What passes as household common sense doesn't necessarily apply to our legislature. Consider, for example, the fact that the Bank of Canada raised the prime lending rate by a quarter percent this week and all other indicators suggest a continued upward trend. For many borrowers and consumers the slight increase means more money going to interest payments rather than to debt.

When the cost of borrowing increases, most of us reassess our finances; and, some even reduce planned expenditures in order to cover debt costs. Individual households undertake such activities on a regular basis in the most ordinary fashion. Re-organizing household finances is a reflex not a production.

It is all the more bizarre then, to watch the spectacle of jubilant announcements unleashed on the public when the government manages to spend less than it takes in throughout a fiscal year. For the government, a balanced budget is cause for clowns, jugglers and magicians but for the rest of us it is certainly a mundane and necessary exercise.

However, according to the first quarter report, the government's budget is more than a little off target. In February, the finance minister was forecasting a $100 million surplus for the fiscal year 2004/5 but thanks to stronger than expected revenues, the surplus is projected to jump to $865 million (plus $300 million in forecast allowances).

Subsequently, the government's finance committee promptly assembled and traveled the province to ask taxpayers how to spend the windfall. As expected, the myopic tax and spend crowd suggested a massive infusion for the chronic money pits of health and education. But, before we flitter away today's fortunes on short-sited but electorally popular program spending, the government should start paying off yesterday's spendthrift decisions and legislate a debt repayment schedule.

While Alberta is set to retire its debt next year, BC's is at an all time high of $37 billion. To service the debt this year, it will cost taxpayers $1.468 billion tax dollars, which is almost $4 million per day. That money is not going toward any programs, services and certainly not any toward tax relief. The Canadian Taxpayers Federation (CTF) submitted its pre-budget report to the finance committee and recommended the government implement a legislated debt repayment schedule.

The proposal calls for 2.5% of own source revenue (that's all revenue less federal transfers) or 75% of the first quarter forecast surplus -whichever is greater- be applied against the debt each year. The CTF also recommends an option to accelerate the repayment schedule to 5% own source revenue in 2015.

If the government amends The Balanced Budget and Ministerial Accountability Act to include the CTF's debt repayment provisions, BC could be debt free in 2033. It's not an unrealistic goal and the benefit is clear: reduced tax burden for current and future taxpayers.

For example, a modest 1.1% growth in own source revenues from 2004/5 would require a debt payment of $656 million (plus forecast allowances) for 2005/6. That amount, of course, assumes that 2.5% own source revenues will be greater than 75% of the first quarter forecast surplus.

The debt repayment proposal uses the first quarter surplus figure for two primary reasons. First, if the government miscalculates the surplus, such as this year with much higher revenues, allocating 75% of the updated forecast surplus will accelerate debt repayment. Second, it limits the government's ability to ramp up spending mid-year while still hitting its budget target at the close of the year.

The federal government has made a tradition of low-balling the budget surplus. Mid-year surplus forecasts skyrocket, spending jumps and debt repayment becomes an afterthought. The CTF's proposal would restrict mid-year spending increases to just 25% of increased surplus forecast.

To sustain the province's fiscal recovery, the government must not only spend less than it receives, it must plan long term. The CTF debt repayment plan is manageable and realistic. Its time BC joined Alberta and Manitoba and began to relieve the debt burden of today's and tomorrow's taxpayers.

Sara MacIntyre
British Columbia Director
Canadian Taxpayers Federation