BALANCED BUDGET 2005

VICTORIA – A strong economy and sound fiscal management paved the way for tax reductions benefiting lower and modest income British Columbians, increased funding for health, education and other key programs, and a record $1.7 billion debt reduction, Finance Minister Colin Hansen said today as he tabled Balanced Budget 2005.

“Through much of the 1990s, B.C.’s economic growth was at or near the bottom of the provincial rankings,” said Hansen. “Four years ago we laid out a plan to change that, and the plan is working. British Columbia has emerged as an economic leader, creating new opportunities for sustainable investments in programs and services that make a real difference in people’s lives.”

The B.C. economy performed impressively in 2004, with robust domestic demand evident in strong growth rates for employment, consumer spending, home construction and non-residential investment. This broadly based economic activity is expected to yield real economic growth of 3.3 per cent in 2004, 3.1 per cent in 2005 and 3.0 per cent in 2006 and 2007.

“On our first day in office, we reduced income taxes for all B.C. families by an average of 25 per cent, and by 28 per cent for those earning less than $30,000 a year,” said Hansen. “Now, with higher revenues fuelled by a stronger economy, we can afford to leave even more dollars in the pockets of those who need them most.”

Effective this year, a new non-refundable personal income tax credit, the BC Tax Reduction, will reduce or eliminate provincial income taxes for about 730,000 British Columbians. Most individuals earning up to $16,000 a year will pay no provincial income tax and those earning up to $26,000 will pay lower tax.

In addition, a $4,000 increase in the thresholds to qualify for the Medical Services Plan Premium Assistance Program will reduce or eliminate premiums for 215,000 people. This means:

Single persons with net incomes of $20,000 or less will pay no premiums, and those earning up to $28,000 will pay lower premiums.
Senior couples and families of four with net incomes of $29,000 or less will pay no premiums, and those with net incomes up to $37,000 will pay lower premiums.

“When combined with our previous tax reductions, this results in significant savings,” said Hansen. “A senior couple with an income of $30,000 will now pay almost $930 less in total provincial tax than they did just four years ago. A family of four earning the same amount will now pay almost $1,300 less. It's initiatives like these that make British Columbia the best place to live and raise a family.”

Over the next three years, the BC Tax Reduction and the enhanced MSP Premium

Assistance Program will provide $480 million in tax reductions for lower and modest income families, seniors, and individuals.

Balanced Budget 2005 supports other tax reductions including:

Improvements to the First Time Homebuyers Program, which exempts first time buyers from the property transfer tax on eligible residential properties.

An improvement to the small business corporate income tax threshold that will allow more business income to qualify for the lower 4.5 per cent small business tax rate.
Enhanced provincial sales tax (PST) relief for alternative fuel vehicles, including an exemption from provincial sales tax, up to a maximum of $2,000, for hybrid electric passenger vehicles (until March 31, 2008).
A two-year PST exemption for energy efficient residential heating equipment.
A 10-year extension of the Mining Exploration Tax Credit to encourage mining exploration in the province.
A $2,000 increase to the vehicle surtax threshold to eliminate the surtax on passenger vehicles valued at $49,000 or below.
A partial exemption from the property (school) tax for eligible hydroelectric projects.
Other previously announced measures such as the reduction of the PST rate to
7 per cent from 7.5 per cent, increased film and television tax credits, and an improved threshold and phase-out rate for the Home Owner Grant Program.

The total value of tax reductions in Balanced Budget 2005 is estimated at $484 million in 2005/06, $496 million in 2006/07 and $501 million in 2007/08.

The revised surplus forecast for 2004/05 is $1.4 billion, with a forecast allowance of $300 million, which, if not required, will result in a record surplus this fiscal year.

Balanced Budget 2005 forecasts surpluses of $220 million in 2005/06 and $200 million in each of 2006/07 and 2007/08. Forecast allowances and contingencies of

$670 million in 2005/06, $720 million in 2006/07, and $860 million in 2007/08 will protect the balanced budget projections against unforeseen events and revenue risks.

Total provincial debt at the end of 2004/05 is forecast at $36.1 billion, a $1.7 billion decline from the previous year and the largest annual debt reduction in B.C. history.

“Making a record payment on our government credit card significantly improves our debt forecast while we continue to make significant capital investments to meet the infrastructure needs of a growing economy,” said Hansen. Balanced Budget 2005 includes a capital plan for ministries and taxpayer-supported agencies that is substantially higher than last year’s plan. The capital plan includes an additional $1 billion in 2005/06 and $900 million in 2006/07, for planned and new capital investments in schools, colleges and universities, health facilities and transportation infrastructure.

As a result, total provincial debt is forecast to reach $39,599 million in 2007/08. This is $979 million lower than the debt forecast for 2006/07 in last year’s fiscal plan.

Balanced Budget 2005 provides $6.5 billion over the next three years for increased ministry funding for health care, communities, children, education, public safety, economic development and the environment. Reflecting the ongoing service priorities of British Columbians, 71 per cent of the new funding is directed to health care and education.

British Columbia is a leader in budget transparency and is the only province in Canada required by law to introduce balanced budgets prepared in accordance with Generally Accepted Accounting Principles (GAAP).

“Over the past four years, we set out a clear plan and built a solid foundation,” said Hansen. “This budget demonstrates the province’s accomplishments and supports a plan to create even greater opportunities as we move towards a golden decade for British Columbia.”

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For the Finance Minister’s speech and more about details on this year’s budget, visit

http://www.bcbudget.gov.bc.ca online.

Download sound clips of Minister Hansen discussing Balanced Budget 2005 at: http://www.mediaroom.gov.bc.ca/events/February15_05e1/ online.

Download a high-resolution photo of Minister Hansen at http://mla2.governmentcaucus.bc.ca/media/Hansen_600.jpg online.

1 backgrounder(s) attached.
Media contact:	Robert Pauliszyn Communications Director Ministry of Finance 250 356-2821

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