Those who have followed this blog are aware of my objections against the manner in which Canadian Provincial Governments account for their financial dealings; Especially the British Columbia Government , this being the Province in which I presently reside.
Simply put , the Government of BC continually exclaims , brags, about the fact that it balances its budget.
Here is what they say on their website this year about their budget:
B.C.’s 5th-consecutive balanced budget delivers the dividend of a strong economy.’
It is not balanced , I continue to maintain.
What the Government does is separate operating account from capital account. In the last several years it has balanced its current account and says therefore it has balanced its budget. It does not say it balanced only its current account
As any reasonable person knows a budget consists of all the money coming in and all the money going out. Paying the heat and light and mortgage etc –that is current account AND BUYING A NEW CAR is CAPITAL BUT is all a part of your budget.
I did not realize until now , after investigating the Auditor General’s website , and then going to Legislation , that the BC Government has ‘legalized’ a new definition of balanced budget . In other words they can argue that they are correct when they say they have balanced the budget .
The Auditor General actually says this in introducing her examination of the nature of the BC Budget . She explains that in our own life capital and current are all a part of our budget , but as it relates to the Province , it is different , in that legislation provides a different definition.
What is startling to me is that the AG provides no opinion on this new way of defining a balanced budget. Here is her actual words :
‘Budget forecasting in government, the private sector and one’s own household involves essentially the same components: a forecast of how much money is coming in the door (revenue), how much is going out for day-to-day costs (operating expenses) and major purchases (capital spending), and, if what comes in does not cover what goes out, how much will have to be borrowed (debt) to pay the bills.
One key difference , however, is the role of legislation in government budget forecasting. The balanced budget legislation prohibiting government from forecasting a deficit in the main Estimates ( that is current account, my words) for the fiscal year affects operating expense forecasts.those forecasts cannot be higher than revenue forecasts for the fiscal year. ‘
She , the AG , must know that when the ordinary citizen hears a balanced budget being announced by the Provicial Government that he or she automatically concludes that the Province is taking in enough revenues to cover all the money that is going out.
Of course, in this BC case that is not true , most of the Capital Account is borrowed ,adding to the debt . Figures both by the Auditor General and the Government’s own fiscal update confirm this. The debt has been growing every year.
The latest Budget has on its Fiscal Update section , page 12, the total debt growing from $66 Billion this year to $77Billion by 2019/20. So how can one say ‘balanced? Change the legislation .
Now , the relevant legislation centres around two Acts: The Balanced Budget and Ministerial Accountability Act and The Budget Transparency and Accountability Act.
But , of course, like many things in Government these days , it is made very complicated.
There is really nothing in the first Act that explicitly defines balanced budget . It talks of deficit this way
‘The main estimates for a fiscal year must not contain a forecast of a deficit for that fiscal year.’
But it says in this first Act that the definition and word meanings are in the other Act:
‘In this Act, words and expressions have the same meanings as in the Budget Transparency and Accountability Act.’
So on to this Act . Well ,
‘5 (1) The main estimates for a fiscal year must be prepared in accordance with this section and with the accounting policies as established by Treasury Board.
(2) The main estimates for a fiscal year must include the following:
(a) for the government, the proposed Supply Act appropriations for the fiscal year.’
Main estimates are not defined although it usually relates to the numbers for the different departments and agencies of the Government.
But where it becomes clear is that this Act has a separate section dealing with Capital Account . The headline below tells it all :
‘. ‘Major capital project information to be presented with the estimates
8 (1) Subject to section 19 (5) [exception if disclosure would be harmful], for any project where the government reporting entity, directly or indirectly,
(a) has made commitments, or
(b) anticipates making commitments
that will, in total, exceed $50 million towards the capital cost of the project, the minister must present to the Legislative Assembly, at the same time that the main estimates are presented, a statement of the current and anticipated total cost to the entity in relation to the capital cost of the project.’
So if you are still with me –THE ESTIMATES ARE THE BUDGET AND THE CAPITAL ACCOUNT A BIT OF AN ADD ON .
ITS ALL DONE IN A ROUND ABOUT WAY IN THE LEGISLATION BUT IN THE END IT REDEFINES THE BUDGET TO TECHNICALLY ALLOW THE GOVERNMENT TO PREACH THAT IT HAS BALANCED IT , If IT HAS BALANCED CURRENT ACCOUNT.
There was no easier way to explain this without leaving out parts of the legislation and then be accused of deliberately doing what I am accusing the Government of doing —really.
The Federal Government’s budget is both Current and Capital Account, unlike the deliberate separation done in BC. And the Federal Parliamentary Library in describing the budget process has a budget being current and capital account.
In summary then, The BC Government has changed by legislation the manner in which they present their budget which allows them to claim that their budget is balanced when in fact the total expenditures of government exceed the total revenues.