====================================================================== Note: The electronic version of the following Appendix B is for informational purposes only. The printed version remains the official version. All tables have been placed at the end of the file. ====================================================================== APPENDIX B FISCAL REVIEW AND OUTLOOK REVIEW OF 1992/93 Slower-than-expected economic growth and changes to federal forecasts of income tax collections resulted in the 1992/93 deficit being $161 million higher than forecast in last year's budget. Revenue for the year was $169 million below budget while spending was $8 million below budget (see Table B1). REVENUE Consolidated Revenue Fund revenue totalled $16.0 billion in 1992/93, up 8.7 per cent from 1991/92, but 1.0 per cent lower than the 1992/93 budget estimate. Personal income tax revenue was $695 million or 14.7 per cent below budget, due to the effect of downward revisions to federal forecasts of national personal income. During 1992/93, the federal government lowered its forecast of 1992 national basic federal tax by $5 billion, or 7.7 per cent, causing lower instalment payments to provinces during the year. Also, 1991 tax assessments were lower than forecast resulting in a large negative prior year adjustment. Corporation income tax revenue was $51 million or 8.5 per cent below budget, mainly as a result of a lower federal forecast of 1992 national corporate profits. Due to the lower revenue from personal and corporation income tax, more of the province's Established Programs Financing (EPF) entitlement was paid through cash transfers. The federal government's decision to adjust the provincial population estimates for the census undercount also contributed to higher-than-expected EPF revenues. As a result, EPF cash contributions were $431 million above budget. Social service tax was $49 million or 2.3 per cent below budget, mainly due to weakness in consumer spending in the early part of the year. In 1992, retail sales grew by 3.6 per cent, compared to the budget forecast of 5.0 per cent. Dividends from British Columbia Hydro and Power Authority were $100 million above budget in 1992/93 due to higher net income. Revenue from other sources was $95 million higher than budget. þ Property transfer tax revenue was $30 million above budget due to higher real estate sales in response to lower mortgage rates and continued in-migration. þ Corporation capital tax was $30 million higher than budget because of higher-than-expected instalment payments during the year. þ Forests revenue was $25 million above budget reflecting higher stumpage revenues and lower logging tax refunds for prior year losses. þ Property tax revenue was $21 million higher than budget due to the impact in 1992/93 of changes to property tax rates effective January 1, 1993. EXPENDITURE Expenditure of the Consolidated Revenue Fund in 1992/93 was down $8 million from budget. Expenditures were 6.5 per cent higher than comparable spending in the previous year, which excludes one-time accounting valuation adjustments. Expenditure pressures in several ministries were offset by savings of over $316 million in other programs. Ministry of Social Services expenditure was $40 million above budget. Higher spending for income assistance and child day care was partly offset by savings in other programs. For 1992/93, the number of income assistance cases is estimated to be 19.8 per cent higher than last year. Spending by the Ministry of Attorney General was $36 million above budget, mainly due to increased expenditures for the Legal Services Society, and higher criminal injury compensation payments. Ministry of Forests expenditure was $19 million above budget. This includes overexpenditure of $42 million on forest fire suppression, partly offset by savings of $23 million in other programs. Ministry of Health expenditure was $13 million above budget because of higher spending on ministry operations, partly offset by savings in other programs. A change in accounting policy resulted in additional expenditures of $26 million to record concessionary loan expenses. This included $24 million in the Ministry of Energy, Mines and Petroleum Resources for loans to Pacific Coast Energy Corporation, in respect of the Vancouver Island natural gas pipeline. Debt interest costs were $23 million higher than budget due to higher-than-expected borrowing in 1992/93. This is after deducting $14 million of interest earnings due to prefunding of borrowing requirements. Expenditure savings included reduced highway construction and maintenance in the Ministry of Transportation and Highways; lower education grants resulting from lower-than-expected public school student enrolments and reduced debt servicing costs in the Ministry of Education; reduced spending for revenue sharing grants in the Ministry of Municipal Affairs, Recreation and Housing; and efficiency savings in a number of ministries. 1993/94 FISCAL PLAN Table B1 summarizes the budgetary transactions of the Consolidated Revenue Fund, which includes the General Fund, British Columbia Endowment Fund and Natural Resource Community Fund. Revenue for 1993/94 is estimated at $17.5 billion, an increase of 9.0 per cent from the 1992/93 revised forecast. This includes $637 million in revenue measures introduced in the 1993 budget. Program expenditure, which excludes spending on management of public funds and debt, is estimated at $18.0 billion for 1993/94, an increase of 5.0 per cent from the 1992/93 revised forecast. As a result, the program deficit in 1993/94 is estimated at $547 million, less than one-half of the revised forecast for 1992/93. After including expenditures for management of public funds and debt of $988 million, the Consolidated Revenue Fund deficit is estimated at $1,535 million in 1993/94. This is $415 million lower than the revised forecast for 1992/93. The government's financial requirements total $1,579 million in 1993/94. This includes the Consolidated Revenue Fund deficit and net disbursements from financing/working capital transactions of $44 million. This will be financed by increasing government direct debt outstanding (see Table B2). 1993/94 REVENUE Revenue of the Consolidated Revenue Fund for 1993/94 is estimated at $17,460 million, an increase of 9.0 per cent from the revised forecast for 1992/93. This includes the impact of revenue measures introduced in the 1993 budget, which total $637 million. Taxation revenue, the largest source of provincial government revenue, is expected to total $10,862 million in 1993/94, up 12.8 per cent from the 1992/93 revised forecast (see Table B3). Personal income tax revenue is expected to increase 11.0 per cent to $4,458 million. This reflects growth in personal incomes, the increase to the high income surtax rate announced in the budget, and a recovery from a large negative prior year adjustment in 1992/93. Corporation income tax revenue is estimated at $607 million, an increase of 10.2 per cent, due to growth in national corporate profits and the increase to the general rate effective July 1, 1993. Social service tax revenue, estimated at $2,605 million, will increase by 26.5 per cent, mainly due to tax changes introduced in the budget. These changes include the one-point increase in the tax rate, applying the tax to specified labour services, and removal of the trade-in allowance on purchases of passenger vehicles. Property tax revenue is expected to increase 10.3 per cent in 1993/94, due to the effect of rate increases announced in the budget and the introduction of a school property tax surtax on higher-valued residential properties. Tobacco tax revenue will increase only slightly in 1993/94, as the effect of the tax rate increase is offset by a decline in taxable volumes. Continued strength in real estate markets, due to lower interest rates and in-migration, is expected to raise property transfer tax revenues by 5.7 per cent to $370 million. Corporation capital tax revenue will rise 7.5 per cent reflecting increased levels of filing and growth in the tax base. Revenue from the insurance premium tax is expected to rise 8.1 per cent, mainly due to higher motor vehicle insurance premiums. Natural resource revenue is expected to increase 20.5 per cent to $1,481 million. Revenue from petroleum, natural gas and minerals will increase by 12.9 per cent, mainly due to higher natural gas volumes and mineral prices. Forests revenue is expected to show an increase of 32.3 per cent reflecting higher average stumpage rates. Lumber prices have risen dramatically since October 1992, and revenue could increase further if prices remain high for the remainder of 1993. Water rental revenue will decline slightly due to reduced electricity generation in 1992/93, offset by the effect of a rate increase on January 1, 1993. Other revenue, estimated at $1,912 million, is expected to increase by 1.9 per cent. Medical Services Plan premium revenue will increase 2.2 per cent, reflecting increased subscription levels. An increase in premiums effective October 1, 1993, will be offset by higher premium assistance. Revenue from fees, licences and fines will rise due to volume increases and rate adjustments later in the year. Investment earnings are forecast to decline $29 million mainly due to lower interest rates. Contributions from government enterprises will total $840 million, up 6.3 per cent from the 1992/93 revised forecast. Liquor Distribution Branch profits are expected to increase by 2.9 per cent, reflecting increased prices, partly offset by a decline in overall sales volumes. Dividends from British Columbia Hydro and Power Authority are forecast at $290 million, an increase of $43 million from 1992/93. Contributions from the federal government are estimated at $2,365 million, a decline of 5.3 per cent. Federal cash payments for Established Programs Financing are expected to fall 11.6 per cent due to the effect of slow growth in federal transfers and the large positive prior year adjustment received in 1992/93. Recoveries under the Canada Assistance Plan (CAP) will rise 5 per cent to $838 million, reflecting the federal government's growth limit on contributions. Other federal payments are expected to increase 2.9 per cent in 1993/94 reflecting higher recoveries of cost-shared expenditures for public schools education and the Forest Resources Development Agreement. 1993/94 EXPENDITURE Expenditure of the Consolidated Revenue Fund is estimated at $18,995 million in 1993/94, an increase of $1,023 million or 5.7 per cent from the revised forecast for 1992/93 (see Table B4). This compares to expenditure growth in 1992/93 of 6.5 per cent, excluding the effect of one-time accounting adjustments recorded in 1991/92. Ministry of Social Services expenditure is estimated at $2,837 million, an increase of $408 million or 16.8 per cent from the 1992/93 revised forecast. Spending will increase $276 million or 18.4 per cent for income assistance and by 2.7 per cent for child day care subsidies. Expenditure on community support services will increase 11.1 per cent to $354 million. Ministry of Health spending is estimated to increase $243 million or 4.1 per cent to $6,196 million. Significant spending increases include $101 million for community health services, $71 million for hospital care, $56 million for the Medical Services Commission and $12 million for Pharmacare programs. Ministry of Education expenditure shows an increase of 3.4 per cent from the 1992/93 revised forecast. Operating contributions to schools will increase about $100 million. This funding covers projected enrolment increases and continues both the school meals project and the expanded English as a Second Language Program. It also provides new money for inner city schools and to help teenaged parents stay in school. Spending by the Ministry of Advanced Education, Training and Technology is projected to total $1,342 million, an increase of 2.8 per cent from the 1992/93 revised forecast. Advanced education programs, which include contributions to universities, colleges and institutes, will increase $34 million. Ministry of Transportation and Highways spending, estimated at $762 million, will decrease $88 million. However, the government has established the BC Transportation Financing Authority, a self- financing corporation, to undertake highway capital construction in British Columbia. Spending of the new Build BC Special Account is estimated at $100 million in 1993/94. Expenditures of the special account will focus on regional capital projects, employment and job training initiatives, resource enhancement and other infrastructure projects. Expenditure on Management of Public Funds and Debt is estimated to rise to $988 million, up 20.8 per cent from 1992/93 due to higher debt outstanding. 1993/94 FINANCING PLAN Gross borrowing for government purposes is estimated at $2,324 million in 1993/94. This will be partially offset by sinking fund contributions, sinking fund earnings and maturing debt totalling $750 million. As a result, net government direct debt is expected to increase by $1,574 million to $10.5 billion at March 31, 1994 (see Tables B2 and D1). Gross borrowing for Crown corporations and agencies is estimated at $2,749 million. This increase will be partially offset by repayment provisions, resulting in net borrowing of $1,555 million in 1993/94. Other guarantees are expected to decrease $3 million. Details of 1993/94 borrowing are provided in Appendix D. ACCUMULATED DEFICIT Table B5 shows that at March 31, 1994, the accumulated deficit of the Consolidated Revenue Fund is expected to total $9,811 million, up $1,535 million from March 31, 1993. -------------------------------------------------------------------------------- TABLE B1 BUDGETARY TRANSACTIONS CONSOLIDATED REVENUE FUND -------------------------------------------------------------------------------- Revised Estimate Forecast Estimate 1992/93(1) 1992/93(1) 1993/94 -------------------------------------------------------------------------------- ---------------($ millions)------------- Revenue ............................... 16,191.0 16,022.0 17,460.0 Program Expenditure ................... 17,185.0 17,154.0 18,007.0 -------- -------- -------- Program Surplus (Deficit) ............. (994.0) (1,132.0) (547.0) Management of Public Funds and Debt ... 795.0 818.0 988.0 -------- -------- -------- Surplus (Deficit) ..................... (1,789.0) (1,950.0) (1,535.0) ======== ======== ======== (1) Restated to conform to the 1993/94 Estimates. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE B2 SUMMARY OF TRANSACTIONS CONSOLIDATED REVENUE FUND -------------------------------------------------------------------------------- Revised Estimate(1) Forecast(1) Estimate 1992/93 1992/93 1993/94 -------------------------------------------------------------------------------- ---------------($ millions)------------- Consolidated Revenue Fund Surplus (Deficit) ..................... (1,789.0) (1,950.0) (1,535.0) Net Sources (Requirements) from Financing and Working Capital Transactions(2) ............... (33.0) (300.3) (44.0) Decrease (Increase) in Cash and Short Term Investments ........ (20.0) (103.2) 5.0 -------- -------- -------- Net (Increase) Decrease in Provincial Government Direct Debt(3) ..... (1,842.0) (2,353.5) (1,574.0) ======== ======== ======== (1) Restated to conform to the 1993/94 Estimates. (2) Financing and working capital transactions represent either a source or use of funds, such as the payment or collection of loans and accounts payable/receivable, or non-cash transactions including allowances for doubtful accounts. They do not cause a change in the annual surplus (deficit) but only a change in the composition of the provincial government's assets and liabilities. (3) Includes direct debt incurred for government operating purposes and does not include debt incurred by, or on behalf of, Crown corporations and agencies. -------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- TABLE B3 REVENUE BY SOURCE CONSOLIDATED REVENUE FUND ----------------------------------------------------------------------------------- Revised Estimate(1) Forecast(1) Estimate Increase 1992/93 1992/93 1993/94 (Decrease)(2) ----------------------------------------------------------------------------------- ----------------($millions)---------------- (per cent) Taxation Revenue: Personal income ......... 4,712.0 4,017.0 4,458.0 11.0 Corporation income ...... 602.0 551.0 607.0 10.2 Social service .......... 2,109.0 2,060.0 2,605.0 26.5 Property ................ 1,081.0 1,102.0 1,216.0 10.3 Fuel .................... 585.0 585.0 604.0 3.2 Other ................... 1,274.0 1,315.0 1,372.0 4.3 -------- -------- -------- 10,363.0 9,630.0 10,862.0 12.8 -------- -------- -------- Natural Resource Revenue: Petroleum, natural gas and minerals .... 258.0 233.0 263.0 12.9 Forests ................. 665.0 690.0 913.0 32.3 Water and other ......... 305.0 306.0 305.0 (0.3) -------- -------- ------- 1,228.0 1,229.0 1,481.0 20.5 -------- -------- -------- Other Revenue ................ 1,868.0 1,876.0 1,912.0 1.9 -------- -------- -------- Contributions from Government Enterprises ............. 667.0 790.0 840.0 6.3 -------- -------- -------- Contributions from the Federal Government: Established Programs Financing .......... 1,096.0 1,527.0 1,350.0 (11.6) Canada Assistance Plan and other .......... 969.0 970.0 1,015.0 4.6 -------- -------- -------- 2,065.0 2,497.0 2,365.0 (5.3) -------- -------- -------- TOTAL REVENUE ............... 16,191.0 16,022.0 17,460.0 9.0 ======== ======== ======== (1) Restated to conform to the 1993/94 Estimates. (2) Percentage change between the 1992/93 revised forecast and the 1993/94 estimate. ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- TABLE B4 EXPENDITURE BY MINISTRY CONSOLIDATED REVENUE FUND ----------------------------------------------------------------------------------- Revised Estimate Forecast Estimate Increase 1992/93 1992/93(1) 1993/94 (Decrease)(2) ----------------------------------------------------------------------------------- ------------($millions)------------ (per cent) Legislation ................... 23.9 25.4 24.0 (5.5) Auditor General ............... 6.9 6.7 6.9 3.0 Commission on Resources and Environment ............... 4.1 4.1 4.2 2.4 Conflict of Interest Commissioner .............. 0.2 0.1 0.2 100.0 Information and Privacy Commissioner .............. - - 1.2 - Ombudsman ..................... 3.7 3.7 4.4 18.9 Office of the Premier and Executive Council Operations ................ 21.9 21.1 22.2 5.2 Aboriginal Affairs ............ 17.4 16.1 18.2 13.0 Advanced Education, Training and Technology: Advanced Education Programs .................. 996.3 992.1 1,026.3 3.4 Other ..................... 306.8 312.8 315.6 0.9 -------- -------- -------- Total ..................... 1,303.1 1,304.9 1,341.9 2.8 Agriculture, Fisheries and Food....................... 95.8 89.5 89.1 (0.4) Attorney General .............. 776.1 811.9 822.1 1.3 Economic Development, Small Business and Trade ........ 87.2 72.2 77.3 7.1 Education: Operating Contributions.... 3,219.0 3,194.3 3,293.0 3.1 Other ...................... 371.0 349.2 369.8 5.9 -------- -------- -------- Total ..................... 3,590.0 3,543.5 3,662.8 3.4 Energy, Mines and Petroleum Resources ................. 43.8 66.1 68.8 4.1 Environment, Lands and Parks .. 258.0 249.0 241.3 (3.1) Finance and Corporate Relations 345.8 334.8 342.4 2.3 Forests ....................... 634.3 653.7 640.7 (2.0) Government Services ........... 98.0 100.6 93.4 (7.2) Health: Contributions to Hospitals ................. 2,497.3 2,549.6 2,626.0 3.0 Other ..................... 3,441.7 3,402.7 3,569.5 4.9 -------- --------- -------- Total ..................... 5,939.0 5,952.3 6,195.5 4.1 Labour and Consumer Services .. 31.8 30.7 32.9 7.2 Municipal Affairs, Recreation and Housing ............... 500.0 472.2 482.6 2.2 Social Services ............... 2,389.5 2,429.5 2,837.2 16.8 Tourism ....................... 61.5 59.9 58.0 (3.2) Transportation and Highways ... 879.2 850.5 762.2 (10.4) Women's Equality .............. 32.0 30.9 34.0 10.0 Other Appropriations: Management of Public Funds and Debt ........ 795.0 818.0 988.0 20.8 Contingencies and New Programs .............. 27.7 11.2 30.0 - Build BC Special Account .. - - 100.0 - Other(3) .................. 14.1 13.4 13.5 0.7 -------- -------- -------- TOTAL EXPENDITURE ............. 17,980.0 17,972.0 18,995.0 5.7 ======== ======== ======== (1) Restated to conform to the 1993/94 Estimates. (2) Percentage change between the 1992/93 revised forecast and the 1993/94 estimate. (3) Includes the Government Accounting Systems Strategic Plan Vote, the Insurance and Risk Management Special Account, the South Moresby Implementation-Forestry Compensation Special Account and other appropriations. ----------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE B5 NET EQUITY AT YEAR END CONSOLIDATED REVENUE FUND -------------------------------------------------------------------------------- Revised Estimate Forecast Estimate 1992/93(1) 1992/93 1993/94 -------------------------------------------------------------------------------- --------------($ millions)------------- General Fund ..................... (8,764.0) (8,854.4) (10,432.3) British Columbia Endowment Fund... 542.0 558.0 597.0 Natural Resource Community Fund .. 16.0 20.8 24.7 -------- -------- -------- Consolidated Revenue Fund Accumulated Deficit .......... (8,206.0) (8,275.6) (9,810.6) ======== ======== ======== (1) The accumulated deficit at the beginning of the 1992/93 fiscal year has been increased from the amount shown in the 1992 Budget to reflect the prior period adjustment of $678 million included in the 1991/92 Public Accounts. --------------------------------------------------------------------------------