BC’s crushing debt absent from election discussion
“The Darkest Places in Hell are reserved for those who maintain their Neutrality in Times of Moral Crisis.” – Dante Alighieri
The citizens of BC had a front row seat to an election outcome that remains almost impossible to comprehend. After a determined push back of the much reviled HST, it appeared very probable that the Liberal Party would go down to a well earned defeat. It would have been a defeat, not so much because a better option was thought to be on offer, but more because enough voters had lost their trust in those who seemed divorced from contemporary economic realities and who were not serving the public’s interests.
Standard & Poor’s issued a public report dated 15 April, 2011, titled “Canadian Provinces Face Tough Choices in Restoring Fiscal Balance”. The report directed provinces to curb rising debt levels and to correct the practices of deficit budgeting. It also recommended operating expense savings to be found in the budgets for health care and education. “Rising debt service burdens further limit financial flexibility because as these burdens increase as a share of total spending, they crowd out other program spending,” claimed the report. “Debt service expenditures are contractually bound and as such cannot be easily cut.”
This was an unambiguous disclosure that provincial credit ratings were under negative scrutiny, over two years ago.
So what did the BC government appear to do, knowing this was like a warning shot across the bow? They did screw down on the budgets for education and health care. They did not seriously attempt to find more revenues but rather promoted the fiction that a natural gas industry would provide fiscal salvation, which it did not – nor is this likely to happen, despite election rhetoric. The government certainly did not curb its appetite for ever more debt.
At the end of fiscal 2012 (one year ago), total provincial liabilities reported by the provincial government were $70.358 billion, or 100% greater than when the Liberal government first came into power. What was even more distressing was the government’s deliberate non-disclosure of “Contingencies and Contractual Obligations”, which the BC Auditor General publicly reported to be $96.374 billion. This liability amount was separate from the $70 billion, as confirmed directly with the Auditor General’s office. These provincial liability values were directly supplied to the four party leaders just following the writ being dropped, so they all knew – but for what ever their reasons, they remained silent.
In a few words, BC voters were clueless about the province’s financial condition prior to voting because virtually all politicians and the mainstream media wanted to practice willful ignorance. It is not hard to understand why Premier Clark avoided this topic, but for the others to do so is a big mystery. A few people have suggested that the NDP avoided this issue because they did not wish to win the election and have to address the province’s financial mess.
Incoming MLAs will now be forced to confront BC’s fiscal and debt reality. There is no escape from the fact that global economic circumstances are not set to improve any time soon. More tax revenues will need to be found, along with a freeze on further borrowing, either directly or indirectly, via contracting (Public, Private, Partnerships). It is almost a certainty that BC is in for credit downgrades, which will add further to the difficulty of crafting budgets. Of course, selling public assets is another option the Liberals already have spoken of and doing that is, in effect, an admission of past poor management judgment.
Good luck, BC.