November 25, 2022 | 16:18
British Columbia FY22/23 Mid-Year Fiscal Update
The Province of British Columbia is estimating a $5.7 billion surplus for FY22/23 (1.3% of GDP), another sharp improvement from the $5.5 billion deficit penciled into the 2022 budget. Recall that the Q1 fiscal update lifted the province into a small $706 million surplus, so this is another large step into the black.
The Province does not lay out a medium-term forecast in this update, as they did in Q1. But, recall that the Q1 update showed the province slipping back into deficit in FY23/24 and beyond, largely because of upward wage pressure and a further $2 billion for spending priorities. Those priorities have since been outlined, such as insurance rebates, hydro credits and affordability payments, and remain costed in this update.
Total revenues are now tracking a massive $12.5 billion stronger than initially expected in the 2022 budget, and $3.2 billion higher than in the prior fiscal update. Personal and corporate income tax revenues have surged, as seen across most provinces through the year thanks to higher prior-year tax assessments rolling through. The province is not providing a full economic forecast update at this point, but will do so with the Q3 update early next year alongside the 2023 budget.
Meantime, spending is tracking lower thanks mainly to a lower bill (this year) for labour negotiations than was pencilled in as a buffer in the prior fiscal update. Over the term of the recent three-year agreement, however, B.C. looks to pay more than initially expected, so this spending pressure will likely show up in the 2023 budget. Spending contingencies of $4.8 billion also remain built in, along with a $300 million explicit forecast allowance.
Total gross borrowing requirements have now fallen sharply to $7.1 billion for FY22/23, down from $19.0 billion in the budget and $17.6 billion expected as of Q1. Just $1.5 billion remains to be completed. The net debt-to-GDP ratio is now tracking at 14.6%, down 4.3 ppts from expectations early in the year.
The Bottom Line: British Columbia's finances are suddenly flush, and a curious early-year deficit forecast has become a meaningful surplus. Reading the tone of the room, however, suggests that there are going to be more spending pressures coming over the next few years that could eat into this.