B.C.'s projected deficit grows again to $9.4 billion in latest fiscal update

New Finance Minister Brenda Bailey shakes hands with Lt.-Gov. Janet Austin during the swearing-in ceremony at Government House in Victoria, Monday, Nov. 18, 2024. THE CANADIAN PRESS/Chad Hipolito

British Columbia's forecasted record deficit for this fiscal year has grown by another $429 million, reaching $9.4 billion.

The province unveiled the latest quarterly update, the first under new Finance Minister Brenda Bailey, showing B.C.'s debt level to reach $130 billion by the fiscal year's end, which is $1.4 billion higher than September's projections.

Bailey says in a statement that the province will see "modest" economic growth projected at 0.9 per cent for 2024, while next year's growth is expected to come in at 1.9 per cent.

But she warns that there is also uncertainty looming, including the tariff threat from U.S. president-elect Donald Trump.

Bailey says the NDP government will be "careful" in reducing the record deficit "over time," by growing the economy rather than cutting services, with $13.2 billion in infrastructure spending planned for this fiscal year.

In September, just before the provincial election call, then-Finance Minister Katrine Conroy presented B.C.’s quarterly financial update that forecasted a then-record $8.9 billion budget deficit for this year, driven largely by lower corporate income taxes and natural resource revenue as well as costs for fighting wildfires.

Those projections also promised more fiscal pain to come, with annual deficits of $6.7 billion and $6.1 billion in the two following years.

The B.C. New Democrats released a costed platform during the election in October that projected a budget deficit for next year to rise to $9.6 billion from the original $6.7 billion forecast, as revenue was expected to fall by more than $1.5 billion due to a number of promises and proposals.

Those include pledges of a $1,000-per-household grocery rebate next year, free off-peak transit for seniors and a middle-class provincial income tax cut of about $1,000 per household starting in 2026.

The costed NDP platform listed about $2.9 billion in what it called new investments up to 2027, and Premier David Eby said at the time that the campaign promises were made so that “the maximum number of people benefit” from the intended affordability relief.

Conroy said in September — her last update as finance minister — that B.C.'s economic growth is expected to strengthen during the three years, but it will be up to her successor to determine the timing for a return to a balanced budget.

Last week, the province announced that the B.C. Public Service has temporarily paused all external hiring except for positions such as those in critical or front line areas or involving the Indigenous Youth Internship Program and others.

The statement on the hiring freeze cited “a constrained fiscal situation” that requires the B.C. Public Service to make “the best use of its resources.”

In April, S&P Global Ratings dropped B.C.’s credit score from AA to AA-minus due to what the agency described as large government spending and the risk of outsized deficits. It was the third ratings drop from the agency for B.C. since 2021 when the province lost its AAA status.

S&P said then that more rating cuts may come in the next two years, given B.C.’s current fiscal course that would create rising debt and very low internal liquidity.

Another agency, Moody’s, maintained the province’s long-standing AAA credit rating but revised its outlook to negative.

This report by The Canadian Press was first published Dec. 17, 2024.