Declining natural gas revenues hit BC with $1.14 billion deficit
British Columbia faces a $1.14 billion deficit in 2012-2013 due to declining natural gas revenues, a deficit increase of $173 million from its Budget 2012.
Finance minister Michael de Jong (MLA Abbotsford West) announced today that natural resource revenue is down by $1.4 billion over the three-year fiscal plan compared to the Budget 2012 forecast.
Natural gas is a focal point for the government, particularly liquefied natural gas (LNG) development. The province's Natural Gas Strategy includes plans to operate three LNG facilities by 2020.
"The natural gas industry is an important revenue generator for British Columbia," reads Christy Clark's introduction in the Strategy. "With new, undeveloped shale gas deposits in the northeast, there is a real opportunity for growth."
However, with declining revenues the government will need to find $241 million this year to manage the natural gas market impact on royalty revenues.
It will need $389 million next year, and $483 million in 2014-15. In total, the province will need a total of $1.1 billion.
The law requires the government to balance the budget in 2013-14.
Budget 2012 included measures to keep government spending at an overall annual increase of two per cent over the three-year fiscal plan. The government stated that Ministries are on track to meet their spending targets, but further measures are necessary to control spending and manage the effect of low natural gas prices and volumes.
Immediate measures to address the revenue shortfall listed in a press release include:
- Further spending reductions within government operations, such as travel budgets and other discretionary funding.
- Freezing salaries for public sector management, including government, Crown corporations, health authorities, universities and colleges, etc.
- Implementing a hiring freeze in the public service (government).
- Reviewing the bargaining mandate. Government will continue to evaluate other measures over the coming months to manage the gap created by diminishing natural gas revenues.
The province stated it is investing $10.5 billion in infrastructure spending over the three-year fiscal plan, which includes $193 million in new capital approved since Budget 2012 to deliver essential services and maintain highway infrastructure.
New projects range from improvements at public schools and post secondary institutions, to health-care facilities and housing projects, as well as road and highway work.
However, to keep debt affordable and help protect its triple-A credit rating, the province stated it will adjust its capital plan as necessary so the debt-to-GDP targets remain on track.
The government forecasts BC's real GDP will grow by 2.0 per cent in 2012, 1.8 per cent in 2013, and about 2.4 per cent annually in the following years. This forecast is mainly due to continued weakness in Europe, slow U.S. recovery and the potential for slowing demand from Asia.
BC has also released the 2013 Budget Consultation Paper, which asks British Columbians what their priorities are for the next provincial budget. The Select Standing Committee on Finance and Government Services will also hold public consultations around the province in September and October.