The BC government released the 2023 Provincial Budget on February 28, 2023, focused on improving health and mental-health care, growing a clean economy, and helping British Columbians affected by global inflation.

Economic Forecast

The $5.7 billion budget surplus from the 2022/23 budget has been revised to $3 billion following provincial announcements in support of housing, affordability,  and social support, with further funding commitments expected by government prior to the end of the 2022/23 fiscal period (March 31, 2023).

The BC unemployment rate is near historic lows (4.4% in January) but is leading to high job vacancies in some sectors. Consumer Spending Consumer spending on services continues to recover while spending on goods has softened. Housing construction is strong (46,721 units in 2022) while sales activity has declined to low levels (-35.2% in 2022).

The value of goods exports is weakening (-25.2% since May), while service exports continue to recover.

The 2023/24 Budget is projecting:

• Revenue projections of $77.7 billion (2023/24), $79.7 billion (2024/25), and $82.2 billion (2025/26)

• Expenditures projections of $81.2 billion (2023/24), $83.0 billion (2024/25), and $84.8 billion (2025/26)
• Provincial budget deficits of $4.2 billion (2023/24, $3.8 billion (2024/25), and $3 billion (2025/26) for a total of $11 billion of additional operational debt over the next three years

Infrastructure

The BC Budget included an increase in operating budget for Ministry of Transportation & Infrastructure maintenance, operations, and Commercial Vehicle Safety and Enforcement (CVSE) at just over 10%.

While no new highway capital spending projects were announced, the Budget included funding commitments for a number of key BCTA Member infrastructure priorities including:

• George Massey crossing ($4.3 billion)
• Highway 1 widening through Langley between 216th Street and 264th Street ($345 million)
• Pattullo Bridge replacement ($1.4 billion)
• Highway 1 four-laning
  • Kicking Horse Canyon ($601 million)
  • Between Kamloops and Golden ($964 million)
• Coquihalla Highway flood repairs ($350 million)

Climate Change

• Commitment to increase BC’s Carbon tax annually by $15 per tonne until rates are equal to $170 in 2030, effective April 1, 2023
  • See the carbon tax rate schedule for years beginning April 1, 2022 to 2026 on the Provincial Carbon tax rates by fuel site here
• $500M Increased BC Affordability tax credit (in addition to the previously announced $1.1B)
  • Doubling of the Climate Action Tax Credit payment:
    • $500 per family to $900
    • $193 per individual to $447
• $750 million from the 2022 Budget to help communities affected by extreme climate-related disasters, such as wildfires and the November 2021 floods
  • $85 million to increase emergency-management capacity in the province and provide new investments in disaster risk assessment, preparedness, and mitigation
  • $64 million over the next five years for firefighting equipment

Health Care

Over the next three years, $6.4 billion will be invested in health care.

$867 million will be put toward addressing mental health, addiction treatment, illicit drug use, and public safety.  The province has also committed to $585 million to expand treatment and recovery beds throughout the province.

Comments from BCTA:

This budget is a defining document for this government. Levels of debt are accelerating at an unprecedented pace, yet in a 182-page briefing document, the word “innovation” appears a total of six times, five of those in the title of a Ministry. “Competitiveness” appears twice, both in the context of greenhouse gas (GHG) emissions. “Economic growth” has 13 references- half of which are tied to “deceleration,” “slower,” or “slowing.” There is no discussion nor strategy to enhance economic development, and no discussion to support development of industry, or reduction of red tape. Any support for business is limited to minimal direct fiscal intervention programs, not supporting business development.

Entirely missing from any high-level government commentary, summaries, or releases is any mention of goods movement or infrastructure spending. While capital investment will be the largest in BC history at $37.5 B, highways are not mentioned in any highlights and the word “highway” was mentioned once in a list given within a sentence in the address. Forestry, trades support, municipal facilities and health care are all emphasized extensively in remarks and highlights. 

The increase in government debt to $99 billion by the end of the three-year cycle is concerning, particularly in a higher interest rate/inflation environment. The impact of this level of debt as a percentage of gross domestic product (GDP) or, more importantly, attributed to taxpayers, is very concerning. Spending on social programs carry forward operational costs each year in perpetuity. Government has chosen to accelerate our debt growth, in real and (more importantly) relative terms far in excess of projected economic and inflationary growth. This is not a surprise. 

While supporting families struggling in this environment is laudable, we are concerned that pumping billions of dollars toward supports with an inflationary economy is working at cross purposes. While government is making the largest-ever provincial investment in affordable housing ($7B over ten years as previously announced; another $4.2B in operating and capital investment over the next three years), these amounts represent less than a drop in the real estate bucket. But is represents a major element of public debt.

More than anything, this provides the clearest indicator of what government’s priorities are. Unsurprisingly, social program spending is carrying the vast amount of attention in this budget and provincial debt is climbing quickly. In summary, this budget focuses on the immediate, accelerates debt loads and debt servicing obligations, and doubles down on government’s limited direct fiscal tools to address the current and future needs of British Columbia.   

Comments from Business Council of BC:

“We recognize the pressure to address challenges in the health care system, social services and rural communities, and also to deal with rising living costs for many British Columbians," said Ken Peacock, Business Council of BC (BCBC) Chief Economist. "However, government spending is set to advance at a record pace, which is likely to pose fiscal risks over the medium term. In addition, Budget 2023 contains no substantive measures aimed at driving long-term economic growth, improving business investment conditions, boosting productivity, or reducing business costs.”

The Budget proposes substantial increases in capital spending. Investments in new hospitals, schools and transportation infrastructure are necessary, but the planned new investment comes when capital spending is already high, and project construction costs are escalating. We see a risk that higher capital spending in 2023-24 will aggravate construction sector inflation and result in more cost overruns on projects. Read more on the BCBC website.