VANCOUVER -- British Columbia's Liberal government is conceding defeat to the crumbling world economy, announcing it will break its own balanced-budget law and bring in a deficit for the next two years.

Finance Minister Colin Hansen had ruled out deficit spending but now says there has been a dramatic decline in projected revenues and in order to protect health and education in B.C., the government has made a decision to run a deficit.

The B.C. Liberals introduced balanced-budget legislation in 2001 but Hansen says the provincial Liberals have already trimmed all the fat they could from provincial spending.

Premier Gordon Campbell, who faces an election in May, says bringing in a balanced budget would require cutting hundreds of millions of dollars for health and education, something he says would do "significant harm."

B.C. is not alone.

Ontario Premier Dalton McGuinty is warning of multi-year deficits for Ontario in the face of the global economic downturn and the federal Conservative government brought in an $85-billion deficit last week.