British Columbia government debt

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British Columbia government debt is composed of the financial liabilities of the Canadian provincial government of British Columbia.[1]: 81 

As of 2023, the British Columbia (BC) total government debt (total liabilities) was $129.3 billion for the 2022-23 fiscal year (ending 31 March 2023).[2] Total debt consists mainly of debt securities (e.g. government-issued bonds), but includes other financial liabilities such as accounts payable.[2]: 154  The BC government had $85.2 billion in debt securities (e.g., government bonds) outstanding in 2022.[3]

British Columbia government net debt (i.e., total debt minus financial assets) was $60.7 billion in 2022–23.[2]: 154  Net debt per person was $11,329, and net debt as a percentage of provincial GDP was 15.4%.[2]: 154  In its 2024 budget, the BC government forecast that its net debt would more than double in four years, rising to $128.8 billion by 2026–27.[2]: 154  Following the budget's release, Moody's Investors Service downgraded the province's credit outlook to "negative",[4] and S&P issued its second credit downgrade in a year,[5][6] with both agencies highlighting the province's burgeoning debt.[7][8]

British Columbia became the first province in Canada to pass legislation to limit the growth in government debt in 1991.[9] Between 2000 and 2022, BC had legislation in place to limit the growth of government debt, with the measures having been introduced by both major parties (the New Democratic Party and the BC Liberal Party).[10][11][9]

Alternative measures of BC government debt[edit]

The British Columbia (BC) government focuses on its debt measured as net debt (also called net liabilities). Its net debt is defined as its total debt minus its total financial assets, which consist chiefly of investments in commercial publicly-owned (Crown) corporations, such as BC Hydro.[2]: 154  Another measure of BC government debt is its debt securities issued in the market (e.g. government bonds, bills, and debentures).[3]

Amount ($ billions)
Net debt (2022–23)[2]$60.7
Total debt (2022–23) [2]$129.3
Debt securities (2022)[3]$85.2

History[edit]

British Columbia government net debt was fairly stable from 1998, but rose following the 2007–2008 financial crisis before stabilizing again. Government spending accelerated after 2017, with real per person spending rising 4.7% annually between 2017 and 2021 vs. 0.5% between 2000 and 2017. (To ensure the growth rate difference was not due to the pandemic, COVID-related expenditures were excluded.)[12]

Columnist Gary Mason said that when the NDP government of John Horgan was elected in 2017, it was initially concerned about maintaining sound finances since, in the 1990s, the NDP gained a reputation for being "spend-thrifts – lefties who hadn't a clue about properly managing the province's finances".[7] However, when David Eby became premier in November 2022, he signalled that balanced budgets were no longer a priority and the province borrowed heavily.[12][7][8]

British Columbia's net debt was projected to increase from 15% of GDP in 2022 to 28% by 2026.[12] BC finance minister Katrine Conroy argued the rise in debt was justified as "We cannot afford to have a deficit of services" and "what would be reckless would be to make cuts in this province".[13]

British Columbia government net debt, net debt per capita, and net debt as a percentage of GDP
Fiscal yearNet debt (billions)Net debt per capitaNet debt as a percentage of GDP
1998–99$21.9$5,50218.3
1999–00$23.2$5,77718.4
2000–01$23.9$5,92817.6
2001–02$25.6$6,28618.5
2002–03$28.6$6,96519.8
2003–04$29.8$7,22219.6
2004–05$28.4$6,82617.2
2005–06$27.1$6,45815.3
2006–07$24.5$5,77112.9
2007–08$23.9$5,56511.9
2008–09$26.4$6,07212.8
2009–10$29.6$6,71815.0
2010–11$32.2$7,21615.6
2011–12$37.1$8,24717.0
2012–13$39.5$8,63117.7
2013–14$40.3$8,68617.4
2014–15$40.2$8,52916.5
2015–16$41.2$8,64816.4
2016–17$39.4$8,10914.9
2017–18$43.5$8,82015.4
2018–19$43.8$8,73214.7
2019–20$46.9$9,17515.2
2020–21$54.8$10,58817.8
2021–22$57.5$10,99416.1
2022–23$60.7$11,32915.4
2023–24*$73.7$13,35918.1
2024–25*$92.6$16,32222.0
2025–26*$112.1$19,39025.5
2026–27*$128.8$21,93228.0
  • Note: Data for 2023–24 to 2026–27 are B.C. 2024 budget estimates.[2]: 154 

Sources: For 1999–2000 to 2022–23: "Net debt" is from the Department of Finance, Canada, Fiscal Reference Tables, October 2023, Table 27: British Columbia.[14] For 2023–24 to 2026–2027: Net debt are estimates from Table A15, Budget 2024: Budget and Fiscal Plan 2024/25 – 2026/27, British Columbia Ministry of Finance.[2]

Table Definitions: Per capita net debt is calculated using the population on July 1 in the fiscal year (e.g. for 2022–23 net debt is divided by population on 1 July 2022). The fiscal year ends 31 March. Population is from Statistics Canada.[15] Net debt as a percentage of GDP is calculated using nominal GDP for the calendar year ending in the fiscal year (e.g. for 2022–23, net debt is divided by GDP for the 2022 calendar year.) GDP is from Statistics Canada.[16] The net debt series begins in 1998–99 since earlier data is not directly comparable, due to a break in the data following the move to comply with generally accepted accounting principles.[14]

Credit rating[edit]

British Columbia's credit rating provides an indication of its debt sustainability, as it shows a rating agency's view of the province's ability to meet its financial commitments.[17]

BC was rated AAA by S&P Global Ratings until July 2021, when it was downgraded to AA+.[5][18] The rating was cut to AA- with a negative outlook in April 2024 (the third downgrade in three years) after the provincial government increased borrowing.[5][6] S&P said it might lower its rating again in the next two years if the province "[maintained] its current fiscal trajectory".[5][6]

Credit rating agency Fitch gave British Columbia a long-term issuer default rating of "AAA stable" in 2007. Fitch cut its rating to "AAA negative" in July 2020, then downgraded BC to "AA+ stable" in July 2021.[19]

Moody's Investors Service has rated BC at its highest rung, Aaa, from 2006, partly on the basis that provinces in Canada have support from the federal government.[5] On 9 April 2024 Moody's cut its outlook to "negative" due to rising spending commitments and a "lack of commitment to return to fiscal balance within a specified period".[4]

Legislation to limit government debt in BC[edit]

British Columbia was the first province in Canada to limit the growth of government debt with its Taxpayer Protection Act introduced in 1991 by the Social Credit party.[9] The act required a balanced budget on a cumulative basis over the succeeding five-year period, and spending growth was limited to the rate of average GDP growth over the previous five years.[20]: 5  Although the NDP voted in favour of the act while in opposition, the law was repealed in 1992 by the newly-elected NDP government of Premier Mike Harcourt, which ran a series of deficits.[9][21]: 8 

In 1994, the Harcourt government introduced a Debt Management Plan, and two successor plans, to balance the budget and limit the growth of debt.[21]: 8–10  NDP premier Glen Clark's government passed the Balanced Budget Act in 2000, arguing "equity demands that future generations of British Columbians not be burdened with an unsustainable level of debt", and that BC needed to maintain its position as a low-debt province so it would have the financial flexibility to make adequate investments in health, education, social justice, and the environment.[22][9][23]

In 2001, Premier Gordon Campbell's Liberal government introduced its own fiscal control act, the Balanced Budget and Ministerial Accountability Act.[11] As with the NDP government's law, cabinet ministers would lose up to 20% of their annual salaries if budget targets were not met.[9][24]: 296–297  The act was amended in 2009 to allow for two years of deficit spending, due to the fall in provincial revenues following the worldwide 2007–2008 financial crisis.[24]: 302 

Amid the COVID-19 pandemic in 2020, Premier John Horgan's NDP government introduced the Economic Stabilization Act which suspended for three years the law that prohibited deficit budgets.[25] In 2022, the balanced-budget component of the law was abolished permanently.[10][26] Finance Minister Selina Robinson said people expected their MLAs to make wise decisions based on needs, not "so that members of the executive council can get their full pay. I think that's a terrible motivation."[10] She added that the legislation "sent the wrong message" and could be viewed as a deterrent to fund programs and policies that affect the budget.[27]

See also[edit]

References[edit]

  1. ^ Government finance statistics manual 2014 (PDF) (Report). International Monetary Fund. ISBN 978-1-49837-916-8.
  2. ^ a b c d e f g h i j British Columbia Ministry of Finance. "Table A15, Budget 2024: Budget and Fiscal Plan 2024/25 – 2026/27" (PDF).
  3. ^ a b c Statistics Canada (22 November 2023). "Table 10-10-0147-01 Canadian government finance statistics, statement of operations and balance sheet for consolidated government".
  4. ^ a b "Province of British Columbia (Canada): Update following outlook change to negative" (PDF). Moody's Investors Service. 18 April 2024.
  5. ^ a b c d e Seal, Thomas (10 April 2024). "British Columbia gets third credit downgrade in three years". BNN Bloomberg.
  6. ^ a b c Patel, Bhavini; Shillis, Dina (8 April 2024). "Province of British Columbia Downgraded to 'AA-' From 'AA' On Continued Fiscal Weakening; Outlook Negative". S&P Global.
  7. ^ a b c Mason, Gary (16 April 2024). "Is B.C. on track to become the fiscal basket case of Canada?". The Globe and Mail.
  8. ^ a b Editorial Board (22 April 2024). "The B.C. NDP is playing with fiscal fire". The Globe and Mail.
  9. ^ a b c d e f CBC News (9 February 2009). "B.C.'s amended balanced budget law to allow 2 years of deficits".
  10. ^ a b c Leyne, Les (7 April 2022). "Red-ink penalties scaled back for B.C. cabinet ministers, boosting their salaries: B.C. cabinet ministers were losing part of their salaries if the budget wasn't balanced". Victoria Times Colonist.
  11. ^ a b "Balanced Budget and Ministerial Accountability Act [SBC2001] Chapter 28". Queen's Printer: Victoria, British Columbia, Canada. 16 August 2001.
  12. ^ a b c Tombe, Trevor (7 March 2024). "Canada's two richest provinces are playing with fiscal fire: B.C. is financing spending with borrowing, while Alberta is riding the resource rollercoaster harder than ever". The Hub.
  13. ^ Little, Simon (22 February 2024). "B.C. Budget 2024: Record $7.9-billion deficit projected ahead of October election". Global News.
  14. ^ a b Department of Finance, Canada (October 2023). "Table 27: British Columbia, Fiscal Reference Tables".
  15. ^ Statistics Canada. "Table 17-10-0005-01 Population estimates on July 1, by age and gender".
  16. ^ Statistics Canada. "Table 36-10-0222-01 Gross domestic product, expenditure-based, provincial and territorial, annual".
  17. ^ "Rating Definitions". FitchRatings.
  18. ^ Duarte, Esteban (7 July 2021). "British Columbia's AAA rating stripped by S&P on rising debt". Bloomberg News.
  19. ^ "Entity: British Columbia, Province of". Fitch Ratings. 15 March 2024.
  20. ^ Millar, Jonathan (June 1997). The Effects of Budget Rules on Fiscal Performance and Macroeconomic Stabilization (PDF) (Report). Financial Markets Department, Bank of Canada. ISBN 0-662-25942-4.
  21. ^ a b Milke, Mark (June 2020). Protecting Taxpayers: Balanced Budget Legislation in Canada and in British Columbia (PDF) (Report). Canadian Taxpayers Federation.
  22. ^ "Balanced Budget Act [SBC 2000] Chapter 21". 6 September 2000.
  23. ^ "Budget Transparency and Accountability Act [SBC 2000] Chapter 23". 6 July 2000.
  24. ^ a b Simpson, Wayne; Wesley, Jared (2012). "Effective Tool or Effectively Hollow: Balanced Budget Legislation in Western Canada". Canadian Public Policy. 38 (3): 291–313.
  25. ^ Hunter, Justine (24 June 2020). "B.C. abandons balanced budget law for three years in wake of pandemic". The Globe and Mail.
  26. ^ Queen's Printer (16 April 2024). "Balanced Budget and Ministerial Accountability Act [SBC 2001] Chapter 28".
  27. ^ "B.C. cabinet ministers in line to keep 10% portion of pay usually withheld in deficit years: Opposition". CBC News. 24 February 2022.
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