PUBLIC ACCOUNTS CONFIRM SURPLUS, DEBT REDUCTION

VICTORIA – A strong economy, higher resource revenues and sound fiscal management helped generate a $3.1-billion surplus and a $1.5-billion reduction in provincial debt, Finance Minister Carole Taylor announced in releasing the Province’s 2005/06 audited financial statements.

“2005 was a very good year for British Columbia,” said Taylor. “The economy remained strong, the unemployment rate hit 30-year lows, and commodity prices were higher than predicted by most experts. We have created conditions for a strong economy. The real debate now is how to keep our economy strong and the budget sustainable in light of weakening natural gas and lumber prices. I suspect this will be a major point of discussion during budget consultations this fall.”

Total provincial expense reached $32.9 billion, up $2.2 billion from the previous year. The increase reflects $710 million in negotiating incentive payments for contracts settled prior to March 31, 2006. In addition, health expense rose by $885 million to $12.8 billion, a 7.7 per cent increase from the previous year largely due to more surgeries, preventative health programs and providing additional service to a growing and aging population. Education expense rose $431 million to $9 billion, a 5.1 per cent increase from 2004/05 primarily due to new spaces in colleges and universities. Together, health and education represent two-thirds of all government expense.

“We are reinvesting the benefits of a strong economy in better programs and services for British Columbians, including for seniors, children, health care and education,” Taylor said. “But some of our natural resource revenues can be quite volatile, so we must be careful that our choices and investments remain affordable over the long term.”

Total government revenues rose to $35.9 billion in 2005/06, up $2.6 billion from 2004/05, reflecting the 3.5 per cent economic growth in 2005, taxation revenue growth, strong commodity prices, and increased federal contributions, partially offset by weaker results from commercial crown corporations. Total tax revenue was $16.4 billion, almost $1.5 billion higher than the previous year. Natural gas revenues were $1.9 billion, up $482 million from the previous year.

“We were prudent with last fall’s spike in natural gas revenues,” said Taylor. “Prices have since dropped significantly, so it was good that we put that windfall to use in a way that would help keep our fiscal plan sustainable in the years ahead.

“First, we made $1 billion available as an incentive to reach public sector labour agreements. More than half the province’s budget pays compensation for our 309,000 public sector employees, so securing four-year agreements was one of the single most important things we could have done to add stability to our fiscal plan through to 2010. As well, our strong revenue growth and prudent management allowed us to make a substantial pay-down on our debt, which also helps ensure our infrastructure plans remain affordable going forward.”

Total provincial debt fell to $34.4 billion, down almost $1.5 billion from the previous year. The taxpayer-supported debt to GDP ratio, a key measure of debt affordability, declined to 16.2 per cent from 18.2 per cent.

British Columbia invested $3 billion in provincial infrastructure in 2005/06, 33 per cent more than the previous year. New, renovated and expanded education and health facilities accounted for almost two-thirds of this spending.

This is the second consecutive year the Public Accounts received a clean audit opinion from the Office of the Auditor General. The Public Accounts meet the standards of Generally Accepted Accounting Principles and fully consolidate information from school districts, universities, colleges and health authorities (SUCH sector) in the province’s reporting systems.

In addition to the Public Accounts, the Province also released its Ministerial Accountability Report and annual service plan reports for ministries and government agencies. The Ministerial Accountability Report details the fiscal and other accountability targets ministers have achieved. Service plan reports summarize the progress of individual ministries and agencies, as well as the government as a whole, in meeting the performance targets laid out at the beginning of each fiscal year. Service plan reports enhance accountability to taxpayers by disclosing key outcomes and benefits. The Government Strategic Plan Report is nearing completion and will be available by August 31.

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The Public Accounts and related documents are available at www.fin.gov.bc.ca/ocg/pa/05_06/pa05_06.htm online.

1 backgrounder(s) attached.
Media contact:	Robert Pauliszyn Communications Director Ministry of Finance 250 356-2821 250 213-5096 (cell)

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