Finance Minister Carole James leaves the legislative assembly after delivering a budget update in Victoria on Sept. 11, 2017. She will deliver her party’s first full budget on Tuesday. CHAD HIPOLITO / THE CANADIAN PRESS
Finance Minister Carole James will deliver Tuesday’s budget with the weight of 16 years of NDP expectations on her shoulders, and not enough money in the public purse to make good on them all.
It’s a problem James has freely acknowledged since Premier John Horgan assumed power last July — that the pressure to immediately change years of Liberal policies would clash with the practical and financial restrictions on the fledgling government.
But with the NDP’s first full budget looming, the pressure is more acute than ever.
“It’s one of our biggest challenges, that after 16 years there’s a lot to fix,” said James. “There are a lot of pressures. I completely understand the impatience of people to want things fixed overnight. But it is going to take time.”
Voter patience, however, may be thin. The NDP campaigned on many reforms in the May 2017 election, including some sort of solution to Metro Vancouver’s housing affordability crisis and a $10-a-day child care plan. Almost nine months later, this week’s throne speech continued to ensure action on key issues — but it’s unlikely next week’s budget can deliver on all the promises when finances are already stretched so thin.
THE FINANCIAL REALITY
At first, it didn’t look like money would be a problem for the new NDP government. It inherited a surprise $2.8-billion surplus in 2016/17 from the previous Liberal government. But that money automatically went toward provincial debt repayment.
The NDP’s September 2017 mini budget update rolled out almost $2 billion in new spending for commitments like welfare and disability rate increases, a 50 per cent cut to medical services plan premiums, K-12 education improvements and the fentanyl overdose crisis. To help cover the costs, the NDP implemented two major tax increases it had promised during the election — a one per cent hike to the corporate income tax rate, and an income tax increase for those who earn more than $150,000.
The tax increases allowed the NDP to table an estimated $246-million surplus in its September budget update. But it also meant the new government had used up the tax hikes without even beginning to fund its most expensive campaign pledges — $10-a-day child care, housing affordability or the $400-per-person annual renter’s rebate.
The lack of money for these popular initiatives has led to speculation the NDP could introduce new taxes, fees or levies to generate extra funds to power the budget.
“If they decide they don’t want to run operating deficits, it’s unclear where the revenue will come from,” said Jock Finlayson, executive vice-president of the B.C. Business Council. “We are not expecting major tax increases in the budget. We may be wrong.”
James, who can’t discuss tax measures in advance of the budget, said it’s a matter of “balancing the importance of fiscal responsibility with the programs and services people need.” She still intends to deliver a balanced budget.
Meanwhile, costs have continued to mount. The devastating summer wildfire season meant $658 million in unexpected firefighting costs. Ottawa returned lower-than-expected income tax revenue. And the Insurance Corp. of B.C. is facing a surprise $1.3-billion shortfall this year. The projected $246-million surplus shrunk to an estimated $190 million in November.
That has forced the NDP to drop some initiatives it wanted to include in next week’s budget, and to extend timelines on other items until there’s more money.
“Has the ICBC problem meant that we’ve had to go back and take a look at our promises and commitments, make sure we’re setting priorities and take a look at the timelines of implementing? Yes, it has,” said James.
“You can’t take on a $1.3-billion loss without having to go back and review your priorities, programs and services and ensure we’re able to do it within the economic framework we’ve got. ”
It is not all doom and gloom, however. The province’s economy is growing at one of the strongest rates in Canada, its retail sales are stable, and the continued hot housing market means higher-than-expected revenues from the property transfer tax. The carbon tax is set to rise by $5 per tonne, adding an estimated $212 million into general revenue. And the previous Liberal government’s $500-million Prosperity Fund remains available.
“From 10,000 feet the position B.C. is in looks relatively favourable, certainly compared to many other places,” said Finlayson. “But they are operating in a very tight fiscal framework. The bottom line is on the major spending promises, they are going to have to move incrementally. There just isn’t going to be room for dramatic initiatives.”
HOUSING AFFORDABILITY: A COMPLICATED REPAIR JOB
Fraser Health nurse practitioner Jodi Harris has been trying for eight straight months to buy a condo, but either can’t afford the price or has been out-bid by other desperate buyers.
“It is defeating,” said Harris, who was a registered nurse for five years before getting her masters in 2017. “I expected with a better paying job that more doors would open, but I’m repeatedly having doors close on me.”
Her passion is to work with vulnerable residents in the Downtown Eastside, but she never applied for a job with Vancouver Coastal Health because she knew condos in that region were out of her reach.
“You have all these individuals who want to work and reside in an urban setting, around populations for which they want to serve, and they no longer are able. In the future who are you going to have in these centres to care for people who are getting older and sicker?” said Harris.
She is hopeful Tuesday’s budget might bring some relief. She wonders, for example, if the provincial government could require a portion of new developments to be sold only to service providers — such as nurses, teachers, firefighters — so they can live in the communities where they work.
“I think (housing affordability) is pushing a lot of very talented and driven individuals out of the province,” Harris added.
Most of the NDP’s housing affordability ideas are not speedy solutions but longer-term goals, including the creation of 140,000 new housing units over 10 years, to be funded out of borrowed capital dollars and not annual operating money from the budget. It has also promised to review the 15 per cent foreign buyer tax in Metro Vancouver to determine whether it has been effective in improving affordability; eliminate a loophole that allows people to transfer ownership through a bare trust to avoid taxes; and provide more transparency over the “beneficial ownership” of properties through trusts, numbered companies and family connections.
The NDP campaigned on a “yearly two per cent absentee speculators’ tax” that will generate an estimated $200 million annually for a housing affordability fund.
Yet, if the budget includes this speculation tax, it is unlikely to do much for voters who hoped the NDP was going to help them afford a home by bringing about an immediate drop in housing prices.
In Tuesday’s throne speech, the NDP also promised “legislation to crack down on tax fraud, tax evasion and money laundering in B.C.’s real estate market,” but provided no specifics.
It’s not clear if this plan is the same as one proposed in 2016 by academics from the University of B.C. and Simon Fraser University, which the NDP endorsed at the time as a private member’s bill. The academics called for an annual 1.5 per cent property surcharge on all residential real estate, with revenue distributed back to residents who file income tax, thereby targeting the owners of vacant properties or wealthy foreign investors who don’t pay local taxes. The plan also included exemptions for veterans, the disabled and seniors, and for owners of rental properties.
UBC professor Tom Davidoff, who helped draft the plan, said he’s hopeful the NDP will follow through. But he added a reasonable government has to worry about sparking a correction in the market that would lead to a downturn and wipe out equity in people’s homes.
One low-cost idea the province could include in the budget, Davidoff said, is to encourage municipalities to do a better job of changing zoning bylaws to allow higher-density developments, which would help boost the housing supply, in exchange for amenities such as parks.
To assist renters, the NDP promised in the election a $400 annual rebate that would cost government $265 million a year. Even more problematic than the cost, though, is opposition from the NDP’s power-sharing partner, the B.C. Greens, who have called the renter rebate bad policy. That’s forced government to rethink the concept, potentially giving it an excuse to abandon an idea it can’t afford.
Liam McClure, a member of the Vancouver Renters Union, hopes renters will find some relief in the budget, but was never a fan of the $400 rebate because it is not based on income — so a wealthy person renting a glitzy condo in Yaletown would receive the same rebate as a single mom in a basement suite.
“Because it would be spent on everyone, it is very high-cost and low-effect — so it’s not really addressing the people who need assistance with the rent,” he said. “A renter’s benefit is not a bad idea, it just needs to be income scaled.”
Instead, McClure would like the budget to include provisions such as a rent freeze, noting similar concepts have been adopted in other pricey North American cities. He also called on the NDP to follow through with tenant-rights language
, dealing with issues such as reno-victions, which it had proposed in previous bills while in opposition.
The NDP should, as well, allow for the creation of more social housing, which provides “an important floor” in the rental market, McClure added. “I’m cautiously optimistic going into the budget,” he said.
NO QUICK FIX TO THE CHILD CARE CRISIS
When she became pregnant more than three years ago, Tamara Herman put her name on a dozen daycare wait-lists.
“We haven’t gotten a single call,” said Herman, who lives in East Vancouver with her partner and two-and-a-half-year-old son Emil Porter. “We would like to be in a licensed daycare but it is absolutely impossible.”
Emil is under the care of an excellent nanny Herman shares with neighbours, but the situation is both logistically and financially challenging. When the NDP campaigned last year on making child care more accessible and affordable, she volunteered for the first time to help the party get elected.
“I went out and canvassed because they had promised to implement the $10-a-day plan,” said Herman, who works in the non-profit sector.
This week’s throne speech pledged “the largest investment in child care in B.C. history,” though it provided few details. Herman is feeling encouraged, but noted, “It’s going to take a lot of money and a lot of political will.”
It is also going to take a lot of time — which is sure to frustrate parents who can’t find adequate child care today.
Herman knows her volunteer work on behalf of the $10-a-day campaign may never help her toddler son, who will likely be in school by the time real change comes.
“There’s no way (Emil) is going to benefit from this plan, but my hope is that kids in the future will,” said Herman, whose son was once in the same east Vancouver daycare where toddler Macallan Saini died last year. “This is something that has very real and tragic implications for people.”
She would like the government to adopt the $10 plan created by the Coalition of Child Care Advocates of B.C., noting it has been well-researched and costed.
Tuesday’s throne speech dropped the $10-a-day slogan, although, when pressed later, Horgan said the price point remains his eventual goal.
Since forming government the NDP has begun the delicate process of reconciling the popularity of the $10-a-day plan with the expensive reality of implementing it. It is now preparing a 10-year universal child care program that will start with a focus on building spaces, training early childhood educators and providing financial support for children aged zero to three years old, before expanding in future years as money allows.
During the election campaign, the NDP promised $10-a-day full-time child care, $7-a-day part-time, and free child care for low-income families, to be phased in over 10 years with an annual cost of $1.5 billion when fully operational. The party had pledged $855-million over the first three years, and that financial commitment was supposed to start last year but was delayed.
In addition to cost, another reason for the delay was resistance from the B.C. Greens. Though both parties support the idea of universal daycare, the Greens don’t think it should be tied specifically to the $10-a-day slogan. Advocates, though, have said the two parties could find a middle ground in shared goals, such as free care for low-income earners.
Sharon Gregson, a founding member of the child care coalition, won’t be upset if the NDP doesn’t adopt the exact $10 plan, as long as top issues, such as lowering parent fees and creating more licensed spaces, are addressed.
She cautions, though, that the coalition’s plan allows for up to 10 years to fix the system, so parents need to be patient. “The crisis that exists, what we call the child care chaos, is too big and too deep to be fixed by one budget,” Gregson said.
The question remains how much of it can be fixed in this one budget. The NDP will receive some help from the federal government, which this week pledged $153 million over the next three years for child care — but can this cash-strapped government find the remaining $750 million it promised over the next three years?
SOME CAMPAIGN COMMITMENTS ARE STILL UNFUNDED
Many of the NDP’s campaign pledges have already been enacted, and won’t be new costs in Tuesday’s budget. These include raising the minimum wage to $15 per hour by 2021, removing fees on adult basic education and ESL courses, making post-secondary loans interest-free, reducing the cost of prescription drugs and deductibles, boosting domestic violence funding, restoring disability bus passes and waiving post-secondary tuition for youth in care.
However, some outstanding election promises will require millions in new money and could be squeezed for space in Tuesday’s budget, such as reducing waiting times for surgeries and hospital emergency rooms. Other unfunded big-ticket commitments include boosting staffing levels in seniors’ care homes; climate action rebate cheques to compensate for carbon tax increases; and reforms to the annual school funding formula as well as a fund for classroom supplies.
Some promises will impact the capital (borrowing) side of the budget, but not the annual operating surplus or deficit. That includes any cost overruns on the now-NDP-approved $10-billion Site C dam, removal of bridge tolls on Metro Vancouver bridges (which forced $3.6-billion in Port Mann Bridge debt onto government’s books), as well as vows to accelerate seismic upgrades for schools and to replace aging hospitals.
And on Friday, the government announced it would take over the TransLink-owned Pattullo Bridge, paying for the entire $1.4-billion replacement cost out of its $14.6-billion three-year capital plan.
Debt rating agencies have warned government not to let the capital debt grow much more, for fear it could imperil B.C.’s AAA credit rating.
As she struggles to balance voter expectations and a near-empty treasury, it won’t become clear until Tuesday how the finance minister will try to lift some of that weight from her shoulders. “We know the problems are there,” James said, “and we are working to fix them.”
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