VICTORIA – The B.C. government finished the fiscal year this spring with a deficit of $309 million, nearly $1 billion less than what was forecast last fall.
The savings came partly from extra tax revenues generated by four-per-cent economic growth during 2010-11, Finance Minister Kevin Falcon said Monday in releasing the province's audited public accounts. Some was realized from lower than expected spending in programs such as health care, and some came from extra revenues collected through the harmonized sales tax.
But Falcon wasn't able to say exactly how much extra revenue the HST brought in during its first year of operation. B.C. sales tax revenues are growing by about $600 million a year, partly due to the fact that provincial sales tax has been extended to a variety of services as well as goods.
But B.C.'s gross domestic product is growing faster than the national average and consumer confidence is strong, so revenues from the former PST would also have grown, Falcon said. And he noted it has been clear since the HST was introduced that it collects more revenue because of the broader tax base.
"It is also a tax that generates greater economic activity, generates more job creation, and that in turn will drive more revenues to the government," Falcon said.
NDP finance critic Bruce Ralston said the government is using "funny math" to produce a rosy picture of the B.C. economy. One reason the past year's deficit is so much lower is that B.C. collected $769 million from Ottawa, the second half of its $1.6 billion "bribe money" for adopting the HST, he said.
"People have a sense they are being played," Ralston said. "They have an agenda, they want to ram the HST through and this is just one more instance of that."
Falcon warned that if the HST is rejected in the referendum that is currently underway, that will cost the province about $3 billion over the next three years. Half of that is to repay the federal government, and the rest is transition costs and extra HST revenue that won't be collected.
"We will have to manage that $3 billion hit, and the only way you can do that is either have larger deficits, which means borrowing more money and passing the bill onto future generations, or you can increase revenues, or you can reduce spending," Falcon said.
Because the provincial budget remained in deficit, B.C. cabinet ministers will not receive a 10 per cent holdback to their salaries for the 2010-11 fiscal year.