As we outlined on the blog yesterday, the Liberal Government of Gordon Campbell has embraced the culture of deficit financing, if only for a few years in order to rescue the province from the oncoming financial storms that are washing ashore.
While normally the guardians of the balanced budget, or at least the credo of such, the economic tea leaves are apparently so worrisome that Premier Campbell and his Finance Minister Colin Hansen are preparing to deliver a budget that will toss aside those declarations of balance and delve into the uncharted waters of deficits.
Priming the provincial economy will be the new call for the Liberals, spending in all corners of the province in order to keep the economy moving in British Columbia.
The Daily News featured the Liberals reversal of policy as the front page story in Tuesday's paper.
LIBERALS DECIDE TIME IS RIGHT TO RUN A BIG DEFICIT
Need to stimulate the provincial economy overrides provinces aversion to debt.
By George T. Baker
The Daily News
Wednesday, February 04, 2009
Pages one and two
The times are changing for the B.C. Liberal government.
In the last seven years, the provincial government has lived under its own legislation, the 2001 Balanced Budget and Ministerial Accountability Act - the act that made running a deficit illegal.
But on Monday, the provincial government announced it is about to run up a serious deficit for the first time since Premier Gordon Campbell was sworn in.
The premier did not hold back his feelings on the issue.
"I have made it clear that I hate deficits," said Campbell.
During a press conference Monday afternoon, Campbell and provincial Finance Minister Colin Hansen said that the province would spend more than it will take in for 2009, which the B.C. Liberals have historically loathed doing.
The premier said he expects the province to continue to see jobs shed as commodity prices drop.
In October, the premier and finance minister both promised a "deficit free zone" in B.C. but that looks to be a dead promise as the world's economy continues to tighten.
"I wrestled with this decision for a couple of days and I know I have supporters that will be disappointed - in fact some may even be angry," said Campbell who said he had no choice but to do so.
"We are facing a situation that candidly we couldn't plan for," he added.
Hansen said that as late as two weeks ago the provincial government thought it would be able to table a balanced budget.
"We are the province that is the least dependant on the U.S. market but nevertheless it is still well over 60 per cent of our export economy," said Hansen.
While neither Campbell nor Hansen could mouth the word 'recession' Monday, they said the economy is fast changing and that even the economic forecast from December had to be updated in January to realign itself with global difficulties.
The past 12 months have seen provincial economic growth evaporate.
Hansen said that in July, provincial forecasters were looking at 2.7 per cent growth and then, in December, that growth rate had dwindled to 0.6 per cent. Hansen now says it is likely to be zero per cent growth for 2009.
"The good news, and for the light-at-the-end-of-the-tunnel, for 2010 all of the economists say British Columbia will see an up tick," said Hansen.
For the coming three years, the provincial government has seen a $6 billion-decline in projected revenues.
Both Campbell and Hansen insisted they would not cut into either of the education or health care budgets but would others would have their belts tightened on what Hansen termed "discretionary spending."
"That meant that all ministries had to budget for significant reductions in areas such as travel, administration costs, advertising and discretionary grants," said Hansen.