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B.C. budget balanced, tobacco tax up; 2014 operating surplus of $175M

Finance Minister Mike de Jong says lack of job growth in the past two years is disappointing, but government is continuing its emphasis on natural gas and trade. - Black Press
Finance Minister Mike de Jong says lack of job growth in the past two years is disappointing, but government is continuing its emphasis on natural gas and trade.
— image credit: Black Press

VICTORIA – Finance Minister Mike de Jong unveiled B.C.'s second straight surplus budget Tuesday, with few spending and tax changes as the province plans for economic growth driven by natural gas exports.

The biggest tax change is that provincial tobacco tax goes up 32 cents a pack April 1, on top of the latest federal increase of 40 cents a pack. B.C.'s share is expected to generate another $50 million, and de Jong said a "significant portion" of that will be used to develop smoking prevention efforts in partnership with the Canadian Cancer Society.

Provincial funding for K-12 education continues at 2013 levels, as the government pursues an appeal of a court decision that could add hundreds of millions to school district costs. The budget includes a $300 million contingency fund this year, rising to $400 million next year, to cover anticipated costs in labour and other areas such as forest fires.

The budget touts investments in trade skills training, with shop projects at Camosun College, Okanagan College and NorKam Secondary in Kamloops. But the largest capital project is a new campus for Emily Carr College of Art and Design in Vancouver, and operating spending on colleges and institutes is projected to fall by $5 million in the coming year.

De Jong said the "re-engineering" of B.C.'s skills training programs referred to in last week's throne speech is getting underway, and a new $1,200 education savings grant for children born in 2007 or later is being delivered starting this year.

NDP finance critic Mike Farnworth said the government balanced its budget with cuts to skills training, increases to fees and appropriating $480 million added to BC Hydro's growing debt.

The B.C. Liberals spent heavily to promote a job plan that has seen people continue to leave the province for work, Farnworth said.

The government expects to end the current year with an operating surplus of $175 million, rising to $184 million next year, which de Jong said is mainly a result of spending discipline. B.C. and Saskatchewan are the only provinces to balance budgets this year, and the three western provinces remain the only ones with a triple-A credit rating.

B.C.'s personal income tax rates remain the lowest of any province, but the budget announced another four per cent increase in Medical Services Plan premiums for next year. That makes increases totalling more than 30 per cent over the past five years.

Taxpayer-supported debt rises to more than $43 billion in the coming fiscal year, climbing to $45.5 billion by 2016-17. About $11 billion of next year's burden is operating debt left by a string of deficit

Total provincial debt, including self-supported debt held by BC Hydro and other agencies, grows from $64.7 billion this year to $68.9 billion three years from now.

B.C. pays $2.5 billion a year to service debt, or four cents for each revenue dollar.

To generate the resource wealth Premier Christy Clark has promised will pay off B.C.'s debt, the budget describes a two-tier income tax on liquefied natural gas exports 1.5 per cent and up to seven per cent.

LNG production companies would pay the lower rate to start, with most or all of it repaid by an investment tax credit until their capital costs have been recovered. Rates are to be confirmed with legislation in the fall.

No revenues from LNG are expected until 2017, and in the first three years, producers would recover income tax through a credit that continues until their capital investment is paid off.

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