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Province prepares for four years of deficit spending

New budget increases spending on health and some social programs, but significant cuts will also be made



Up against a rock and a hard place, the B.C. government introduced a tough budget on Tuesday that shores up the social safety net, cuts programs and costs, and allows for a record $2.8 billion deficit this year, and continuing deficits through 2013 for a total of $5.6 billion.

Overall, West Vancouver and Sea to Sky MLA Joan McIntyre said the province tried to walk a fine line with the budget, protecting key services while keeping deficits to a minimum.

"I think in a sense I'm proud that we're still trying to stick to a fiscally prudent course, though obviously we've had to go into significant debt - but not to the same extent as other provinces and far below where the federal government is leading," she said. "It's important because we (the Liberal Party of B.C.) have prided ourselves in being financially prudent and we want to be out of the downturn as quick as we can. At the same time we're going into deficit, we're laying the groundwork for economic recovery so we can be stronger coming out the other side."

It's the first time since 2003 that the province has posted a deficit. The Liberal Party had made a law requiring government to balance the budget each year, but that had to be repealed this year.

Things changed as a result of the global economic crisis, which reduced the province's revenues by roughly $2 billion, while the cost of providing services to out-of-work British Columbians and stimulus spending to boost the economy is costing an additional $1 billion.

Before the last election in May 2009, the province suggested that the deficit could be limited to about $500 million and critics in the NDP are suggesting that the Liberal Party deliberately low-balled the size of the deficit to increase their chances in the election. They would also like to see more funding for health and social services.

McIntyre said the decline in revenues caught the province and its economists off-guard, but says the province has been upfront since the election that the deficit would be larger than initial forecasts.

"I don't think (anyone) was surprised yesterday," said McIntyre. "Just look at Alberta... They projected a surplus of $8 billion for this year and now have a $7 billion deficit, so that's a $15 billion swing. It shows the extent to which they rely on resources. But B.C. is also very much a resource economy and forest revenues have slumped significantly, and even oil and gas revenues are down.

"Our costs are also up in ways we didn't expect, like H1N1 (swine flu virus) and forest fires. Our budget for fighting fires was $60 million, and now we're budgeting $400 million and hoping that will do. There was $400 million for social assistance and programs like that... while our revenues have lagged."