February 17, 2009 / 11:33 PM / 9 years ago

British Columbia sees deficits, blames slowdown

VICTORIA, British Columbia (Reuters) - British Columbia unveiled its annual budget on Tuesday, forecasting a deficit of nearly C$500 million ($395 million), saying the global downturn would cause the Western Canadian province's once robust economy to contract slightly this year.

British Columbia is the first of several provinces expected to roll out red ink budgets in coming weeks and follows the Canadian government's announcement that it would run up to C$85 billion in deficits over the next five years as officials try to right the country's sagging economic ship.

British Columbia's Liberal government, which had once vowed never to return the province to deficits, defended the plan as cutting spending in most programs but protecting areas such as education and health.

"What British Columbia families are looking for is a sense of responsibility from government," said Finance Minister Colin Hansen, adding that the spending plan would provide job stability in tough economics times.

Spending for the 2009-2010 fiscal year was pegged at C$39.3 billion with revenue of C$38.8 billion. The government said its current-year's budget should still end with a C$50 million surplus, thanks largely to a C$750 million allowance set aside for unexpected revenue drops.

The province also expects to run a C$245 million deficit in the 2010-2011 fiscal year, but said it will return to balanced budgets after that date. Legislators had to suspend the province's balanced budget law last week to allow the red ink budgets.

Capital spending was set at C$6.9 billion, including C$2 billion in accelerated infrastructure spending to stimulate the economy. Total debt is expected to rise slightly to C$40.5 billion, putting the debt to GDP ratio at 20.4 percent.

OLYMPIC STIMULUS AND MYSTERY

Provincial economists predict British Columbia's resource-based economy will see a 0.9 percent drop in real economic growth in 2009, although it is expected to rebound and then grow by 2.4 percent in 2010, due in part to stimulus provided by the 2010 Winter Olympics in Vancouver.

Missing from the documents were details of the province's share of the Games security budget, which some estimates have said could come close to C$1 billion. The federal government has not disclosed the overall figure, but Hansen said the budget would meet the province's obligations.

Business groups, in general, defended the budget and said the government had to be cautious in its economic assumptions.

"This is not like a normal business cycle. It's like being hit by a meteor," said Jock Finlayson of the Business Council of British Columbia.

The opposition New Democrat Party denounced the budget.

"This budget must be seen for what it is, a document written on the eve of an election by a government trying to cling to power," said Bruce Ralston, the NPD's finance critic.

British Columbia holds its next provincial election in May.

($1=$1.26 Canadian)

Reporting by Allan Dowd, editing by Rob Wilson

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