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VANCOUVER (Reuters) - British Columbia's finance minister is crafting a "status quo" budget for next year as the provincial government sorts out who will be its next leader when Premier Gordon Campbell leaves.
Colin Hansen said he is still confident the western Canadian province's economy is rebounding. But a second quarter budget update released on Thursday rolled back expectations that the deficit will be much smaller than first projected.
The fiscal year to April 1 is now expected to end with a deficit of just under C$1.7 billion. That's about C$20 million less than forecast in February, but up from the C$1.4 billion projected in a September update.
Revenue from personal income taxes dropped in the second quarter and lower commodity costs cut royalty revenues, although corporate income tax revenue was higher than expected, the Finance Ministry said.
Hansen is scheduled to introduce his next budget on February 15, 11 days before the B.C. Liberal Party votes on replacing Campbell, who announced plans to resign this month.
"It will be a status quo budget," Hansen told reporters, promising to leave as much flexibility as he can to allow the new leader to decide the priorities to pursue.
British Columbia's budget for the 2010-2011 fiscal year was C$40.6 billion, up from C$39.7 billion the year before.
Hansen, who does not plan to enter the leadership race, acknowledged the next premier may bring in another budget later in the year.
Campbell announced his resignation this month amid voter anger over the province's decision last year to merge its provincial sales tax with the federal government's in a new Harmonized Sales Tax.
Voters will decide in September whether to repeal the new tax. Supporters say the tax helps businesses stay competitive, but opponents say it shifts more taxes to consumers.
Campbell had promised to cut personal income taxes by 15 percent, but the government has suspended that plan, saying the final decision would be up to the next premier.
Hansen said his February budget will have the flexibility to reexamine the tax cut idea.
Private sector economists have cut their projected GDP growth for the province in 2011 to 2.6 percent from 3.3 percent forecast in September. That is still above the government's own forecast of 2.2 percent growth.
An analyst report on Thursday said the new deficit figures were no major cause for concern.
"Despite a downward revision, British Columbia's fiscal hole remains ankle deep, growth prospects are solid and the province has a clear path back to surplus in short order," BMO said in a note to investors.
Saskatchewan on Thursday raised is projected budget surplus, while Alberta warned last week its deficit will be higher than expected.
Reporting by Allan Dowd; editing by Janet Guttsman