February 2, 2009 / 10:24 PM / in 9 years

British Columbia sees budget deficits for 2 years

VANCOUVER, British Columbia (Reuters) - British Columbia forecasts it will run budget deficits for the next two years, saying its resource-based economy is being too battered by the global economic slowdown to avoid it.

Premier Gordon Campbell, who had once vowed to never run a deficit, said on Monday the plans will require the Liberal government to abandon a law it introduced that required Canada’s westernmost province to field only balanced budgets.

“No matter how politically tough it may be to table a deficit budget, the heart of any budget’s credibility is its commitment to telling the public the truth,” Campbell told a Vancouver news conference.

The government had thought as recently as two weeks ago it could keep the budget balanced, but doing that would have required cuts to health and education spending that the province was not willing to make, Campbell said.

“It would be a budget that hurts more than it helps,” said Campbell, whose right-of-center government faces a scheduled election in May.

Finance Minister Colin Hansen refused to predict the size of the deficits. The province will introduce the budget for the 2009-10 fiscal year on February 17. The budget will return to balance in 2011-12, he said.

The February fiscal plan will include short-term job stimulus programs, but cuts in all areas of discretionary spending, Campbell said.

He said the province will not abandon the carbon tax on energy use that it introduced last year to fight climate change. The tax, which replaced some existing taxes, is the first of its kind in North America.

British Columbia’s announcement comes a weak after the Canadian government introduced forecast budget deficits totaling about C$85 billion ($68 billion) over the next five years as it introduces billions of dollars in new spending and tax cuts to stimulate the economy.

Ontario, the center of Canada’s industrial sector, has also said it expects to run a deficit, and other provinces are forecasting shortfalls as well.

British Columbia’s economic advisory panel is predicting the province will see zero economic growth in 2009, with weak prices for lumber, natural gas and other commodities. That is down from the 0.6 percent growth it had predicted as late as December.

The left-leaning New Democratic Party accused Campbell of ignoring the province’s weak economy by wasting money on pet construction projects and hiding spending for the 2010 Winter Olympics in Vancouver.

The NDP vowed to repeal the carbon tax, which it says is hurting the economy.

The Canadian Taxpayers Federation also blasted Campbell’s announcement, saying the government could have done more to cut spending, while allowing spending in areas such health and education to increase despite tough economic times.

“Balanced budget laws are not just about photo-ops for politicians,” said Maureen Bader, a spokeswoman for the federation’s British Columbia branch.

The Liberals introduced the law to balance the budget for the 2004-05 fiscal year, and has run surpluses since then. The province’s last deficit was in the 2003-04 fiscal year.

Reporting Allan Dowd, editing by Rob Wilson

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