British Columbia’s fifth consecutive balanced budget delivers the dividends of a strong and diversified economy and prudent fiscal management by cutting costs for middle-class B.C. families, investing in priority programs and services, and promoting a competitive, job-creating economy, Finance Minister Michael de Jong announced today.
Balanced Budget 2017 funds new investments for classrooms, mental health services, and other supports for families, children, and those most in need, while leaving nearly $1 billion more in the pockets of B.C. families by cutting Medical Services Plan (MSP) premiums in half as a first step to eliminating them entirely as it becomes affordable.
Beginning Jan. 1, 2018, MSP premiums will be reduced by 50% for households with an annual net income of up to $120,000. Following this change, more than two million British Columbians will pay no premiums and a further two million will see a 50% reduction in their premiums — cutting premiums near to levels set in 1993. A typical family of four paying full premiums will save $900 per year in 2018. A single parent with net income up to $40,000 and two children will see their monthly premiums drop from $46 to $23. A family with net income less than $35,000 and two children will see their monthly premiums eliminated.
Balanced Budget 2017 makes significant new investments in classrooms. Compared to Budget 2016, the Education budget will increase by $740 million over three years, including $228 million more to fund enrolment growth in B.C. schools, funding for rural education enhancement, student transportation, K-12 salary costs, continued funding for the Learning Improvement Fund, and an incremental $320 million over three years while government works to conclude a final agreement with the BC Teachers’ Federation on class size and composition. Budget 2017 is also funding $2 billion in school capital projects over three years — to build, replace, renovate, seismically upgrade and repair schools throughout the province.
The Ministry of Health will see a three-year increase of $4.2 billion, compared to its 2016-17 base budget, including funding to support government’s $100-million, three-year enhancement in services addressing mental health and substance use issues, particularly for youth. Budget 2017 also includes funding for $2.7 billion in health capital projects – including new patient care towers at both the Penticton Regional Hospital and the Royal Inland Hospital in Kamloops. The recent funding agreement with the federal government will provide additional resources over and above these budgeted amounts for addictions treatment and mental health.
Balanced Budget 2017 provides an additional $796 million over three years to support families, individuals and children most in need, including:
- $287 million over the next three years to the Ministry of Children and Family Development, of which $120 million is to begin addressing recommendations of the Grand Chief Ed John Report on Indigenous Child Welfare.
- $199 million to fund a $600 per year increase to income assistance rates for persons with disabilities.
- $175 million to provide income assistance supports for those in need, including $8 million to exempt additional child-related benefits, expected to help 600 families and 1,000 children.
- $135 million over three years for community living services, primarily via Community Living BC.
The Province continues to act to address housing supply and improve housing affordability for middle-class B.C. families. Government has committed $920 million to support the creation of over 5,300 affordable housing units. Leading up to Budget 2017, government committed an additional $65 million to fund another 380 affordable housing units to house the homeless and those with mental health or substance use issues. The BC HOME Partnership program, launched in January 2017, will provide more than $700 million in repayable down payment assistance over the next three years to help over 42,000 individuals and families get into the housing market for the first time.
As well, the threshold for the first-time homebuyers’ program will be increased to $500,000, saving first-time buyers up to $8,000 in property transfer tax on the purchase of their first home.
Other changes to help support workers, jobs and the ability of businesses to compete internationally and remain resilient in a challenging global trade climate include:
- Eliminating PST on electricity over the coming two years — saving small, medium, large and industrial businesses throughout the province $164 million by 2019-20, which further encourages use of clean B.C. hydro power. This measure was recommended by the Commission on Tax Competitiveness.
- Cutting the small business corporate income tax rate to 2% from 2.5%.
- Extending and enhancing sector tax credits for tech, Scientific Research and Experimental Development, venture capital to support innovation, commercialization and the tech sector.
- Investing a record $13.7 billion over three years in new and upgraded provincial taxpayer-supported infrastructure to support services and jobs.
Government is forecasting modest surpluses in all three years of the fiscal plan, helping keep taxpayer-supported debt affordable. By the end of 2019-20, the direct operating debt, forecast at $1.1 billion, will be 90% lower than the $10.2 billion in 2013-14. This reduction is estimated to save more than $500 million in interest costs by the end of the fiscal plan. With continued discipline, there will be an opportunity for B.C. to be free of operating debt as early as 2020-21 – which would mark the first time in 45 years the Province would not be carrying the burden of operating debt.
The Province’s taxpayer-supported debt-to-GDP ratio, a key measure of debt affordability, is forecast to decline to 16.0% in 2019-20, down from 17.9% in 2013-14.
The independent British Columbia Economic Forecast Council is projecting provincial real GDP growth to be 2.3% in 2017, 2.2% in 2018, and an average of 2.1% over the 2019-21 period. Reflecting prudence, government is projecting B.C. economic growth of 2.1% in 2017, 2.1% in 2018, and 2.0% over the 2019-20 period.
Finance Minister Michael de Jong –
“Budget 2017 represents this government’s fifth-consecutive balanced budget, showing the benefits of a fiscal plan that includes steady, solid growth and managed spending. There’s additional funding for the programs people rely upon and almost $1 billion left in the pockets of British Columbians to let them make the choices that are important to them.”
For more details on Budget 2017, visit: www.bcbudget.ca
For online information and services, visit the Province’s website: www.gov.bc.ca
Four backgrounders follow.
Jamie EdwardsonCommunications Director
Ministry of Finance
Medical Services Plan premiums will be cut in half for British Columbians with annual family net income up to $120,000, effective Jan. 1, 2018. This is the first step as the Province begins the process of eliminating MSP premiums.
The changes mean annual savings up to $900 for families paying full premiums and up to $450 for individuals paying full premiums. As a result, two million British Columbians will see their premiums reduced by half, in addition to the two million British Columbians who don’t pay premiums at all. Changes to MSP premiums included in Budget 2017 will leave $953 million in the pockets of British Columbians.
The Province is also raising the income threshold below which households are fully exempt from MSP by $2,000. For example, this means individuals with net income up to $26,000 will pay no premiums, and couples with two children and family net income up to $35,000 will pay no premiums.
Individuals and families will need to register to benefit from the 50% reduction. This will allow government to verify income information to determine eligibility. Those already receiving premium assistance will be automatically registered for the 50% premium reduction. Over the coming weeks and months, more information will be available to help guide British Columbians through the registration process.
Most British Columbians will see significant premium reductions:
- A single adult with net income between $42,001 and $120,000 will save $450 per year, or $37.50 per month.
- A couple with family net income between $45,001 and $120,000 will save $900 per year, or $75 per month.
- A senior couple with family net income between $51,001 and $120,000 will save $900 per year, or $75 per month.
- A single parent with two children with net income between $48,001 and $120,000 will save $450 per year, or $37.50 per month.
- A couple with two children with family net income between $51,001 and $120,000 will save $900 per year, or $75 per month.
As B.C. moves toward elimination of MSP premiums, the Province will consult with British Columbians to determine the timing and structure of the change. This work continues and details will be announced over the coming year.
First introduced in the 1960s, MSP premiums have historically been an important component of health-care funding, raising about $2.5 billion in recent years – or 13% of total health-care spending. However, MSP has evolved into a complex program that requires significant resources from individuals, government and businesses.
Budget 2017 changes to MSP premiums build on actions the Province has already taken to improve affordability and fairness effective Jan. 1, 2017. This includes eliminating MSP premiums for children, enhancing premium assistance for more than 300,000 adults, and cancelling the planned 4% increase that would have taken effect this year. The Province also adjusted the way premiums are calculated for two-person households, so couples now pay exactly twice the rate as single individuals and single parents pay the single individual rate.
The Province is phasing out provincial sales tax (PST) on electricity purchases as recommended by the Commission on Tax Competitiveness. The commission found that eliminating PST on business costs like electricity could significantly improve British Columbia’s overall economic performance.
In its report, the commission specifically pointed to PST on electricity as hindering competitiveness for B.C. businesses, noting that no other North America jurisdiction levies a similar retail sales tax on electricity. Residential and farm customers already do not pay PST on electricity.
Effective Oct. 1, 2017, the tax rate on electricity will be reduced to 3.5% from 7%. Effective April 1, 2019, electricity will be fully exempt from PST. PST paid on electricity represents a significant cost to many of B.C.’s industries. In 2015-16, PST cost:
- Manufacturing sector: $46 million.
- Primary industry (agriculture, forestry, mining, etc.): $21 million.
- Wholesale and retail: $21 million.
- Accommodation and food services: $11 million.
Eliminating PST on electricity is also estimated to save small- and medium-sized businesses about $50 million per year. These savings will allow business owners to reinvest in additional equipment, increase wages for employees or adopt new technologies. The PST exemption also applies to the public sector, providing savings to municipalities, hospitals and schools.
The PST exemption may also provide an added incentive for businesses to switch to clean B.C. hydroelectric power over other more carbon-intensive fuels, supporting B.C.’s Climate Leadership Plan.
Other Budget 2017 measures to improve competitiveness and support economic development include:
- Reducing the small business corporate income tax rate reduced to 2% from 2.5%.
- Extending and enhancing sector tax credits for the tech, scientific research and economic development, and venture capital to support innovation and commercialization.
- Providing $6 million to fund three government trade and investment offices in Association of Southeast Asian Nations (ASEAN) countries.
A total of $4.2 billion has been added to the Ministry of Health budget, compared to its 2016-17 base budget. In addition, Budget 2017 invests nearly $3 billion in other priority programs and services over the next three years, compared to Budget 2016. These investments include:
- $796 million for children, families and those in need.
- $740 million for the K-12 sector, including $320 million to address the recent interim agreement with the BCTF.
- More than $700 million for first-time homebuyers, building on $920 million for housing affordability and assistance.
- $249 million for communities and economic development.
- $149 million for parks and environmental protection.
- $280 million for other programs and services.
Support for families and people in need:
- $267 million to support services for vulnerable youth and those with special needs and to help keep families together.
- $199 million to increase assistance rates by $600 per year for more than 100,000 persons with disabilities.
- $175 million for caseload growth in income assistance.
- $135 million for community living services, including Community Living BC.
- $20 million for child care, including up to 2,000 new child-care spaces.
New mental health funding with a focus on youth:
- $45 million to Ministry of Children and Family Development over three years for more mental health counselling and treatment for children.
- $12 million for up to 28 additional specialized youth addictions treatment beds.
- $9 million for the expansion of youth service centres at up to five sites, each expected to reach 1,200 to 2,500 more clients annually.
- Up to $5 million to support mental-health services for post-secondary students.
- $11 million over three years for the BC Centre on Substance Use.
- $65 million to provide affordable housing for the homeless, including people with mental health or substance-use issues.
Investing in housing supply and affordability:
- Government is supporting the creation of nearly 5,300 units of affordable and supportive housing.
- BC HOME Partnership program will provide over $700 million in mortgage down payment assistance loans to an estimated 42,000 first-time home buyers over the next three years.
- Rental assistance programs for low-income families and seniors support over 33,000 households each year.
- Increasing the threshold for the first time homebuyers’ exemption from property transfer tax to $500,000 from $475,000.
K-12 education — $740 million over three years, including:
- $320 million over three years in interim funding pending the conclusion of a final agreement with the BC Teachers’ Federation on class size and composition.
- $228 million to fund enrolment growth across the fiscal plan period.
- $54 million to eliminate bus fees for regular students and mitigate rural school closures.
- $29 million for supplies and resources that reduce costs for parents and help teachers deliver B.C.'s new curriculum.
Communities and economic development:
- $40 million to extend rural broadband service.
- $6 million to continue the Buy Local program to support B.C. agriculture.
- $10 million for the Island Coastal Economic Trust for economic initiatives.
- $6 million for three new international trade offices in Southeast Asia.
- $50 million for local government infrastructure projects under Building Canada and the Clean Water Wastewater Fund.
- $15 million for a new community gaming grants capital program.
- $12 million for maintain provincial highways to appropriate standards.
- $23 million for the Guns and Gangs strategy and community safety.
- $87 million for an enhanced technology strategy, with details to be announced at the BC Tech Summit, March 2017.
Parks and environmental protection:
- $36 million for the Parks Future Strategy.
- $18 million for mines permitting and oversight.
- $9 million for Environmental Management Act compliance and enforcement.
- $27 million for the caribou recovery program.
- $9 million for enhanced reforestation work.
- $40 million for the Clean Energy Vehicle program.
B.C.’s economic outlook steady, but with rising global uncertainty
British Columbia’s economic performance in 2016 shows strong domestic activity relative to 2015. Most indicators show that B.C. performed well compared to other provinces in 2016 with strong growth in retail sales, housing starts and employment. While some of that domestic momentum is expected to continue into 2017, commodity prices and export market activity may experience some instability over the coming years due to ongoing global economic uncertainty.
The government forecasts the B.C. economy to grow by 2.1% in 2017, 2.1% in 2018 and 2.0% in 2019.
Downside risks to B.C.’s economic outlook include uncertainty in U.S. fiscal and trade policy, ongoing fragility in Europe, slower-than-anticipated economic activity in Asia, exchange rate uncertainty, and the potential for a slowdown in domestic and Canadian economic activity.
Budget 2017 projects modest surpluses of:
- $295 million in 2017-18.
- $244 million in 2018-19.
- $223 million in 2019-20.
Total government revenue is forecast at $50.8 billion in 2017-18, $51.2 billion in 2018-19, and $52.0 billion in 2019-20.
Total expense over the three-year plan is forecast at $50.2 billion in 2017-18, $50.7 billion in 2018-19, and $51.6 billion in 2019-20.
In addition to an annual average 3.6% funding lift for the Ministry of Health, government is increasing ministry operating budgets by almost $3 billion over the three-year fiscal plan, compared to Budget 2016 amounts, including $740 million in funding to the K-12 sector and $796 million in additional support for children, families and individuals in need.
Taxpayer-supported infrastructure spending on hospitals, schools, post-secondary facilities, transit and roads will total $13.7 billion over the fiscal plan period.
Keeping debt affordable
The Province’s taxpayer-supported debt-to-GDP ratio, a key measure of debt affordability, is forecast to decline to 16.0% in 2019-20, down from 17.9% in 2013-14. Total taxpayer-supported debt is projected to fall year-over-year in 2016-17 for the first time since 2008-09, and direct operating debt is on track to be eliminated by 2020-21, the first time since 1975-76.
Direct operating debt is forecast to decline by $4.1 billion over the course of the fiscal plan, from $5.2 billion in 2016-17 to $1.1 billion by 2019-20 — a decrease of 79% and its lowest point since 1982-83.
Taxpayer-supported interest costs continue to remain low, averaging 4.2 cents per dollar of revenue over the three-year fiscal plan.
Total taxpayer-supported debt is forecast to be $43.3 billion in 2017-18, $45.2 billion in 2018-19 and $47.2 billion in 2019-20, reflecting a significant increase in infrastructure investment over the next three years.
Self-supported debt of commercial Crown corporations is forecast to be $26.1 billion in 2017-18, $28.0 billion in 2018-19 and $30.2 billion in 2019-20.
The fiscal plan includes contingencies of $400 million in 2017-18, $300 million in 2018-19 and $300 million in 2019-20 to help manage unexpected costs and priority initiatives. As well, the fiscal plan includes forecast allowances of $350 million in 2017-18, and $250 million in each of 2018-19 and 2019-20 as a hedge against volatility, including unforeseen changes in revenue.