VICTORIA – Budget 2012 lays a firm foundation for the future, putting British Columbia on the right path to eliminate the deficit, protect public services, and build a more competitive economy that attracts jobs and investment, Finance Minister Kevin Falcon announced today.
Budget 2012 shows the deficit forecast for 2011-12 improved by $ 594 million over second Quarterly Report projections to $ 2.5 billion. The Province forecasts a deficit of $ 968 million in 2012-13, and surpluses of $ 154 million in 2013-14 and $ 250 million in 2014-15.
Over the next three years, government will contain spending growth to an annual average of two per cent while continuing to protect health and education funding. The Ministry of Health budget will increase $ 1.5 billion over the three-year fiscal plan to nearly $ 17.3 billion in 2014-15. While continuing to achieve key health outcomes that lead the country, government will work to reduce the rate of growth in health spending through an ongoing focus on identifying additional best practices for delivering care and finding administrative savings.
Funding to school districts will increase, despite a trend of declining enrolment. In addition to the $ 4.7 billion a year districts will receive for the next three years, government is investing an additional $ 165 million to establish a fund to deal directly with issues of class composition. The annual facilities grant for maintenance again totals $ 110 million in 2012-13.
Government remains committed to funding critical social services and is reallocating contingency funds to the ministries of justice and social development, where caseloads continue to rise.
Budget 2012 introduces new tax measures that benefit seniors, families and businesses in B.C., including:
- The B.C. First-Time New Home Buyers’ Bonus of up to $ 10,000.
- The B.C. Seniors’ Home Renovation Tax Credit of up to $ 1,000.
- The Children’s Fitness Credit and the Children’s Arts Credit.
Budget 2012 also supports the B.C. Jobs Plan with tax measures for businesses that:
- Eliminate the provincial jet fuel tax for international flights.
- Provide an additional $ 3 million for the Small Business Venture Capital Program.
- Extend the Training Tax Credit program.
- Introduce new training tax credits for shipbuilding and ship repair industry employers.
- Make permanent the existing temporary municipal tax rate caps for B.C.’s major port terminals.
“There is a new paradigm in today’s world economic environment. It demands prudent fiscal discipline. With Budget 2012, we continue to hold the line on spending and will achieve a surplus in 2013-14, as required by law.”
Finance Minister Kevin Falcon
Given the uncertain fiscal environment, the small business corporate tax rate will be maintained at 2.5 per cent, and will be revisited after the fiscal situation has improved. The fiscal plan also includes a temporary, one-point increase in the general corporate income tax rate to 11 per cent, effective April 1, 2014. The requirement to implement this tax measure will be re-evaluated in next year’s budget. Additionally, to help spur economic activity throughout the province and generate needed revenue, government will release non-strategic surplus assets for sale.
Over the next year, the government will undertake a comprehensive review of the revenue-neutral carbon tax. The review will cover all aspects of the carbon tax-both positive and negative-including revenue neutrality, and it will consider the impact on the competitiveness of B.C. businesses, and in particular B.C. food producers.
Budget 2012 forecasts British Columbia’s taxpayer-supported debt-to-GDP ratio will be 17.6 per cent in 2012-13, 18.2 per cent in 2013-14, and peak at 18.3 per cent in 2014-15, before trending downward once again. Taxpayer-supported capital spending on schools, hospitals and other infrastructure across the province over the next three years is expected to total $ 10.7 billion.
The government forecasts British Columbia’s economy will grow by 1.8 per cent in 2012, 2.2 per cent in 2013 and 2.5 per cent per cent in 2014 – a forecast that is prudent relative to the independent British Columbia Economic Forecast Council.
BACKGROUNDER 1: Budget 2012 supports BC Jobs Plan
Tax Relief for B.C. Ports
In 2004, to encourage new port investment and secure the competitive position of British Columbia’s major industrial ports, the Province enacted the Ports Property Tax Act (PPTA). Following a review in 2007, the Province renewed the Ports Property Tax Act in 2008 for another 10 years, extending it to 2018. This resulted in investment of more than $ 1 billion in terminal expansions.
Under the act, property tax relief is currently provided to major industrial ports by capping municipal tax rates on eligible property. The act also provides for compensation payments to municipalities.
- A tax rate cap of $ 27.50/$ 1,000 of assessed value for existing ports property until 2018.
- A tax rate cap of $ 22.50/$ 1,000 for ten years on eligible new investments constructed before Dec. 31, 2018. New investments constructed in 2018 may be eligible for the tax rate cap until the 2028 taxation year.
- Municipal compensation payments indexed to the rate of inflation until 2018.
Subject to approval of the legislature, these expiry dates would be removed to give port operators increased certainty about the maximum municipal tax rate they will face and provide for longer-term investment decisions.
Training Tax Credits for Shipbuilding and Ship Repair Industry
Eligible employers that employ apprentices in the British Columbia shipbuilding and ship repair industry can receive a refundable tax credit of 20 per cent of wages paid per year, up to $ 5,250, per eligible apprentice in the first 24 months of an eligible apprenticeship program and can also receive similar credits based on an apprentice’s completion of higher training levels.
These tax credits are enhanced by 50 per cent in respect of apprentices who are First Nations individuals or persons with disabilities.
Eligible shipbuilding and ship repair industry employers that claim the new training tax credits will not be eligible to claim training tax credits under the existing training tax credit program. The training tax credits for shipbuilding and ship repair industry employers will be made effective by regulation and will expire at the end of 2019.
BC Training Tax Credits
The BC Training Tax Credits are extended for an additional three years to the end of 2014. Through approximately $ 31-million annual funding, the apprenticeship training tax credit program encourages employers and apprentices to participate in and complete apprenticeship programs offered in British Columbia.
The program provides employers with refundable tax credits for salary and wages paid by employers to eligible apprentices. Apprentices registered in an eligible program are also eligible for fully refundable personal income tax credits. To encourage participation in trades training in respect of First Nations individuals or persons with disabilities, individual and employer tax credits are enhanced by 50 per cent.
B.C.’s training tax credit program complements federal incentives for apprenticeship training, which are limited to the first two years of “Red Seal” apprenticeship programs.
Small Business Venture Capital Program
Effective for the 2012 program year, the budget for the Small Business Venture Capital Program is increased by $ 3 million to provide tax credits for direct investments in eligible new corporations.
Under the program, eligible investors can receive an income tax credit of 30 per cent of their investment in eligible business corporations up to an annual limit of $ 60,000. An eligible new corporation must:
- Qualify as an eligible business corporation under the act,
- Have been incorporated for less than two years, and
- Be doing business in a targeted sector: community diversification; development of interactive digital media products; clean technology; prescribed manufacturing and processing; destination tourism; or research and development of proprietary technology.
The $ 3-million increase will allow for up to $ 10 million annually in additional equity financing for qualifying new businesses for 2012, 2013 and 2014.
BACKGROUNDER 2: Budget 2012 – tax savings for B.C. families
BC First-Time New Home Buyers’ Bonus
The new BC First-Time New Home Buyers’ Bonus will be a temporary one-time refundable income tax credit for first-time home buyers who purchase a newly constructed home. The credit will be calculated as five per cent of the purchase price of the home up to a maximum credit of $ 10,000.
The credit will be phased out at a rate of 20 per cent of net income in excess of $ 150,000 for single individuals and at a rate of 10 per cent of family net income in excess of $ 150,000 for couples. Only one credit can be claimed per home.
The credit will be available on purchases of newly constructed housing where both the HST applies and where a written agreement of purchase and sale is entered into on or after Feb. 21, 2012.
BC Seniors’ Home Renovation Tax Credit
The BC Seniors’ Home Renovation Tax Credit will be a new refundable personal income tax credit to assist with the cost of permanent home renovations that provide individuals aged 65 and over with increased independence, allowing them the flexibility to remain in their own homes longer.
The maximum credit will be $ 1,000 annually calculated as 10 per cent of eligible expenditures. The credit will be available to individuals who incur eligible expenditures on or after April 1, 2012. The credit can be claimed by seniors, whether they own their home or rent, and by individuals who share a home with a senior relative.
Children’s Fitness Credit and Children’s Arts Credit
The Children’s Fitness Credit is a non-refundable tax credit of 5.06 per cent of eligible expenditures up to $ 500 for each child, providing a benefit of up to $ 25 per child.
The Children’s Arts Credit is a non-refundable tax credit of 5.06 per cent of eligible expenditures up to $ 500 for each child, providing a benefit of up to $ 25 per child.
For both the Children’s Fitness Credit and the Children’s Arts Credit, eligible expenditures are those that qualify for the federal children’s fitness and arts credits.
BACKGROUNDER 3: Fiscal Plan 2012-13 – 2014-15
In 2011, key economic indicators such as employment, retail sales and exports show that B.C.’s economy is slowly but steadily improving.
The Ministry of Finance forecasts the economy to grow by 1.8 per cent in 2012, 2.2 per cent in 2013, and 2.5 per cent in 2014.
Risks to the economic outlook include a return to recession in the US, the European sovereign debt crisis, slower than expected Asian demand for B.C.’s exports, exchange rate volatility, and further weakening of the US dollar disrupting global financial and commodity markets.
Total government revenue is forecast at $ 43.1 billion in 2012-13, $ 44.6 billion in 2013-14, and $ 45.7 billion in 2014-15. Revenue is expected to average 2.9 per cent annual growth over the next three years.
Total expense over the three-year plan is forecast at $ 43.9 billion in 2012-13, $ 44.2 billion in 2013-14 and $ 45.1 billion in 2014-15 – an average annual increase of 2.0 per cent over the next three years.
Budget 2012 allocates new funding for health-care and education priorities. It also reallocates funding from contingency funds to justice and social services where caseload pressures continue to rise.
In total, government drew down the contingencies vote by $ 153 million in 2012-13 and by $ 203 million in 2013-14 and 2014-15 and reallocated funding to the Ministry of Justice and Ministry of Social Development.
Budget 2012 confirms government’s ongoing commitment to protect health care. By 2014-15 the Ministry of Health’s budget will increase by more than $ 1.5 billion from 2011-12 levels. Total health spending by function will reach $ 19.1 billion or 42.2 per cent of all government expenses by 2014-15.
Block funding to school districts remains unchanged from Budget 2011, at $ 4.7 billion annually through to 2014-15. The same is true of the Annual Facilities Grant to fund maintenance of schools, which through a combination of operating and capital funding, again totals $ 110 million in 2012-13.
Budget 2012 also provides an additional $ 165 million over three years for the Learning Improvement Fund. This is in response to the issues surrounding the Bill 28 ruling in the spring of 2011. The funding will be targeted directly to the classrooms with the highest needs.
Budget 2012 allocates an additional $ 237 million over the next three years to the Ministry of Justice to address caseload pressures and maintain existing services – including the extra policing introduced as part of government’s guns and gangs strategy. These ministry budget increases are a reallocation from the contingencies vote.
Supports to Individuals and Families
Budget 2012 provides an additional $ 444 million over the next three years to support individuals and families. This includes:
- $ 294 million over three years for individuals and families in need of income assistance, including temporary assistance, disability assistance and supplementary assistance (health and other supports for families on income assistance).
- $ 144 million to increase capacity and improve services for individuals with developmental disabilities and their families consistent with the recommendations made by the Deputy Ministers’ Review of Community Living British Columbia (CLBC).
- $ 6 million over three years for communications tools (e.g. speech-generating devices) and other supports to assist young adults with severe communications disabilities. The funding will serve approximately 90 new clients annually, as well as provide ongoing support to existing clients.
Significant portions of the ministry budget increases are reallocations from the contingencies vote.
Taxpayer supported capital spending on schools, hospitals, roads, post-secondary institutions and other infrastructure in B.C. is expected to total $ 10.7 billion over the next three years. This includes new spending of $ 1.3 billion in new and expanded facilities; $ 1.1 billion to maintain and upgrade schools, health facilities, post secondary institutions and other provincial infrastructure; and over $ 300 million to support innovation and technological transformation and ministry operations.
Taxpayer-supported capital spending is projected to decline from recent peak levels following substantial completion in 2011-12 of the accelerated infrastructure program.
Self-supported capital spending by commercial Crown agencies is above historical levels due to continued investment by BC Hydro in infrastructure projects and the Port Mann Bridge/Highway 1 project. Capital spending is projected to decline over the plan period as the Port Mann Bridge/Highway 1 project is completed.
The total provincial debt is forecast to be $ 57.6 billion in 2012-13, $ 62.7 billion in 2013-14 and $ 66.4 billion in 2014-15.
Taxpayer supported debt is forecast to be $ 38.7 billion in 2012-13, $ 41.7 billion in 2013-14 and $ 43.7 billion in 2014-15.
Between 2002-03 and 2008-09, the taxpayer supported debt-to-GDP ratio – a key measure of debt affordability – was reduced by 37 per cent. This significant reduction has put British Columbia in a strong position to ride out the ongoing global economic uncertainty. The debt-to-GDP ratio will peak at 18.3 per cent in 2014-15.
Taxpayer-supported interest costs continue to remain low, averaging 4.2 cents per dollar of revenue over the three-year fiscal plan.
Budget 2012 projects a deficit of $ 968 million in 2012-13, and surpluses of $ 154 million in 2013-14 and $ 250 million in 2014-15.
The fiscal plan includes contingencies of $ 300 million in 2012-13 and $ 250 million in each of 2013-14 and 2014-15. The fiscal plan includes forecast allowances of $ 200 million in 2012-13, $ 250 million in 2013-14 and $ 350 million in 2014-15 to help guard against revenue volatility.
Ministry of Finance