While some of the noise around reception of the Provincial Budget tabled February 17 is abating, what has not died down is the concern over the rapid rise of B.C.’s debt load. The fastest growing line item in B.C.’s budget is debt servicing – now nearly triple what it was in 2021-2022.
The coveted AAA credit rating is a thing of the past in the province. Credit rating agencies – four rate the province, including Moody’s, Standard & Poor’s, Morningstar DBRS and Fitch Ratings – have yet to weigh in with their opinions, but they will.
As individuals – and businesses know too well – credit ratings indicate a borrower’s ability to pay interest and to repay the principal balance, upon maturity, of their outstanding debt. Long term ratings for B.C. aren’t awful – short term is a different story. And outlooks from all four agencies are “negative.” You can keep track at gov.bc.ca
Fiscal health is often measured (for governments) with the taxpayer-supported debt-to-GDP ratio. B.C. is projecting this ratio to rise from 17.5% (2021-2022) to 37.4% by 2028-2029.
There are tax increases in Budget BC 2026. Even with these, record deficits persist in B.C.’s budget. It sometimes help focus to drop in a quote – so here is one from the always-quotable Winston Churchill: “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Business growth has been constrained by B.C.’s budgets over the past four years. And only economic growth will lead to a natural increase in provincial revenue.
So why are the hands of business people, entrepreneurs and organizations being tied? It may be a lack of energy for business itself within government. Legislating without adequate consultation can lead to negative growth. Red tape doesn’t create cashflow. Spending money we don’t have and taxing our way to prosperity isn’t going to end well.
One time-honoured way individuals stay afloat financially is to compare and manage the cash that comes in against the cash that goes out. Paycheque in: groceries and rent out.
Applying that formula at a provincial level, again from 2021-2022 to today, it is seen that operating expenses, the groceries and rent – have grown by 39%. So, have paycheques grown to match (or slightly increase) to cover that figure?
No: revenues (the paycheque) have grown 18%, and this includes the meteoric rise in online gambling and single event sports betting. So: 100% out and less than 50% in. Not good math.
Will the ratings agencies downgrade B.C.’s credit rating as spring 2026 unfolds? If so, the debt load will grow again as borrowing costs go up.
B.C. businesspeople and newcomers wanting to invest can be part of the solution but have to have their hands untied in terms of red tape, and business-constraining legislation – and then we could see the economy grow at its historic 2.5% average or more – certainly above the current 1.3% to 1.9%.
What does B.C. have that the world wants? Lots. Smart people. Great research. Trees. LNG. Water. Minerals. A remarkable coastline and ports. Spectacular parks and destinations. And businesses, hungry for success.
Let’s employ that awful word, monetize, a bit more for the betterment of our residents, current and future. And for the retirement of our debt.
When the Province broadened the targets of the provincial sales tax at the end of February, many businesses called it “the last straw.” A business coalition led by the Greater Vancouver Board of Trade warned the move increases costs for businesses, slows investment and worsens housing affordability. Most galling is the tax on security services which only highlights the Province’s failure to effectively deal with the rapidly widening impact of crime on businesses across the province.
The effect of growing the reach of the PST also affects municipalities across the province. So, now they have a bigger tax bill just to run the business of a city, payable to the Province. What’s the sense in that?
It almost seems that chronic disorder on the streets is being matched by chronic inability to manage a revenue/expense budget.