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2017 B.C. Budget Update

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Edelman Canada shares highlights from British Columbia Finance Minister Mike de Jong’s 2017 Budget. To learn more about Edelman Canada, please visit www.edelman.ca.

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2017 B.C. Budget Update

  1. 1. Edelman Vancouver | 1400 – 1500 West Georgia St | Vancouver, BC V6G 2Z6 | 604 623 3007 On February 21st, B.C. Finance Minister Mike de Jong tabled British Columbia’s fifth consecutive balanced budget. For a government heading to the polls on May 9th, this is a classic pre-election budget. Budget 2017 offers broad relief to residents and small businesses across the province in the form of tax cuts, Medical Services Plan (MSP) cuts, and $2.1 billion in new spending. The $50.2 billion Budget 2017 forecasts a surplus of $295 million, down from the $1.5-billion surplus forecast for the current fiscal year ending March 31st . The great challenge for the B.C. Liberal government is to make these sweeping headlines feel like meaningful improvements to British Columbians. Public trust is waning across all sectors, making what politicians say or do, and what is reported in the news, especially difficult for the public to personally validate in their everyday lives. A feeling of “get on with it” will be a common refrain for those wanting to see tangible progress on expanded hospital space, smaller class sizes, more efficient public transit, and MSP/tax relief to ease the cost of living in the lower mainland, specifically. Good policy is good politics, but the public will only believe it when the headlines become reality. We can expect to see a time-sequenced, regionally balanced string of announcements over the coming weeks to make these connections. Then, we’re off to the campaign trail, where British Columbians may see one the closest fought provincial election campaigns in memory. Bob Richardson Executive Vice-President & National Practice Lead 416.849.1913 | bob.richardson@edelman.com 2017 BC BUDGET UPDATE OUR PERSPECTIVE HIGHLIGHTS Hon. James Moore Special Advisor, Public Affairs, Edelman Canada 604.648.3401 | james.moore@edelman.com Bridgitte Anderson General Manager, Edelman Vancouver 604.648.3403 | bridgitte.anderson@edelman.com • Budget 2017 takes aim at cutting red tape for B.C.’s small business sector, offering a corporate income tax rate reduction of .5% to 2%. • It also includes a rate reduction on electricity by reducing the PST from 7% to 3.5% effective October 1, 2017, with a full exemption as of April 1, 2019. • In line with the federal government’s infrastructure focus and the Metro Vancouver Mayors’ 10 Year Plan, Budget 2017 includes a record $24.5 billion investment over three years in new and upgraded provincial infrastructure projects. • Sustainability features prominently in Budget 2017, with $40 million proposed for B.C.’s Clean Energy Vehicle program, and $87 million to enhance the government’s tech strategy – a rising industry on Canada’s west coast. • B.C.’s Prosperity Fund, initially designed to be filled with revenues from an LNG industry, will also receive a $400 million boost from the 2016-17 surplus. • With the lowest Debt-to-GDP ratio in Canada (16.1%), B.C. holds a AAA credit rating. • B.C. is the only province to receive the highest mark available from Standard and Poor’s, Moody’s, and Fitch, and continues to have one of the lowest overall tax burdens in Canada – including income, consumption, health care premiums and payroll taxes. The government has increased the provincial education budget by $740 million over three years for total school capital spending of $2 billion. This includes $228 million more to help with enrolment growth (up to 5,200 new student spaces in Surrey), as well as seismic upgrades, funding for rural education enhancement, student transportation, K-12 salary costs, and an incremental $320 million over three years while a final agreement with the B.C. Teachers’ Federation on class size and composition is concluded. The government has also earmarked investment in infrastructure projects, with a focus on trades education, at several Post-Secondary Institutions, including campuses in Surrey, Kamloops, Cranbrook, Prince George, Nelson, Campbell River, Dawson Creek, Terrace, and the Okanagan. EDUCATION
  2. 2. Edelman Vancouver | 1400 – 1500 West Georgia St | Vancouver, BC V6G 2Z6 | 604 623 3007 2017 BC BUDGET UPDATE HEALTH CARE The government will be cutting Medical Services Plan (MSP) premiums by 50% for B.C. residents with annual family net incomes up to $120,000, effective January 1, 2018. This is a preliminary step towards eliminating MSP premiums in the province. The average annual savings for families paying full premiums is $900. Two million residents are expected to see their rates cut by 50% - returning premiums to rates set in 1993. Budget 2017 includes $2.7 billion in heath capital projects – including new patient care towers at both Penticton Regional Hospital and the Royal Inland Hospital in Kamloops. An additional $45 million will be allocated to the Ministry of Children and Family Development over three years for mental health counselling and treatment services. To further address addiction, the government is allocating $11 million over three years for the B.C. Centre for Substance Abuse, as well as $12 million for an additional 28 specialized youth addiction treatment beds. FAMILIES AND HOUSING Budget 2017 will provide an additional $796 million over three years to support families and children in need. This includes $199 million to fund a $600 per year increase to income assistance rates for persons with disabilities, as well as $20 million for provincial child care to help the creation of up to 2,000 new spaces. The introduction of a $250 B.C. back-to-school tax credit for parents of school age children was announced to help with the cost of purchasing necessary school supplies, and the interest rate on student loans will be reduced from prime-plus-2.5 per cent, to prime, starting August, 2017. The threshold for B.C.’s first time homebuyers’ exemption was also increased to $500,000, saving house seekers up to $8,000 in property transfer tax. Additionally, Budget 2017 allocates $920 million to support the creation of over 5,300 affordable housing units, and a further $65 million towards 380 housing units to support B.C.’s homeless and those suffering from mental health and substance use issues. Of note: as a result of B.C.’s red-hot real estate market, the province took in $2.025 billion in property transfer tax in 2016-17. CHALLENGE While British Columbia’s fiscal situation is strong, the present and pending instabilities of our global economy should give pause to both the government and the public. Nearly 20% of B.C.’s GDP is dependent on continued access to U.S. markets, and with President Trump’s commitment to renegotiating NAFTA, B.C. must remain vigilant about protecting provincial interests, both in Washington, and with the federal government who will negotiate on B.C.’s behalf. Equally, with the collapse of the Trans Pacific Partnership (TPP), instability in the Asia Pacific region could have tangible consequences for B.C.’s efforts to diversify market access. The post-TPP realignment, including ongoing discussions around a potential Canada-China Free Trade Agreement, is both a challenge and an opportunity for B.C. firms, and the B.C. government. STAKEHOLDER REACTIONS “British Columbia continues to lead Canada in terms of financial management and economic strength, giving our business community a stable foundation on which to build” - Greater Vancouver Board of Trade President Iain Black. “Budget 2017 represents this government’s fifth consecutive balanced budget, showing the benefits of a fiscal plan that includes steady, solid growth and managed spending. There’s additional funding for the programs people rely upon and almost $1 billion left in the pockets of British Columbians to let them make the choices that are important to them” – Honourable Michael de Jong, Minister of Finance. “This budget represents a cynical ploy by handing out financial goodies a few months before an election. It pretends to tackle issues that should have been dealt with years ago” - Andrew Weaver, Leader of the B.C. Green Party “Christy Clark made life worse for ordinary families. And now that an election is coming she wants people to forget everything. The B.C. Liberals are using their cash surplus to make you forget there’s a deficit in the services people care about.” – John Horgan, Leader of the B.C. NDP

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