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September 14, 2007

Taylor Reveals Windfall from Feds

Why didn't Minister of Finance Carole Taylor say that 62.5% of the net increase in the province's forecast surplus is due to increased transfers from the federal government? That's what is revealed by the numbers in table 1.1 on page 6 of the First Quarterly Report 2007/08. The table shows some items increasing and some decreasing relative to the February 20th budget, resulting in a net increase of $950 million, to which another $250 million is added by reducing the forecast allowance. Federal transfers are $116 million higher due to the HPV immunization and Patient wait times guarantee, $60 million higher due to higher national tax points, $50 million higher due to changes in the Canada Social Transfer, and a whopping $368 million higher due to "one time eco-Trust, multiculturalism and immigration funding, Millennium Scholarship Fund and direct post-secondary research grant funding".

Taylor's news release only incidentally mentions increased federal funding as one item in a list of increased revenue sources. The only other source of revenue that comes close to the windfall the Campbell government is receiving from Ottawa is the corporate income tax, which is up by $377 million relative to the February budget estimate. That windfall is at least partly due to the "higher impact of duty deposit refunds on forest firms' income", i.e. the softwood deal.

The Campbell government is trying to spin the first quarterly report as an indication of a strong economy and good management. The truth is that it shows luck in receiving benefits from the federal government. In the 90s Paul Martin balanced his budget on the back of the provinces; how times have changed! Like the evaporating natural gas revenues, down $369 million from the February estimate, the increase in federal transfers, which are heavily weighted by one-time grants, can disappear. Perhaps that is why the Minister is floating trial balloons about higher gasoline taxes and dramatically higher ferry fares. When federal generosity ends, something has to plug the hole that was made by reckless tax cuts.

 
 

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