BUDGET AND F P - BC Budget 2020

BUDGET AND FISCAL PLAN

2020/21 ? 2022/23

February 18, 2020

National Library of Canada Cataloguing in Publication Data British Columbia. Budget and fiscal plan. ?- 2002/03/2004/05Annual Also available on the Internet. Continues: British Columbia. Ministry of Finance and Corporate Relations. Budget ... reports. ISSN 1207-5841 ISSN 1705-6071 = Budget and fiscal plan -- British Columbia. 1. Budget -- British Columbia -- Periodicals. 2. British Columbia -- Appropriations and expenditures -- Periodicals. I. British Columbia. Ministry of Finance. II. Title. HJ12.B742 352.48'09711'05 C2003-960048-3

BUDGET AND FISCAL PLAN 2020/21 to 2022/23

February 18, 2020

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Attestation by the Secretary to Treasury Board

Summary............................................................................................................................................................. 1

Part 1: Three Year Fiscal Plan Introduction......................................................................................................................................................... 7 Expense................................................................................................................................................................ 8

Consolidated Revenue Fund Spending.................................................................................................... 8 Making Life More Affordable....................................................................................................... 8 Services British Columbians Count On........................................................................................ 11 Building a Strong and Sustainable Economy that Works for Everyone.......................................... 17

BC Public Service.................................................................................................................................... 26 Public Sector Compensation - Sustainable Services Negotiating Mandate............................................... 26 Protecting Core Programs and Services through Expenditure Management............................................. 26 Recovered Expenses................................................................................................................................. 26 Operating Transfers................................................................................................................................. 27 Service Delivery Agency Spending........................................................................................................... 27 Revenue............................................................................................................................................................... 30 Major Revenue Sources........................................................................................................................... 32 Capital Spending.................................................................................................................................................. 38 Taxpayer-Supported Capital Spending.................................................................................................... 38 Self-Supported Capital Spending............................................................................................................. 47 Projects Over $50 Million....................................................................................................................... 48 Provincial Debt.................................................................................................................................................... 53 Risks to the Fiscal Plan......................................................................................................................................... 55

Tables: 1.1 Three Year Fiscal Plan................................................................................................................... 7 1.2.1 BC Child Opportunity Benefit..................................................................................................... 8 1.2.2 Earnings Exemptions.................................................................................................................... 13 1.2.3 Investments in Support Services for People................................................................................... 14 1.2.4 Justice and Community Safety Investments.................................................................................. 16 1.2.5 CleanBC - Operating, Capital and Contingencies Allocations...................................................... 18 1.3 Revenue by Source....................................................................................................................... 28 1.4 Expense by Ministry, Program and Agency................................................................................... 29 1.5 Comparison of Major Factors Underlying Revenue...................................................................... 31 1.6 Personal Income Tax Revenue...................................................................................................... 32 1.7 Corporate Income Tax Revenue.................................................................................................... 33 1.8 Sales Tax Revenue......................................................................................................................... 33

BUDGET AND FISCAL PLAN - 2020/21 to 2022/23

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TABLE OF CONTENTS

1.9 Federal Government Contributions.............................................................................................. 36 1.10 Capital Spending.......................................................................................................................... 38 1.11 Capital Expenditure Projects Greater Than $50 Million............................................................... 50 1.12 Provincial Debt Summary............................................................................................................ 54 1.13 Provincial Debt Changes.............................................................................................................. 55 1.14 Key Fiscal Sensitivities.................................................................................................................. 55

Topic Boxes: Economic Foundation to Support a Sustainable Budget and Fiscal Plan.................................................. 21 Provincial Transportation Investments..................................................................................................... 45

Part 2: Tax Measures Tax Measures? Supplementary Information........................................................................................................ 62 Tables:

2.1 Summary of Tax Measures............................................................................................................ 61

Part 3: British Columbia Economic Review and Outlook Summary.............................................................................................................................................................. 69 British Columbia Economic Activity and Outlook............................................................................................... 69

Labour Market........................................................................................................................................ 70 Consumer Spending and Housing........................................................................................................... 71 Business and Government....................................................................................................................... 74 External Trade and Commodity Markets................................................................................................. 74 Demographics......................................................................................................................................... 76 Inflation.................................................................................................................................................. 76 Risks to the Economic Outlook........................................................................................................................... 77 External Outlook................................................................................................................................................. 77 United States........................................................................................................................................... 78 Canada.................................................................................................................................................... 80 Asia......................................................................................................................................................... 82 Europe.................................................................................................................................................... 83 Financial Markets................................................................................................................................................. 83 Interest Rates........................................................................................................................................... 83 Exchange Rate......................................................................................................................................... 85 A GBA+ Look At B.C.'s Labour Force.................................................................................................................. 89 Introduction ............................................................................................................................................. 89 Labour Force and Participation Rate....................................................................................................... 89 Employment........................................................................................................................................... 90 Average Hourly Wage Rate...................................................................................................................... 91 Unemployment Rate............................................................................................................................... 92 Labour Market Indicators for Indigenous Peoples................................................................................... 92

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BUDGET AND FISCAL PLAN - 2020/21 to 2022/23

TABLE OF CONTENTS

Tables: 3.1 British Columbia Economic Indicators........................................................................................ 70 3.2 U.S. Real GDP Forecast: Consensus versus B.C. Ministry of Finance........................................... 80 3.3 Canadian Real GDP Forecast: Consensus versus B.C. Ministry of Finance................................... 82 3.4 Private Sector Canadian Interest Rate Forecasts............................................................................ 84 3.5 Private Sector Exchange Rate Forecasts......................................................................................... 85 3.6.1 Gross Domestic Product (GDP): British Columbia...................................................................... 86 3.6.2 Selected Nominal Income and Other Indicators: British Columbia.............................................. 87 3.6.3 Labour Market Indicators: British Columbia................................................................................ 87 3.6.4 Major Economic Assumptions..................................................................................................... 88 3.7 B.C. Labour Force Statistics Summary......................................................................................... 93

Topic Box: The Economic Forecast Council, Budget 2020........................................................................................ 95

Part 4: 2019/20 Updated Financial Forecast (Third Quarterly Report)

Introduction......................................................................................................................................................... 99 Revenue............................................................................................................................................................... 101 Expense................................................................................................................................................................ 101 Contingencies...................................................................................................................................................... 102 Forecast Allowance............................................................................................................................................... 102 Government Employment (FTEs)........................................................................................................................ 102 Provincial Capital Spending................................................................................................................................. 103 Provincial Debt.................................................................................................................................................... 104 Risks to the Fiscal Forecast................................................................................................................................... 105 Supplementary Schedules..................................................................................................................................... 105

Tables: 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11

2019/20 Forecast Update............................................................................................................... 99 2019/20 Financial Forecast Changes............................................................................................ 100 2019/20 Capital Spending Update............................................................................................... 103 2019/20 Provincial Debt Update.................................................................................................. 104 2019/20 Operating Statement...................................................................................................... 105 2019/20 Revenue by Source......................................................................................................... 106 2019/20 Expense by Ministry, Program and Agency.................................................................... 107 2019/20 Expense by Function...................................................................................................... 108 2019/20 Capital Spending........................................................................................................... 109 2019/20 Provincial Debt.............................................................................................................. 110 2019/20 Statement of Financial Position...................................................................................... 111

Appendix............................................................................................................................................................. 113

BUDGET AND FISCAL PLAN - 2020/21 to 2022/23

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February 18, 2020

As required by Section 7(1)(d) of the Budget Transparency and Accountability Act, I confirm that Budget 2020 contains the following elements: ? Fiscal forecasts for 2020/21 to 2022/23 (provided in Part 1) and economic forecasts for 2020 to 2024

(provided in Part 3). ? A report on the advice received from the Economic Forecast Council (EFC) in November 2019 (updated in

January 2020) on the economic growth outlook for British Columbia, including a range of forecasts for 2020 and 2021 (see Part 3, page 95). ? Material economic, demographic, fiscal, accounting policy and other assumptions and risks underlying Budget 2020 economic and fiscal forecasts. In particular: - The economic forecast reflects stable economic growth for British Columbia amidst ongoing global economic

uncertainty. In recognition of downside risks, the economic projections assumed in Budget 2020 are prudent relative to the average of the forecasts provided by the Economic Forecast Council. - Consistent with past practice, the economic forecast does not incorporate fiscal policy measures announced in the current budget (Budget 2020), due to the timing of decisions. These budget policy measures will be incorporated into the economic outlook in the updated forecast included in the First Quarterly Report. - Personal and corporate income tax revenue forecasts include the preliminary 2018 income tax assessments and the corporate income tax revenue forecast is based on projections for national corporate taxable income provided by the federal government. - Natural gas royalty forecasts continue to adopt a lower natural gas price forecast compared to the private sector average in order to maintain prudence against volatility. - Budget 2020 provides ministry base budget increases over the three-year fiscal plan period to fund all signed collective agreements reached to date under the Sustainable Services Negotiating Mandate. Budget 2020 also includes centralized funding to assist with the anticipated costs of concluding the remaining agreements consistent with the Sustainable Services Negotiating Mandate. - The fiscal plan includes three-year financial projections for school districts, post-secondary institutions and health authorities, based on plans submitted by those entities to the Ministries of Education, Advanced Education, Skills and Training, and Health, respectively, and for the other service delivery agencies and the commercial Crown corporations. - The financial results of the Insurance Corporation of British Columbia are a key risk to government's fiscal plan. - Fiscal prudence totals $900 million in 2020/21, and $700 million per year in 2021/22 and 2022/23, being the sum of the contingencies allocation and the forecast allowance in each fiscal year. Government's economic and fiscal prudence measures generally have resulted in government exceeding its budget targets. To the best of my knowledge, the three-year fiscal plan contained in Budget 2020 conforms to the standards and guidelines of generally accepted accounting principles for senior governments as outlined in Note 1 of the 2018/19 Public Accounts. I would like to recognize staff in government ministries and agencies for their contribution to this document. I would especially like to acknowledge staff in the Ministry of Finance, whose professionalism, commitment and expertise were essential to the completion of this budget and fiscal plan.

Heather Wood Associate Deputy Minister and Secretary to Treasury Board

BUDGET AND FISCAL PLAN - 2020/21 to 2022/23

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