The Topline
- B.C. Finance Minister Brenda Bailey introduced a budget that includes a record-high deficit of $13.3 billion in fiscal year 2026/27
- To help offset declining revenues, Bailey announced a series of tax increases, capital project delays, and a reduction of 15,000 public sector jobs over three years
- B.C. is the first province to deliver a fiscal plan for 2026/27. Other provinces are anticipating similar financial situations
Switch sides,
back and forth
Economic realities
If B.C.’s financial situation sounds dire, it’s because the province is being hit by a wave of external shocks.
In her speech , B.C.’s Minister of Finance Brenda Bailey said, “We are in a period of serious fiscal pressure. Global uncertainty is slowing growth. Commodity markets are volatile. The housing market has cooled.”
Bailey goes on to say “the B.C. economy was being hit simultaneously by numerous disruptions: a global pandemic, soaring inflation, devastating wildfires and flooding, and now an unprovoked trade war.”
In other words, government revenues that depend on growth, commodities and housing are all under pressure at exactly the same time.
The trade conflict started by the United States hit B.C. especially hard. Bailey calls the conflict unexpected and excessive, coming from a partner B.C. normally depends on.
And while critics will point the finger at the NDP government for irresponsible spending, Bailey says all provinces are dealing with this. “The reality facing every province is the same” and “growth has not kept pace with the cost of delivering public services.”
Earlier this month, Alberta Premier Danielle Smith said “significant” deficits are in store for her province as it tries to grapple with oil price volatility. Ontario’s fiscal watchdog said earlier this month that the province is not on track to deliver its promised balanced budget by 2027.
Across Canada, money coming in through taxes and other revenues simply isn’t growing fast enough to cover the rising cost of services.
“Costs are rising for everything from health care to building infrastructure,” said Bailey. The province is paying far more than planned just to maintain its existing services and projects.
Things like health care, education, child care, social services and infrastructure projects are all getting more expensive to provide because of factors like inflation, wage pressures, demographics and construction costs.
Taken together, B.C.’s financial situation didn’t happen because of reckless spending decisions. Economic shocks and inflation are hitting both government and household budgets alike – something no province can easily escape.
Mismanaged, not misfortune
Global economic factors aren’t entirely responsible for the province’s financial mess. It was Premier David Eby’s homegrown decisions that put us in this position.
A short history lesson: As pointed out by The Vancouver Sun’s Vaughn Palmer, Eby was once a member of the late Premier John Horgan’s Treasury Board. That’s the budget-making committee of the provincial government.
In February 2022, Horgan kicked Eby off the Treasury Board completely. Palmer writes it was because Eby clashed with Finance Minister Selina Robinson.
Horgan liked Robinson’s fiscal prudence and discipline. Eby, on the other hand, was an activist and a spender. When Eby eventually became premier, he removed Robinson as Finance Minister – even though B.C. had a comfy $6 billion budget surplus.
See where I’m going with this?
Fast forward to today. Ahead of this year’s budget, the Business Council of B.C. called for the province to “stabilize its fiscal trajectory by restraining spending and improving conditions for private sector investment and hiring.”
Instead, the council says this year’s deficit “deteriorates to a record $13.3 billion in 2026/27, $3.1 billion larger than projected in last year’s budget,” and that “B.C.’s finances have unraveled at a breathtaking speed over recent years as spending growth has far outpaced revenue growth.”
Under Eby’s watch, provincial debt has exploded. Palmer writes in a later column that total debt is on track to jump from more than $90 billion in John Horgan’s last year to about $234 billion by 2029, and that interest payments are rising rapidly and projected to approach $9 billion annually within a few years, becoming “the fastest growing line item in this year’s budget.”
Remember, Eby inherited a surplus of almost $6 billion when he took over from John Horgan. In his response to this year’s budget, B.C. Conservative Finance Critic Peter Milobar said, “The question people are asking is simple: Where has all the money gone?”
One factor is public-sector wages. As Palmer writes, last June Eby initially proposed a 3.5 per cent increase over two years, calling it “as much as government could afford.”
But facing pressure ahead of an NDP convention, he ultimately signed off on giving the BC General Employees Union a 12 per cent raise over four years. That’s a $4 billion difference.
The general response to the budget has been fairly consistent: you can’t blame all of this on pandemics, inflation and trade wars.
Yes, the world has been rough. But B.C.’s record deficit, rapid debt growth, rising tax burden and surging interest costs are, above all, the result of deliberate choices to let spending grow faster than revenue.
