VANCOUVER, British Columbia (Reuters) - British Columbia’s projected budget surplus has dropped by more than half because of the slower U.S. economy and lower personal income tax revenue, provincial officials said on Monday.
The Pacific coast province also warned it expects revenues over the next three years will be C$3 billion less than projected, but Finance Minister Colin Hansen vowed not to run a deficit during that time.
The C$450 million ($364 million) surplus for the C$37.7 billion 2008-09 budget contrasts with the C$1 billion surplus that financial officials had projected in their last update in September. The fiscal year ends in March.
The revised surplus would have been even lower had the province not also cut the contingency allowance it leaves for potential errors in revenue and spending forecasts to C$500 million from C$750 million.
Provincial economists said British Columbia’s natural resource-based economy was slowing, but it was too early to say if it would fall into recession. GDP growth is projected now at 1.4 percent for 2008 and 1.9 percent in 2009.
The weak U.S. housing market has slashed revenue from provincial forest lands, and lower natural gas prices have squeezed drilling royalties -- although gas prices are still higher than projected when the budget was unveiled in February.
Hansen said the government would use spending cuts not higher taxes to make up for any revenue shortfall, but there was no plan to delay the increase in carbon taxes on gasoline and other fuels scheduled for next July.
Premier Gordon Campbell, whose Liberal government faces an election in May, announced last month that because of the slowing economy it would speed up income tax cuts that were scheduled for next year.
Economists said on Monday those income tax cuts were part of the reason personal income tax revenue was projected to fall below earlier expectations.
Reporting Allan Dowd, editing by Rob Wilson