A New Fiscal Framework for British Columbia

British Columbia’s provincial government finances have deteriorated rapidly in recent years. With large deficits and rapid debt accumulation forecasted in the years ahead, British Columbia is on track to become a high-debt province.
This transformation in the health of BC’s finances has been the result of a fundamental shift in the government’s approach to government spending that began in 2017/18. Since that time, BC’s government has increased spending at a much faster rate than occurred during a lengthy period of fiscal discipline that dates back to the turn of the century.
This paper begins a process of outlining an alternative approach to public finances in British Columbia by establishing a fiscal framework to control expenditures to return to a balanced budget and begin saving rather than spending royalty revenues from natural gas.
The implementation of the fiscal framework outlined in this paper would produce markedly different fiscal outcomes than those forecasted in the government’s recent budget. By 2026/27, it would produce a balanced budget, in contrast to the government’s projected $6.3 billion deficit. It would also result in the accumulation of $22.5 billion less debt over the next three years compared to the government’s current plan. This framework would generate substantial deposits into a BC Prosperity Fund, allowing the fund to reach $3.7 billion by 2026/27.
In the longer term, the implementation of the fiscal framework would create a range of policy options including tax relief, and explicit debt reduction.
A fiscal framework based on spending restraint and saving rather than spending revenue from natural gas can prevent the rapid debt accumulation now forecasted in the years ahead, put provincial finances on a sounder footing for the long term, and ensure lasting benefits from natural resource royalties.