currently get the bus passes will now have to pay for them, meaning they’ll see a net boost of just $25/mo.
NDP Leader John Horgan says it amounts to an increase of less than one-percent over a nine-year span.
“To de Jong’s credit he did not trumpet this change. But it was another example of tinkering around the edges, a sleight of hand, rather than going directly at the issues. I think what Justin Trudeau showed us in the last federal election campaign is that people want to have redial change on some of the ways we do things.”
Horgan says while the Liberals crow about the balance sheet it is not the measurement of a community.
No doubt about it – with the low dollar, Hollywood North is back.
But business is so good, the province is actually looking at cutting back film and TV production tax credits.
The province says foreign production is up by about 50% in the last five years.
That means credits have nearly doubled – costing the province nearly half a billion dollars last year.
de Jong says the province is now starting talks with the industry about paring the credits back, to reflect the low dollar and boost in local business.
While independent school got a big boost to their bottom line the BC budget again left public schools with nothing much to be happy about.
BCTF President Jim Iker says there isn’t even money to cover inflation increases, MSP hikes, or to help integrate Syrian refugee children into schools.
“We see that this government has let BC kids down again. We have another shell game in funding. In the last budget they announced 29 million dollars in cuts for this current school year and then another 25 million in cuts which they call administrative savings. We see that cut in this budget.”
The budget says public education will get 54-million from the economic stability dividend.
Independent schools on the other hand saw there bottom line increase by 48-million-dollars.
Meanwhile, university and college students hoping for a boost are finding themselves out of luck.
The province is offering a modest boost of 34 million, which will go directly to wage increases for staff.
Leah Squance with the Federation of Poste Secondary Educators of B.C. calls it a missed opportunity.
“78 percent of future jobs will require some for of post secondary education. They haven’t made any commitment to funding the programs that will allow that training to take place”.
Squance says the province also dropped the ball with no new funding for adult ESL classes, just as thousands of Syrian refugees arrive.
Big Business likes the budget
BC Chamber of Commerce President Jon Garson is congratulating the Liberal government for its 4th consecutive balanced budget and its on-going fiscal discipline.
Garson says while this budget is anything but flashy, the Chamber is pleased the government heeded its advice and is implementing forward-looking initiatives such as the Commission on Tax Competitiveness.
The Vancouver Board of Trade is giving the Provincial government an overall “A” grade for the budget, based on the government’s commitment to disciplined spending, paying down direct operating debt, and improving tax competitiveness.
Board of Trade President Iain Black, a former Liberal Cabinet minister, says while other provinces grapple with debt, deficits, and economic uncertainty, a fourth balanced budget in a row gives the business community reassurance that BC is on the correct course.
He says economists across Canada are predicting BC will lead the country in economic growth this year, and it’s clear that is not by coincidence.