November 30, 2006

VICTORIA – Stronger tax assessments from 2005 and one-time federal transfers are pushing British Columbia’s forecast surplus to $2.15 billion, despite continued caution on commodity prices and the slowing U.S. economy, Finance Minister Carole Taylor announced today with the release of the second Quarterly Report for 2006/07.

“We are seeing some fiscal benefits carry forward from the economic strength we have enjoyed in recent years,” said Taylor. “But the outlook includes the same risks and challenges we identified in the first Quarterly Report.”

Strong domestic performance in retail sales and employment, along with higher private sector forecasts, suggest British Columbia’s economic growth in 2006 could now be stronger than the 3.6 per cent forecast in the first Quarterly Report. However, risks to the economic outlook continue to gather, including the current slowing of the U.S. economy, particularly in the U.S. housing sector, as well as declining and volatile commodity prices.

“It looks like 2006 will be a good year for B.C.’s economy, but forecasters are growing increasingly cautious about 2007,” Taylor said. “This will be a key topic when I meet with the Province’s Economic Forecast Council next week.”

The revenue forecast is $1,044 million higher than the first Quarterly Report forecast, including an additional $725 million due to stronger 2005 tax assessment reports from the Canada Revenue Agency and one-time federal trust funds for capital projects. The federal trust funds were only recently finalized, as they were contingent on the size of the 2005/06 federal surplus.

The spending forecast is up $94 million from the first Quarterly Report, in part reflecting projected deficits by health authorities and hospital societies.

The Province’s surplus for 2006/07 is now forecast at $2.15 billion, $950 million higher than at first quarter and $1.55 billion higher than budget.

Taxpayer-supported debt is projected to decline to $26.3 billion by the end of the 2006/07 fiscal year, and the taxpayer-supported debt-to-GDP ratio, a key measure of debt affordability, is projected to fall to 14.7 per cent.

“To meet the needs of our growing province, we’ll continue to borrow money to help fund new construction of health facilities, roads and other public infrastructure,” said Taylor. “But to keep debt affordable, our commitment is to ensure our debt does not grow faster than our economy. So I was pleased to see that Moody’s cited our well-structured fiscal framework, leading to a lower debt-to-GDP ratio, as one of the key reasons they recently upgraded our credit rating to Aaa – their highest possible rating.”