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2004
BRITISH COLUMBIA
FINANCIAL AND ECONOMIC
REVIEW
64TH EDITION
(JULY 2004)
http://www.gov.bc.ca/
[LOGO]
Ministry of Finance
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TABLE OF CONTENTS
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ii TABLE OF CONTENTS
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INTRODUCTION 1
General Description of the Province 2
Geography 2
Physiography 2
Climate and Vegetation 3
Population 3
CHAPTER ONE -- ECONOMIC REVIEW 5
2003 Overview 6
External Environment 6
United States Economy 6
Canadian Economy 7
International Economy 7
Financial Markets 8
British Columbia Economy 8
Capital Investment 9
Exports 10
Population and Labour Force Characteristics 11
Labour and Income Developments 12
Prices and Wages 13
Consumer Expenditure and Housing 14
Industrial Structure and Performance 14
High Tech 16
Tourism 17
Revitalizing the Economy 18
Deregulation 18
Transportation Infrastructure Plan 18
Forestry Policy Reform 18
Energy Plan 19
Oil and Gas 19
Competitive Tax Regime 19
Conclusion 19
CHARTS
1.1 Canada and British Columbia economic growth 6
1.2 External economic growth 7
1.3 Canadian dollar 8
1.4 British Columbia real GDP by component 9
1.5 Export shares by market, 2002 and 2003 10
1.6 Key commodity prices 11
1.7 British Columbia population by age and sex, 2003 12
1.8 Building permits by activity 14
1.9 Service industries in British Columbia 15
1.10 Trends in high technology employment in British Columbia 16
1.11 British Columbia Tourism industry 17
1.12 Visitor entries from Asia 17
Map 1.1 Net interprovincial and international migration in BC, 2003. 12
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TABLES
1.1 British Columbia Population and Labour Market Statistics 13
1.2 Price and Earnings Indices 13
APPENDIX 1 -- ECONOMIC REVIEW 21
TABLES
A1.1 Summary of Economic Activity for British Columbia 22
A1.2 British Columbia Real GDP at Market Prices, Expenditure Based 24
A1.3 British Columbia GDP at Basic Prices, by Industry 24
A1.4 British Columbia GDP, Income Based 25
A1.5 Employment by Industry in British Columbia 26
A1.6 Capital Investment by Industry 27
A1.7 British Columbia International Goods Exports by Major Market and
Selected Commodities, 2003 28
A1.8 British Columbia International Goods Exports by Market Area, 2003 29
A1.9 Historical Commodity Prices (in U.S. Dollars) 30
A1.10 British Columbia Forest Sector Economic Activity Indicators 31
A1.11 Historical Value of Mineral, Petroleum and Natural Gas Production 32
A1.12 Petroleum and Natural Gas Activity Indicators 32
A1.13 Supply and Consumption of Electrical Energy in British Columbia 33
A1.14 British Columbia High-Technology Sector Activity 34
CHAPTER TWO -- FINANCIAL REVIEW 35
2003/04 Overview 36
Revenue 39
Commercial Crown Corporation Net Income 42
Consolidated Revenue Fund Expense 44
Taxpayer-supported Crown Corporations and Agency Expenses 48
Full-Time Equivalents (FTEs) 49
Provincial Capital Spending 50
Provincial Debt 52
Taxpayer-supported Debt 53
Self-supported Debt 53
Credit Rating 55
Debt Indicators 55
TOPIC BOXES
Forest Fires in British Columbia, 2003 57
Government Restructuring Update 59
CHARTS
2.1 2003/04 Deficit - Major Changes from Budget 37
2.2 Revenue Changes from Budget 39
2.3 Capital Spending, 2003/04 51
2.4 Provincial Debt components 52
2.5 Provincial Debt increase 52
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Tables
2.1 Operating Statement 36
2.2 Operating Statement - Changes from Budget 2003 38
2.3 Revenue by Source 40
2.4 Expense by Ministry, Program and Agency 41
2.5 Natural Disaster Costs 47
2.6 Full-Time Equivalents (FTEs) Utilization 49
2.7 Capital Spending 50
2.8 Capital Spending - Changes from Budget 2003 51
2.9 Provincial Debt Summary 53
2.10 Debt - Changes from Budget 2003 54
2.11 Reconciliation of Summary Deficit to Debt Increase - 2003/04 54
2.12 Interprovincial Comparison of Credit Ratings, June 2004 55
2.13 Key Debt Indicators - 1999/2000 to 2003/04 56
APPENDIX 2 -- FINANCIAL REVIEW 61
Government's Financial Statements 62
Government Reporting Entity 62
Implementation of GAAP 62
Financial Statement Presentation 63
The Financial Cycle 64
Unfunded Pension Liabilities 66
Adjustments to the Accumulated Deficit 67
Impact of Including the SUCH Sector 68
Supplementary Schedules 70
CHARTS
A2.1 Changes in Accounting Presentation 64
A2.2 Financial Planning and Reporting Cycle 65
A2.3 Net Operating Impact of SUCH 68
A2.4 Taxpayer-Supported Debt Impact of SUCH 69
TABLES
A2.1 Pension Plan Balances 67
A2.2 Summary of Changes in Accumulated Deficit from the 2003/04 Public Accounts
Reported Balance 67
A2.3 Financial Impact of SUCH 69
A2.4 Operating Statement - 1999/2000 to 2003/04 71
A2.5 Operating Statement Update Since the Third Quarterly Report 72
A2.6 Statement of Financial Position - 1999/2000 to 2003/04 73
A2.6a Changes in Financial Position - 1999/2000 to 2003/04 73
A2.7 Revenue by Source - 1999/2000 to 2003/04 74
A2.8 Five-Year Revenue by Source - Supplementary Information 75
A2.9 Expense by Function - 1999/2000 to 2003/04 76
A2.10 Five-Year Expense by Function - Supplementary Information 77
A2.11a Government Restructuring Expense 78
A2.11b Consolidated Revenue Fund Restructuring Expense - 2003/04 79
A2.12 Taxpayer-supported Entity Operating Statements - 1999/2000 to 2003/04 80
A2.13 British Columbia Hydro and Power Authority Five-Year Income Statement 81
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A2.14 Liquor Distribution Branch Five-Year Income Statement 81
A2.15 British Columbia Lottery Corporation Five-Year Income Statement 81
A2.16 British Columbia Railway Company Five-Year Income Statement 82
A2.17 Insurance Corporation of British Columbia Five-Year Income Statement 82
A2.18 Five-Year Provincial Debt Summary 83
A2.19 Five-Year Provincial Debt Summary - Supplementary Information 84
A2.20 Capital Spending and Debt Update Since the Third Quarterly Report 85
A2.21 Historical Summary Accounts Surplus (Deficit) 86
A2.22 Historical Revenue by Source - Consolidated Revenue Fund 87
A2.23 Historical Expense by Function - Consolidated Revenue Fund 88
A2.24 Historical Provincial Debt Summary 89
A2.25 Provincial Taxes (as of July 2004) 90
A2.26 Interprovincial Comparisons of Tax Rates - 2004 93
A2.27 Summary of Major Tax Changes Announced in 2004 94
APPENDIX 3 -- CONSTITUTIONAL FRAMEWORK 95
Constitutional Framework 96
Provincial Government 96
Legislature 96
Executive 97
Judiciary 97
Provincial Government Jurisdiction 98
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INTRODUCTION
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2 INTRODUCTION
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GENERAL DESCRIPTION OF THE PROVINCE
British Columbia is located on Canada's Pacific coast, and has a land and
freshwater area of 95 million hectares. It is Canada's third largest
province and comprises 9.5 per cent of the country's total land area.
GEOGRAPHY
The province is nearly four times the size of Great Britain, 2.5 times
larger than Japan and larger than any American state except Alaska. BC's
7,022-kilometre coastline supports a large shipping industry through
ice-free, deep-water ports. The province has about 8.5 million hectares of
grazing land, 1.8 million hectares of lakes and rivers, and 950,000
hectares of agricultural land that is capable of supporting a wide range of
crops.
PHYSIOGRAPHY
BC is characterized by mountainous topography, but also has substantial
areas of lowland and plateau country. The province has four basic regions,
a northwesterly trending mountain system on the coast, a similar mountain
system on the east, and an extensive area of plateau country between the
two. The northeastern corner of the province is lowland, a segment of the
continent's Great Plains.
The western system of mountains averages about 300 kilometres in width and
extends along the entire BC coast and the Alaska panhandle. The Coast
Mountains contain some of the tallest peaks in the province. The western
system includes the Insular Mountains that form the basis of Vancouver
Island and the Queen Charlotte Islands. These islands help to shelter the
waters off the mainland coast of BC, which form an important transportation
route for people and products.
The interior of the province is a plateau of rolling forest and grassland,
600 to 1,200 metres in average elevation. North of Prince George the
interior becomes mountainous, but plateau terrain returns just south of the
Yukon boundary in the area drained by the Liard River. The southern
interior's water system is dominated by the Fraser River, which has a
drainage area covering about one-quarter of the province. The Rocky
Mountains, in the eastern mountain system, rise abruptly on the southern
BC-Alberta boundary and are cut by passes that provide dramatic overland
transportation routes into the province. The Rocky Mountain Trench lies
immediately to the west of the Rockies. This extensive valley, the longest
in North America, is a geological fault zone separating different earth
plates. It is the source of many of BC's major rivers, including the Peace,
Columbia and Fraser.
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INTRODUCTION 3
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CLIMATE AND VEGETATION
Coastal BC has abundant rainfall and mild temperatures associated with a
maritime climate. The Pacific coast has an average annual rainfall of
between 155 and 440 centimetres, while the more sheltered coasts of eastern
Vancouver Island and the mainland along the Strait of Georgia average
between 65 and 150 centimetres. Canada's longest frost-free periods of over
180 days per year are enjoyed along the edges of the coastal zone and far
inland along the Fraser River valley. Temperatures fall quickly up the
steep slopes of the Coast Mountains. The predominant trees in this coastal
region are the western hemlock, western red cedar and balsam (amabilis fir)
in the wetter parts, and Douglas fir and grand fir in the drier areas.
BC's interior region has a mainly continental type of climate, although not
as severe as that of the Canadian prairies. Considerable variation in
climate occurs, especially in winter, as mild Pacific storms bring relief
from cold spells. The southern interior has the driest and warmest climate
of the province. In the valleys, annual precipitation ranges from less than
30 centimetres to 50 centimetres, while daily temperatures can average over
20 degrees Celsius in July and just under freezing in January. The climate
becomes more extreme further north and precipitation increases. The
frost-free period in the north is short and variable. Lodgepole pine is the
dominant tree of commercial value in the interior.
The northeast region of the province is an extension of the western prairie
region of Alberta. It has a continental climate that is more extreme than
that of the northern interior region. However, it does have long hot
summers and a frost-free period long enough to grow grain, forage and other
crops.
POPULATION
British Columbia is the third largest Canadian province in terms of
population, which was estimated at 4.1 million persons or about 13 per cent
of Canadians on July 1, 2003. British Columbia's population grew at an
average annual compound rate of 1.0 per cent between 1996 and 2003, an
average 0.1 per cent faster than the growth of the Canadian population as a
whole.
Vancouver, a principal Canadian shipping, manufacturing and services
centre, has the largest urban population in British Columbia and was the
third largest metropolitan area in Canada with a population of 2,126,806
persons in 2003. Victoria, the capital of British Columbia, is located on
Vancouver Island and its regional district had a population of 340,132
persons in 2003.
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CHAPTER ONE
ECONOMIC REVIEW
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1 Reflects information available as of July 6, 2004.
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6 CHAPTER ONE -- ECONOMIC REVIEW
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2003 OVERVIEW
The British Columbia economy grew 2.2 per cent in 2003, after rising 2.4
per cent in 2002. British Columbia and other provinces were hit by a number
of external shocks in 2003. These included the rapid rise in the Canadian
dollar, the SARS outbreak, forest fires, floods and Bovine Spongiform
Encephalopathy (BSE).
CHART 1.1 CANADA AND BRITISH COLUMBIA ECONOMIC GROWTH
[CHART]
Consumer spending on durable goods was weak in 2003, but this was offset by
high consumer demand for services. The housing sector also recorded another
dramatic increase in 2003 propelled by low mortgage rates. The number of
people employed in the province rose faster than the size of the labour
force and as a result the unemployment rate fell to 8.1 per cent in 2003.
EXTERNAL ENVIRONMENT
During 2003, the North American economy benefited from the recovery of the
U.S. economy. Economic growth in the U.S. gained strength throughout the
year, posting 8.2 per cent annualized growth in the third quarter, 4.1 per
cent in the fourth quarter and 3.9 per cent in the first quarter of 2004.
UNITED STATES ECONOMY
By mid-2003, U.S. growth was more broadly-based as business sector
investment picked up in response to improving profits. This gave rise to
increased confidence that the economic recovery would be sustained.
However, the U.S. labour market was slow to show signs of improvement.
Payroll employment in the U.S. fell 0.3 per cent in 2003, but has improved
so far in 2004.
Overall, the U.S. economy grew 3.1 per cent in 2003, up from 2.2 per cent
in 2002. Non-residential business investment rebounded in the latter half
of 2003 to post growth of 3.0 per cent for the year. U.S. retail sales were
up 5.4 per cent in 2003 as low interest rates and the strong housing and
auto sales
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markets continued to boost durable goods sales. Residential construction
was strong in 2003 with housing starts reaching almost 1.9 million units,
an increase of 8.1 per cent from 2002.
CANADIAN ECONOMY
The Canadian economy grew an estimated 2.0 per cent in 2003 as the rapid
appreciation of the Canadian dollar, SARS and the Ontario blackout were a
drag on Canada's economic growth. However, unlike the U.S., employment in
Canada was robust in 2003, rising 2.2 per cent. Nominal exports were hit
hard by the appreciation of the dollar, and fell 1.4 per cent as a result.
Retail sales grew 3.8 per cent in 2003, compared to a growth rate of 6.4
per cent in 2002. A decline in purchases of new motor vehicles led the slow
down.
INTERNATIONAL ECONOMY
Overseas, economic conditions improved in Japan. Japanese real GDP rose 2.5
per cent in 2003, following a decline of 0.3 per cent in 2002, and marginal
growth of 0.4 per cent in 2001. The recovery of the export and business
sectors, particularly in the last quarter of 2003, led the recovery. The
impressive growth rate continued into the first quarter of 2004, where the
Japanese economy expanded at an annualized 6.1 per cent.
Elsewhere, the European economy continued to face challenges and the rate
of economic growth fell to 0.5 per cent in 2003 after 0.9 per cent in 2002.
The International Monetary Fund estimates that world growth in real gross
domestic product rose from 3.0 per cent in 2002 to 3.9 per cent in 2003.
Rapidly expanding Asian economies, including China, are the leading cause
for the high growth rate.
CHART 1.2 EXTERNAL ECONOMIC GROWTH
[CHART]
Source: International Monetary Fund; Global Insight
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FINANCIAL MARKETS
Canadian interest rates rose through the first half of 2003 then fell
through the last half, and into the first quarter of 2004. In mid-2003, the
U.S. federal funds target rate was reduced to 1.0 per cent. On June 30,
2004, the Fed increased the rate by 25 basis points due to output expansion
and improved labour conditions.
The relative lack of movement in U.S. interest rates reflected the low
inflation environment, excess capacity and lagging labour markets in the
U.S. economy. At the same time, Canada's economy was reacting to a rapid
appreciation in the Canadian dollar, and several external shocks.
The value of the Canadian dollar rose against the U.S. dollar throughout
2003. For the year, the currency averaged 71.4 cents U.S., up 7.7 cents
U.S. from 2002. In January of 2004, the Canadian dollar noon-rate peaked at
78.8 cents U.S., a 10-year high.
CHART 1.3 CANADIAN DOLLAR
[CHART]
BRITISH COLUMBIA ECONOMY (2)
The British Columbia economy grew 2.2 per cent in 2003, following a 2.4 per
cent increase in 2002. The growth in 2003 was attributable to strong demand
for consumer services coupled with a rebound in business and residential
investment.
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(2) GDP estimates are based on Statistics Canada's preliminary Provincial
Accounts for 2003, released in April 2004. Further information on British
Columbia's economic performance will be released in November 2004, when
Statistics Canada releases revised GDP data for 2003 and previous years.
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CHART 1.4 BRITISH COLUMBIA REAL GDP BY COMPONENT
[CHART]
Domestic demand remained relatively robust with a sizable rise in the
demand for services offsetting weak demand for durable goods, especially
auto sales. Residential investment remained strong, with housing starts
increasing 21.0 per cent over 2002. Total employment rose 2.5 per cent in
2003 and the annual unemployment rate fell to 8.1 per cent.
Business investment rebounded in 2003, due to another sizable increase in
residential construction and gains in machinery and equipment investment
and non-residential structures. The total value of imports rose more than
exports, which was a drag on economic growth.
CAPITAL INVESTMENT
Total public and private capital investment(3) in the province rose 6.1 per
cent to $24.4 billion in 2003. The rise was due to increases in both public
and private investment. Public sector investment was up 4.7 per cent, and
private sector investment, which accounts for just over 80 per cent of
total investment, increased 6.4 per cent. After a sharp decline in major
capital spending in the mining, quarrying and oil well industry in 2002,
investment in the industry rebounded with a 26.8 per cent increase in 2003.
Investment in arts, entertainment and recreation doubled in 2003. Despite
the overall rise, declines were apparent in some industries. The
transportation and warehousing, information and cultural, and finance and
insurance industries saw the most substantial declines in investment over
the year.
Housing investment soared, and continued to be the largest dollar value
increase by any industry, growing 17.6 per cent in 2003 to $7.8 billion.
This gain reflected low mortgage interest rates and rising housing starts
through the year.
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(3) Investment figures are nominal and are generated by Statistics Canada based
on a survey of British Columbia businesses, institutions and government.
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Investment figures for 2003 include spending on major capital projects
across the province including:
o Vancouver General Hospital Redevelopment;
o Prince George Regional Hospital;
o University of British Columbia Life Sciences Centre;
o Nisga's Highway;
o Vancouver Convention Centre Expansion Project; and
o Improvements to several dams in the province.
EXPORTS
The value of foreign merchandise exports fell 1.9 per cent in 2003. Exports
to the U.S., the province's largest trading partner, fell 4.5 per cent, due
to a broadly based decline. The value of exports to Japan dropped 5.9 per
cent, led by declines in forestry and energy products. Exports to the
Pacific Rim, excluding Japan, jumped 14.0 per cent, and exports to Western
Europe rose 1.9 per cent. Appendix Table A1.7 provides detail on exports by
major market and commodity.
As a result, the U.S. was the destination of a slightly smaller share of
British Columbia exports in 2003, accounting for 66.0 per cent. Japan's
share fell to 12.8 per cent. The Pacific Rim (excluding Japan) received
11.3 per cent of BC's exports, up from 9.8 per cent in 2002 (see Chart
1.5).
CHART 1.5 EXPORT SHARES BY MARKET, 2002 AND 2003
[CHART]
The strong Canadian dollar was the main reason for the decline in the value
of exports in 2003, particularly to the U.S. The rapid appreciation of the
Canadian dollar relative to the U.S. dollar made our goods and services
considerably more expensive for U.S. consumers.
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CHAPTER ONE -- ECONOMIC REVIEW 11
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The softwood lumber dispute with the United States has affected exports in
a negative way. The U.S. duties were about 27 per cent on Canadian softwood
lumber that crossed the border during 2003. The affects of the tariff
became clear as the value of BC lumber products exported to the U.S. fell
by 20.5 per cent.
o Lumber prices averaged $270 U.S. per thousand board feet in 2003, up
from $235 U.S. in 2002.
o Pulp prices averaged $523 U.S. per tonne in 2003, up significantly
from $463 U.S. in 2002.
o Newsprint prices followed suit, averaging $501 U.S. per tonne, up from
$468 U.S. in the previous year.
CHART 1.6 KEY COMMODITY PRICES
[CHART]
Canadian natural gas prices rose quickly in the first few months of 2003,
peaking at US$7.3/MmBTU in March before falling back to the US$4.0 to
US$5.0 range. Nevertheless, natural gas prices were up 73.9 per cent in
2003.
POPULATION AND LABOUR FORCE CHARACTERISTICS
Historically, British Columbia's population has grown faster than Canada's
due to large net inflows of people from the rest of the country and
immigrants from other countries. This changed after 1997. The province's
population growth slowed due to a net outflow of people to other parts of
Canada. Hence, overall net migration remained positive due to the strength
of immigration from other countries. This trend was brought to an end in
2003, as BC's net interprovincial migration was positive for the first time
since 1997.
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MAP 1.1 NET INTERPROVINCIAL AND INTERNATIONAL MIGRATION IN BC, 2003
[CHART]
Growth in the provincial labour force has been robust over the past several
years, with the exception of 1998 and 2001 when general economic indicators
were weaker. The labour force expanded by 2.1 per cent in 2003, while the
overall level of employment rose by 2.5 per cent. The average annual
unemployment rate fell to 8.1 per cent in 2003 as a consequence.
The baby boom population in Canada is typically thought to be those born
between 1947 and 1964. This generation is quite apparent in the BC
population (see Chart 1.7), now between 40 and 57 years old. A significant
portion of this generation will be retiring within the next couple of
decades, causing a demographic shift in the BC labour force.
CHART 1.7 BRITISH COLUMBIA POPULATION BY AGE AND SEX, 2003
[CHART]
LABOUR AND INCOME DEVELOPMENTS
Annual average employment rose by 2.5 per cent, or 49,900 jobs, in 2003.
Employment ended the year at 2,071,400 jobs, an increase of 4.2 per cent,
or 83,400 jobs, compared to December 2002. Employment gains were observed
in all of the major sectors. Average annual employment in the primary
industries
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rose 17.0 per cent in 2003, adding 11,700 jobs to the total. The
manufacturing industry expanded by 9,200 jobs, or 4.7 per cent.
Employment in the service industries grew 1.7 per cent in 2003. The number
of people employed in education services rose by 4.4 per cent, or 6,200
positions over the year. The number of jobs in business management
increased by 7,300, or 9.8 per cent. These increases were partially offset
by job loss in the health and welfare services industry, and also the
accommodation and food services industry (see Table A1.5 for more details).
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TABLE 1.1 BRITISH COLUMBIA POPULATION AND LABOUR MARKET STATISTICS
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Units 1999 2000 2001 2002 2003
Population (as at July 1) (thousands) 4,011 4,039 4,078 4,115 4,147
(% change) 0.7 0.7 1.0 0.9 0.8
Net Migration
International 28,644 29,266 35,509 27,576 27,251
Interprovincial -12,413 -14,783 -7,278 -7,117 2,094
Labour Force (thousands) 2,079 2,101 2,104 2,158 2,202
(% change) 1.4 1.0 0.2 2.6 2.1
Employment (thousands) 1,906 1,949 1,942 1,973 2,023
(% change) 1.9 2.2 -0.3 1.6 2.5
UNEMPLOYMENT RATE (%) 8.3 7.2 7.7 8.5 8.1
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</Table>
Source: Statistics Canada
PRICES AND WAGES
The British Columbia Consumer Price Index (CPI) increased by 2.1 per cent
in 2003 after rising by 2.3 per cent in 2002. Tuition prices increased the
most of the index's categories during 2003 by 23.1 per cent compared to
2002. Gasoline prices were up 9.4 per cent, and increased tobacco taxes led
to a 14.9 per cent price hike in tobacco products in 2003.
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TABLE 1.2 PRICE AND EARNINGS INDICES
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Units 1999 2000 2001 2002 2003
Consumer Price Index (1992=100) 111.2 113.3 115.2 117.9 120.4
(British Columbia) (% change) 1.1 1.9 1.7 2.3 2.1
Average weekly earnings ($) 625.2 636.9 645.7 667.4 683.4
(% change) 1.1 1.9 1.4 3.4 2.4
Wages and salaries ($ millions) 56,263 60,270 61,496 63,193 65,209
(% change) 3.9 7.1 2.0 2.8 3.2
Personal income ($ millions) 101,465 107,452 109,903 111,852 114,547
(% change) 3.4 5.9 2.3 1.8 2.4
Corporate profits (pre-tax) ($ millions) 9,309 11,381 11,214 10,563 11,878
(% change) 26.9 22.3 -1.5 -5.8 12.4
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</Table>
Source: Statistics Canada
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Wages and salaries increased 3.2 per cent in 2003, reflecting employment
growth, and increases in average weekly earnings. This also led to an
increase in total personal income of 2.4 per cent. Corporate profits
rebounded after two years of decline, rising 12.4 per cent compared to
2002.
CONSUMER EXPENDITURE AND HOUSING
Real consumer spending picked up to a 3.2 per cent growth rate through the
year due to strong demand on the services side of the sector. Growth in the
goods side was weak however, as the total value of retail sales rose just
2.6 per cent in 2003, much slower than the pace observed in recent years.
The decline was mainly due to the slowdown in purchases of large consumer
durables, particularly new motor vehicles.
Housing starts soared in the province through the year as mortgage interest
rates remained at historical lows. For 2003, housing starts totaled 26,174
units, a 21.0 per cent increase from 2003.
As a result of improving housing demand and flat prices, the value of
residential building permits rose 16.1 per cent to $4.5 billion. The
housing sector boom resulted from a combination of several factors. Another
year of strong employment growth, very low mortgage rates, the scarcity of
dwellings available for rent or sale, and rising disposable income together
created exceptional conditions that attracted consumers to the new home
market. The value of non-residential building permits also rose 6.1 per
cent to $1.9 billion.
CHART 1.8 BUILDING PERMITS BY ACTIVITY
[CHART]
INDUSTRIAL STRUCTURE AND PERFORMANCE
The province's rich endowment of natural resources and their development
historically formed the backbone of British Columbia's economic structure.
In the past, the economy was largely based on primary and secondary forest
production. Other natural resource sectors, such as agriculture, mining
(including oil and gas) and fishing (including aquaculture) also
contributed significantly.
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With abundant natural resource-based products and a population too small to
support local production of a full range of manufactured goods and
associated services, the province specialized in certain sectors, relying
heavily on international and interprovincial trade for the exchange of
goods and services. This meant that economic activity in all sectors was
sensitive to developments in world markets and fluctuations in
international commodity prices.
In recent years, a more diversified economy has emerged, supported by many
non-resource activities such as film, tourism, high-technology industries
including software and biotechnology, and other value-added industries. The
British Columbia economy is steadily maturing into a more broadly based
structure that is becoming less vulnerable to changes in international
markets for natural resources.
Cyclical shifts in the goods sector cause it to grow faster or slower than
the service sector in different years, but the basic trend over the past
decade has been a decline in the importance of the goods sector to overall
GDP and employment, and an increase in the importance of the service sector
(see Chart 1.9).
In total, the goods-producing sector, including the construction and
utilities industries, produced 24.5 per cent of the province's total output
in 2003. This compares to 28.3 per cent a decade earlier.
Service-producing industries generated 75.5 per cent of the total
provincial gross domestic product in 2003. Industries within the service
sector include: transportation, communications and storage; wholesale and
retail trade; finance, insurance and real estate; community, business and
personal services; and public administration and defense.
CHART 1.9 SERVICE INDUSTRIES IN BRITISH COLUMBIA
[CHART]
Source: Statistics Canada
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
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16 CHAPTER ONE -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
HIGH TECH
The high technology sector is a leading performer in British Columbia's
economy, outperforming other sectors in revenue, employment, and wage and
salary growth in most years. The global meltdown in high tech in 2001 also
affected British Columbia's high tech goods sector. In 2003 however, the
high technology industry rebounded, again growing faster than the economy
as a whole.
Total real output from the high tech sector jumped by 8.9 per cent in 2003.
Revenues expanded by 6.9 per cent, and wages and salaries were up 7.3 per
cent. The total number of people working in the province's high tech sector
rose 4.3 per cent to total 47,000 jobs in 2003 (see Table A1.14).
CHART 1.10 TRENDS IN HIGH TECHNOLOGY EMPLOYMENT IN BC
[CHART]
Source: BC Stats
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
CHAPTER ONE -- ECONOMIC REVIEW 17
- --------------------------------------------------------------------------------
TOURISM
The tourism industry was hit hard in 2003 from the rapid appreciation of
the Canadian dollar and other shocks (such as forest fires and SARS) that
kept travelers away. The number of international visitors entering BC
declined by 7.9 per cent in 2003, and as a result, total room revenues fell
by 1.3 per cent.
CHART 1.11 BC TOURISM INDUSTRY
[CHART]
The number of visitors from Asia suffered a significant decline following
the SARS outbreak. However, by the end of the year entries from Asia
rebounded to almost the level they were at prior to the scare.
CHART 1.12 VISITOR ENTRIES FROM ASIA
[CHART]
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
18 CHAPTER ONE -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
REVITALIZING THE ECONOMY
British Columbia is committed to building a strong and vibrant economy
characterized by new investment, new job opportunities and a higher
standard of living for British Columbians. Some aspects of the strategy
that have been implemented are discussed in this section.
DEREGULATION
As part of the deregulation initiative more than 113,440 net regulatory
requirements have been eliminated since June 2001, providing greater
flexibility and making the province an attractive location to do business.
The province is already reaping the benefits of deregulation. For example,
increased sales of petroleum, oil and gas rights reflect, in part, recent
streamlining and regulatory reform efforts. Land use decisions in the
Heartlands have also been streamlined, saving time and money, while
protecting provincial interests. The move to a regulatory environment that
is SMART (Sound, Modern, Accountable, Results-Based and Transparent) - a
comprehensive and innovative approach to regulatory reform - is attracting
international attention and boosting BC's competitiveness.
TRANSPORTATION INFRASTRUCTURE PLAN
In February 2003 the government announced a multi-year plan to build an
integrated and competitive transportation system throughout BC.
An effective highway system is reliable and allows goods and services to
move through the province efficiently. Rehabilitation, such as repaving,
extends the life of our existing provincial highways and bridges and keeps
maintenance costs to reasonable levels.
The government is presently engaged in several capital projects including
the Sea to Sky highway improvement project, the Okanagan lake bridge
project, the Border infrastructure program and the Vancouver Gateway
program.
FORESTRY POLICY REFORM
The forest industry remains a cornerstone of the British Columbia economy.
In 2003, legislation was passed that fundamentally changed the way the
forest sector is managed. These changes include the reallocation of timber
rights and market-based policy reforms to forest tenure and revenue
administration. The objective is to create a more competitive, dynamic
forest industry that will contribute sustainable well-paying jobs to BC's
economy.
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CHAPTER ONE -- ECONOMIC REVIEW 19
- --------------------------------------------------------------------------------
ENERGY PLAN
In 2003 the government unveiled a new energy plan designed to capitalize on
BC's competitive advantage in energy. Since the introduction of the plan:
o legislation has been passed to confirm public ownership of BC Hydro's
core generation, transmission and distribution assets, and to
implement the Heritage Contract to preserve the benefits of low-cost
generation for BC ratepayers;
o the BC Transmission Corporation, the publicly owned, independent
transmission operator, has been created to provide greater access to
transmission lines for independent power producers;
o BC Hydro's goal is that 50 per cent of BC's future power needs will be
met from clean energy sources. Hydro has already made the largest
offer to purchase green energy in BC's history and this could result
in up to $800 million in private sector energy projects and create up
to 1,000 construction jobs throughout the province.
OIL AND GAS
BC's potential oil and gas reserves are immense. In May 2003, the
government announced the Oil and Gas Development Strategy for the
Heartlands to promote all-season oil and gas activity, attract industry
investment, and generate revenue. The Strategy is targeted at increasing
natural gas production by 17 per cent, and the number of wells drilled by
31 per cent by 2006/07.
COMPETITIVE TAX REGIME
In 2001, the government initiated various changes to ensure BC's tax regime
was competitive. After cutting personal income taxes by 25 per cent, the
overall level of taxes for British Columbia families are the second lowest
in the country. The province also has the lowest income tax rates in the
country for the bottom two tax brackets.
A substantial investment has also been made in restoring BC's business tax
climate. The province's ability to attract and retain investment has
dramatically improved due to a lower corporate income tax rate, the
elimination of the general corporate capital tax, a sales tax exemption for
production machinery and equipment, and sector specific tax reductions.
CONCLUSION
So far this year the BC economic outlook is positive. Continued strength in
the housing market as well as rebounds in retail sales and manufacturing,
are leading to more optimistic forecasts for economic growth. An average of
seven private sector forecasts as of July 2004 call for real GDP growth of
2.8 per cent in 2004 followed by 3.3 per cent in 2005.
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<Page>
APPENDIX 1
<Page>
22 APPENDIX 1 -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
TABLE A1.1 SUMMARY OF ECONOMIC ACTIVITY FOR BRITISH COLUMBIA
- --------------------------------------------------------------------------------
<Table>
<Caption>
UNITS 1990 1991 1992 1993
- ----------------------------------------------------------------------------------------------------------------------
Annual aggregate indicators
Population(1) (thousands) 3,291 3,373 3,468 3,567
Nominal gross domestic product (at market prices)... ($ millions) 79,350 81,849 87,242 94,077
Real gross domestic product (chained 1997 $)........ 1997 millions) 95,722 95,897 98,373 102,770
Personal income..................................... ($ millions) 72,038 75,336 78,610 81,914
Capital investment.................................. ($ millions) - 17,370 17,979 18,875
Business incorporations............................. (number) 19,550 18,528 20,406 22,955
Labour statistics
Labour force ....................................... (thousands) 1,700 1,749 1,804 1,856
Employment ......................................... (thousands) 1,555 1,573 1,620 1,676
Unemployment rate................................... (per cent) 8.6 10.1 10.2 9.7
Prices and earnings
Consumer price index (British Columbia) ............ (1992=100) 92.4 97.4 100.0 103.5
Consumer price index (Vancouver).................... (1992=100) 92.3 97.1 100.0 103.6
Average weekly wage rate(2) ........................ ($) - - - -
Wages and salaries(2) .............................. ($ millions) - - - -
Personal income per capita ......................... (dollars) 21,889 22,335 22,667 22,964
Personal disposable income per capita... ........... (dollars) 17,009 17,313 17,458 17,806
Financial indicators
Prime rate ......................................... (per cent) 14.06 9.94 7.48 5.94
Canada/U.S. exchange rate... ....................... (U.S. cents) 85.71 87.28 82.73 77.51
Conventional (5 year) mortgage rate ................ (per cent) 13.35 11.13 9.51 8.78
Other indicators
Manufacturing shipments ............................ ($ millions) - - 24,398 26,583
Retail sales(3) .................................... ($ millions) - 24,772 25,938 28,187
Housing starts... .................................. (number) 36,720 31,875 40,621 42,807
Non-residential building permits ................... ($ millions) 1,833 1,803 2,082 1,944
Tourism gross domestic product(4) .................. ($ millions) - - - -
High-tech gross domestic product(5) ................ ($ millions) - - 1,475 1,676
B.C. product exports ............................... ($ millions) 16,650 15,301 16,363 19,064
Commodity data
Lumber production................................... (thousand m3) 33,514 31,406 33,396 33,935
Log production (timber harvest) .................... (thousand m3) 78,318 73,677 74,006 79,239
Market pulp shipments .............................. (000 tonnes) 3,547 4,014 3,825 4,040
Newsprint, other paper and paperboard production.... (000 tonnes) 2,992 2,667 2,708 3,110
Oil and natural gas and gas by-products production . ($ millions) 902 861 894 1,162
Coal production .................................... (000 tonnes) 24,557 24,965 17,173 20,633
Solid mineral production ........................... ($ millions) 3,092 2,950 2,577 2,415
Electric power generated ........................... (GW. h) 60,662 62,981 64,058 58,774
Farm cash receipts... .............................. ($ millions) 1,299 1,342 1,404 1,446
Landed value of wild and farmed fish products... ... ($ millions) 559 492 533 605
- ----------------------------------------------------------------------------------------------------------------------
</Table>
(1) As at July 1. Data take into account adjustments made for net census
undercount in 1991 and 1996, and non-permanent residents.
(2) Data prior to 1997 are not available.
(3) Retail sales data have been revised from 1991 to 2003 and are now
classified under the North American Industry Classification System (NAICS
2002).
(4) Data prior to 1998 not available.
(5) Data prior to 1992 are not available.
Sources: Statistics Canada and BC STATS, Ministry of Finance, based on federal,
provincial and industry data.
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 1 -- ECONOMIC REVIEW 23
- --------------------------------------------------------------------------------
<Table>
<Caption>
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2002-2003
- -----------------------------------------------------------------------------------------------------------------------
(per cent)
3,676 3,777 3,874 3,949 3,983 4,011 4,039 4,078 4,115 4,147 0.8
100,512 105,670 108,865 114,383 115,641 120,921 131,086 132,050 135,552 142,418 5.1
105,669 108,194 110,857 114,383 115,883 119,604 125,314 125,191 128,151 130,914 2.2
85,703 90,056 92,661 95,925 98,135 101,465 107,452 109,903 111,852 114,547 2.4
21,353 20,591 19,408 22,552 20,260 20,449 20,847 22,625 23,027 24,423 6.1
25,774 23,846 22,848 22,958 20,759 21,009 21,515 19,749 21,262 23,243 9.3
1,928 1,958 1,995 2,040 2,051 2,079 2,100 2,104 2,158 2,202 2.1
1,754 1,792 1,821 1,869 1,870 1,906 1,949 1,942 1,973 2,023 2.5
9.0 8.4 8.7 8.4 8.8 8.3 7.2 7.7 8.5 8.1 -4.7
105.5 107.9 108.9 109.7 110.0 111.2 113.3 115.2 117.9 120.4 2.1
105.7 108.4 109.2 109.8 110.4 111.4 113.9 116.0 118.6 121.0 2.0
- - - 610.7 618.3 625.2 636.9 645.7 667.4 683.4 2.4
- - - 53,035 54,174 56,263 60,270 61,496 63,193 65,209 3.2
23,314 23,843 23,919 24,291 24,638 25,297 26,604 26,950 27,182 27,622 1.6
17,969 18,302 18,223 18,482 18,676 19,300 20,188 20,683 21,201 21,442 1.1
6.88 8.65 6.06 4.96 6.60 6.44 7.27 5.81 4.21 4.69 11.4
73.22 72.86 73.34 72.22 67.41 67.31 67.32 64.56 63.68 71.38 12.1
9.53 9.16 7.93 7.07 6.93 7.56 8.35 7.40 7.02 6.39 -9.0
30,333 34,207 32,932 33,496 31,757 36,679 40,699 38,281 38,499 37,224 -3.3
31,484 33,941 34,493 36,302 35,460 36,060 38,105 40,371 42,906 44,034 2.6
39,408 27,057 27,641 29,351 19,931 16,309 14,418 17,234 21,625 26,174 21.0
1,772 1,966 1,957 1,960 2,022 2,104 2,089 2,125 1,771 1,880 6.1
- - - - 4,864 5,067 5,235 5,398 5,485 n.a. n.a.
1,806 2,082 2,200 2,316 2,597 2,725 3,197 3,282 3,343 3,577 7.0
22,894 26,893 25,765 26,761 26,045 29,113 33,752 31,814 29,025 28,474 -1.9
33,671 32,611 32,671 31,562 30,238 32,397 34,346 32,606 36,082 36,086 0.0
75,649 76,472 75,213 68,628 64,967 75,997 76,984 72,009 73,386 61,772 -15.8
4,763 4,572 4,390 4,532 4,462 4,995 5,152 4,710 4,477 4,762 6.4
2,983 2,833 2,801 2,649 2,567 3,016 3,126 2,879 2,900 2,919 0.7
1,275 1,048 1,314 1,599 1,569 2,177 4,786 5,663 4,251 6,217 46.3
22,583 24,350 25,422 27,876 24,868 24,845 25,682 27,006 24,397 23,061 -5.5
2,632 3,438 3,004 3,047 2,893 2,445 2,891 2,867 2,864 n.a. n.a.
61,015 58,006 71,765 66,961 67,710 68,045 68,241 57,332 64,945 63,051 -2.9
1,538 1,586 1,706 1,739 1,814 1,906 2,048 2,223 2,214 2,312 4.4
728 602 590 604 547 613 667 653 668 n.a. n.a.
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
24 APPENDIX 1 -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
TABLE A1.2 BRITISH COLUMBIA REAL GDP AT MARKET PRICES, EXPENDITURE BASED
- --------------------------------------------------------------------------------
<Table>
<Caption>
Machinery and
Consumer Government Residential Non-Residential Equipment Business
Expenditure Expenditure Investment Investment Investment Investment Exports Imports Real GDP
- ------------------------------------------------------------------------------------------------------------------------------------
(MILLIONS OF 1997 $, CHAINED)
- ------------------------------------------------------------------------------------------------------------------------------------
1997...... 72,380 22,266 8,716 5,791 6,799 21,306 49,691 55,143 114,383
1998...... 73,585 22,875 7,543 4,704 7,340 19,598 51,092 54,559 115,883
1999...... 75,648 22,761 6,962 5,000 7,672 19,676 55,575 57,889 119,604
2000...... 78,119 23,291 7,047 5,074 8,263 20,423 60,205 62,226 125,314
2001...... 80,557 24,593 7,707 5,806 8,368 21,951 56,707 61,470 125,191
2002...... 83,036 25,102 8,972 4,514 7,926 21,373 56,627 61,886 128,151
2003...... 85,691 25,534 10,281 4,709 8,172 23,131 56,904 64,571 130,914
- ------------------------------------------------------------------------------------------------------------------------------------
(ANNUAL PERCENTAGE CHANGE)
- ------------------------------------------------------------------------------------------------------------------------------------
1998...... 1.7 2.7 -13.5 -18.8 8.0 -8.0 2.8 -1.1 1.3
1999...... 2.8 -0.5 -7.7 6.3 4.5 0.4 8.8 6.1 3.2
2000...... 3.3 2.3 1.2 1.5 7.7 3.8 8.3 7.5 4.8
2001...... 3.1 5.6 9.4 14.4 1.3 7.5 -5.8 -1.2 -0.1
2002...... 3.1 2.1 16.4 -22.3 -5.3 -2.6 -0.1 0.7 2.4
2003...... 3.2 1.7 14.6 4.3 3.1 8.2 0.5 4.3 2.2
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
Source: Statistics Canada
TABLE A1.3 BRITISH COLUMBIA GDP AT BASIC PRICES, BY INDUSTRY
- --------------------------------------------------------------------------------
<Table>
<Caption>
Crop and Fishing, Forestry Mining,
Animal Hunting and and Oil and Gas
Production Trapping Logging Extraction Manufacturing Construction Utilities
- --------------------------------------------------------------------------------------------------------------------
(millions of 1997 $)
- --------------------------------------------------------------------------------------------------------------------
1997... 907 201 3,185 2,646 11,479 6,434 2,468
1998... 855 131 3,202 2,857 11,238 5,905 2,526
1999... 928 100 3,027 2,830 12,865 5,696 2,557
2000... 1,054 120 2,819 2,699 15,193 5,541 2,488
2001... 1,078 123 2,701 2,916 13,774 5,597 2,314
2002... 1,092 137 2,638 2,735 13,899 5,349 2,372
2003... 1,101 137 2,577 2,766 14,332 5,790 2,375
- --------------------------------------------------------------------------------------------------------------------------
(annual percentage change)
- --------------------------------------------------------------------------------------------------------------------------
1998... -5.7 -35.0 0.5 8.0 -2.1 -8.2 2.3
1999... 8.5 -23.4 -5.5 -1.0 14.5 -3.5 1.3
2000... 13.6 20.0 -6.9 -4.6 18.1 -2.7 -2.7
2001... 2.3 2.6 -4.2 8.0 -9.3 1.0 -7.0
2002... 1.3 10.9 -2.3 -6.2 0.9 -4.4 2.5
2003... 0.8 0.3 -2.3 1.2 3.1 8.2 0.1
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Source: Statistics Canada
<Table>
<Caption>
Transportation Wholesale Finance, Public
and and Retail Insurance and Other Administration Total
Warehousing Trade Real Estate Services and Defence GDP
- --------------------------------------------------------------------------------------------------------------------------
(millions of 1997 $)
- --------------------------------------------------------------------------------------------------------------------------
1997... 6,590 10,982 23,606 29,807 5,764 104,554
1998... 6,660 11,653 23,904 30,674 5,849 105,960
1999... 6,949 11,808 24,662 31,185 6,075 109,176
2000... 7,268 12,279 25,586 32,341 6,281 114,229
2001... 7,115 12,765 26,800 33,521 6,437 115,647
2002... 7,239 13,683 27,996 34,142 6,492 118,240
2003... 7,150 14,347 28,617 34,803 6,645 121,203
- --------------------------------------------------------------------------------------------------------------------------
(annual percentage change)
- --------------------------------------------------------------------------------------------------------------------------
1998... 1.1 6.1 1.3 2.9 1.5 1.3
1999... 4.3 1.3 3.2 1.7 3.9 3.0
2000... 4.6 4.0 3.7 3.7 3.4 4.6
2001... -2.1 4.0 4.7 3.6 2.5 1.2
2002... 1.7 7.2 4.5 1.9 0.9 2.2
2003... -1.2 4.9 2.2 1.9 2.3 2.5
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Source: Statistics Canada
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 1 -- ECONOMIC REVIEW 25
- --------------------------------------------------------------------------------
TABLE A1.4 BRITISH COLUMBIA GDP, INCOME BASED
- --------------------------------------------------------------------------------
<Table>
<Caption>
Interest and Accrued Net Net Income of
Corporation Miscellaneous Income of Non-farm Inventory Net Domestic
Labour Profits before Investment Farm unincorporated Valuation Product at
Income Taxes Income Operators Business Adjustment Basic Prices
- ------------------------------------------------------------------------------------------------------------------------------------
($ millions)
- ------------------------------------------------------------------------------------------------------------------------------------
1997... 60,681 8,286 8,444 89 7,780 101 90,040
1998... 61,965 7,335 8,355 166 8,285 -24.0 90,860
1999... 64,045 9,309 8,365 199 8,723 -373.0 95,125
2000... 68,369 11,381 10,309 176 9,113 -368.0 104,011
2001... 70,044 11,214 7,745 361 9,318 -13.0 103,727
2002... 71,819 10,563 8,855 270 9,915 -394.0 105,988
2003... 74,200 11,878 8,995 76 10,528 622 111,305
- ------------------------------------------------------------------------------------------------------------------------------------
(annual percentage change)
- ------------------------------------------------------------------------------------------------------------------------------------
1998... 2.1 -11.5 -1.1 86.5 6.5 -123.8 0.9
1999... 3.4 26.9 0.1 19.9 5.3 1,454.2 4.7
2000... 6.8 22.3 23.2 -11.6 4.5 -1.3 9.3
2001... 2.4 -1.5 -24.9 105.1 2.2 -96.5 -0.3
2002... 2.5 -5.8 14.3 -25.2 6.4 2,930.8 2.2
2003... 3.3 12.4 1.6 -71.9 6.2 -257.9 5.0
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
Indirect Capital Cons.
Taxes Allowances and GDP GDP at
less Misc. Valuation Statistical at Market Basic
Subsidies Adjustments Discrepency Prices Prices
- ---------------------------------------------------------------------------------------------------
($ millions)
- ---------------------------------------------------------------------------------------------------
1997... 14,480 14,526 -4 114,383 104,562
1998... 14,515 15,050 -6 115,641 105,904
1999... 14,972 15,659 22 120,921 110,806
2000... 15,584 16,544 -22 131,086 120,533
2001... 15,995 17,342 44 132,050 121,113
2002... 16,487 18,059 -22 135,552 124,025
2003... 17,117 18,851 151 142,418 130,307
- ---------------------------------------------------------------------------------------------------
(annual percentage change)
- ---------------------------------------------------------------------------------------------------
1998... 0.2 3.6 50.0 1.1 1.3
1999... 3.1 4.0 -466.7 4.6 4.6
2000... 4.1 5.7 -200.0 8.4 8.8
2001... 2.6 4.8 -300.0 0.7 0.5
2002... 3.1 4.1 -150.0 2.7 2.4
2003... 3.8 4.4 -786.4 5.1 5.1
- ---------------------------------------------------------------------------------------------------
</Table>
Source: Statistics Canada
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
26 APPENDIX 1 -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
TABLE A1.5 EMPLOYMENT BY INDUSTRY IN BRITISH COLUMBIA
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------------------------
(thousands)
TOTAL - ALL INDUSTRIES 1,676 1,754 1,792 1,821 1,869 1,870 1,906 1,949 1,942 1,973 2,023
Primary industries ........................... 79 80 81 85 88 84 78 85 69 69 81
AGRICULTURE ............................... 34 31 26 30 33 33 29 30 26 30 34
FORESTRY .................................. 26 31 36 32 33 30 30 37 26 26 29
FISHING, HUNTING AND TRAPPING ............. 6 6 5 5 5 4 4 5 5 3 5
MINING .................................... 12 12 14 18 17 17 15 13 12 10 13
Manufacturing ................................ 179 184 189 195 197 196 192 205 196 197 206
FOOD, BEVERAGES & TOBACCO ................. 22 27 22 24 26 26 22 24 26 27 32
WOOD PRODUCTS ............................. 49 50 43 44 45 44 42 47 50 45 49
PAPER ..................................... 22 21 24 23 23 23 22 18 15 17 14
PRINTING & RELATED SUPPORT ACTIVITIES...... 8 9 9 12 10 8 9 11 8 9 8
PRIMARY METALS ............................ 8 9 12 12 9 9 9 11 8 6 9
METAL FABRICATION ......................... 9 9 10 9 11 11 12 13 13 13 13
TRANSPORTATION EQUIPMENT .................. 7 8 9 9 13 13 13 13 10 13 12
OTHER MANUFACTURING ....................... 55 51 60 63 62 64 63 70 66 68 69
Construction ................................. 114 126 125 120 123 118 115 113 115 121 122
GENERAL CONTRACTORS ....................... 42 47 44 42 39 37 42 42 41 41 48
SPECIAL TRADE CONTRACTORS ................. 72 78 82 77 84 81 74 71 74 79 74
Utilities .................................... 12 13 11 11 10 11 12 11 12 12 13
Transportation and warehousing................ 101 99 97 99 109 106 118 114 107 110 114
TRANSPORTATION ............................ 95 96 93 96 103 103 114 111 103 105 109
WAREHOUSING AND STORAGE ................... 5 3 4 4 6 3 4 3 4 5 5
Trade ........................................ 275 289 300 294 302 294 309 303 310 319 321
WHOLESALE TRADE ........................... 64 64 66 68 71 62 80 67 69 73 75
RETAIL TRADE .............................. 211 226 234 226 230 233 229 236 241 246 245
Finance, Insurance, Real Estate
& Leasing ................................. 114 118 118 124 127 123 120 120 116 119 127
FINANCE ................................... 47 48 48 51 56 53 54 53 54 54 61
INSURANCE ................................. 22 25 22 24 27 24 23 28 24 23 21
REAL ESTATE................................ 35 35 38 39 33 38 34 30 27 31 34
LEASING ................................... 10 10 10 10 11 8 10 9 12 11 11
Public administration ........................ 101 100 104 107 100 93 90 90 89 85 92
FEDERAL ADMINISTRATION .................... 34 33 33 37 34 29 32 32 30 31 36
PROVINCIAL ADMINISTRATION ................. 30 34 38 36 32 29 28 26 32 26 28
LOCAL ADMINISTRATION ...................... 38 33 34 34 34 35 31 31 27 28 28
Other service industries ..................... 603 645 666 681 701 721 736 771 788 805 808
EDUCATION AND RELATED SERVICES............. 113 120 123 118 122 120 128 135 136 140 146
HEALTH AND WELFARE SERVICES ............... 164 171 177 183 190 195 195 202 204 217 212
INFORMATION, CULTURE & RECREATION.......... 67 79 86 85 89 94 92 99 106 106 106
SERVICES TO BUSINESS MANAGEMENT............ 45 53 55 60 62 66 64 72 74 75 82
ACCOMMODATION AND FOOD SERVICES............ 121 129 135 143 145 152 153 164 171 171 165
MISCELLANEOUS SERVICES .................... 92 93 91 92 93 94 105 99 98 97 97
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
Source: Statistics Canada, Labour Force Survey (unpublished data). Totals may
not add due to rounding.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 1 -- ECONOMIC REVIEW 27
- --------------------------------------------------------------------------------
TABLE A1.6 CAPITAL INVESTMENT BY INDUSTRY
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Preliminary 2002 2003
Actual Actual Actual Actual Actual Intentions to to
1999 2000 2001 2002 2003 2004 2003 2004
- ------------------------------------------------------------------------------------------------------------------------------------
($ millions) (per cent)
Agriculture, forestry, fishing and hunting.. 335.1 336.7 286.8 324.9 351.3 371.9 8.1 5.9
Mining, quarrying and oil well industries... 1,125.5 1,746.4 2,914.8 2,295.2 2,909.9 2,845.7 26.8 -2.2
Manufacturing .............................. 1,236.7 1,335.3 1,244.4 1,048.3 1,031.0 1,173.6 -1.7 13.8
Construction ............................... 267.4 248.0 251.2 281.5 290.7 319.4 3.3 9.9
Transport & warehousing .................... 2,018.9 2,211.8 1,934.5 2,101.7 1,682.1 1,782.4 -20.0 6.0
Utilities .................................. 873.4 829.1 930.9 1,075.1 1,234.1 1,517.2 14.8 22.9
Wholesale .................................. 327.6 312.7 322.5 363.8 364.0 421.5 0.1 15.8
Retail trade ............................... 673.7 732.5 739.2 741.3 747.0 783.1 0.8 4.8
Finance and insurance ...................... 1,810.3 1,567.0 1,373.6 1,224.1 1,114.1 1,184.7 -9.0 6.3
Real estate, rental and leasing ............ 1,265.3 1,266.6 1,360.4 1,533.3 1,546.0 1,491.1 0.8 -3.6
Information and cultural industries ........ 1,143.6 948.9 1,388.6 1,034.0 762.0 817.2 -26.3 7.2
Professional, scientific and technical ..... 220.4 262.6 273.7 302.9 286.9 323.6 -5.3 12.8
Management of companies and enterprises..... 39.4 16.3 29.3 33.1 29.4 35.7 -11.2 21.4
Admin, waste and remediation services....... 110.1 73.7 101.2 59.4 67.6 66.4 13.8 -1.8
Arts, entertainment and recreation ......... 104.7 81.8 109.8 83.6 167.2 191.1 100.0 14.3
Accommodation and food services ............ 246.9 228.0 209.7 348.9 345.5 341.6 -1.0 -1.1
Education services ......................... 658.3 667.1 617.2 674.0 609.2 622.1 -9.6 2.1
Health services ............................ 444.8 483.5 540.7 547.7 659.7 630.3 20.4 -4.5
Public administration ...................... 2,287.5 2,099.9 2,133.5 2,079.4 2,189.6 2,126.2 5.3 -2.9
Other services ............................. 150.3 140.0 161.7 202.6 187.7 174.0 -7.4 -7.3
Housing .................................... 5,108.4 5,258.7 5,701.4 6,671.9 7,848.2 8,504.4 17.6 8.4
------- ------- ------- ------- ------- -------
TOTAL ...................................... 20,448.5 20,846.7 22,625.1 23,026.9 24,422.9 25,723.1 6.1 5.3
- ----- -------- -------- -------- -------- -------- -------- --- ---
Public ..................................... 4,626.5 4,638.5 4,541.6 4,513.3 4,723.4 5,114.2 4.7 8.3
Private .................................... 15,822.0 16,208.2 18,083.5 18,513.7 19,699.5 20,608.9 6.4 4.6
-------- -------- -------- -------- -------- --------
TOTAL ...................................... 20,448.5 20,846.7 22,625.1 23,027.0 24,422.9 25,723.1 6.1 5.3
- ----- -------- -------- -------- -------- -------- -------- --- ---
Machinery and equipment .................... 7,716.8 8,090.8 8,565.3 8,343.3 8,131.7 8,581.7 -2.5 5.5
Construction ............................... 12,731.7 12,756.0 14,059.8 14,683.7 16,291.2 17,141.4 10.9 5.2
-------- -------- -------- -------- -------- --------
TOTAL ...................................... 20,448.5 20,846.8 22,625.1 23,027.0 24,422.9 25,723.1 6.1 5.3
-------- -------- -------- -------- -------- --------
</Table>
Note: Totals may not add due to rounding.
Totals may not add due to some data not being disclosed for confidentiality
reasons
Source: Statistics Canada.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
28 APPENDIX 1 -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
TABLE A1.7 BRITISH COLUMBIA INTERNATIONAL GOODS EXPORTS BY MAJOR MARKET AND
SELECTED COMMODITIES, 2003
- --------------------------------------------------------------------------------
<Table>
<Caption>
European Other Total -
Commodity U.S. Japan Union(1) Markets All Countries
- ----------------------------------------------------------------------------------------------------------------------------
($ millions)
Solid wood products ........................... 6,070 1,548 251 378 8,247
Lumber (softwood) .......................... 3,673 1,106 234 296 5,309
Cedar shakes and shingles .................. 221 0 3 3 227
Plywood (softwood) ......................... 346 31 6 3 386
Other panel products ....................... 720 30 1 8 759
Selected value-added wood products ......... 768 126 3 18 915
Other ...................................... 343 256 5 48 652
Pulp and paper products ....................... 1,944 414 785 1,541 4,684
Pulp ....................................... 591 288 748 1,130 2,757
Newsprint .................................. 352 98 0 134 584
Paper, paperboard - excluding newsprint .... 901 25 37 254 1,217
Other ...................................... 100 3 0 23 126
Agriculture and food other than fish .......... 1,004 131 29 176 1,340
Fruit and nuts ............................. 133 12 9 10 164
Vegetables ................................. 207 11 2 25 245
Other ...................................... 664 108 18 141 931
Fish products ................................. 617 188 64 112 981
Whole fish; fresh, chilled, frozen - ....... 131 45 19 15 210
excluding salmon... ........................
Whole salmon; fresh, chilled, frozen ....... 237 9 2 8 256
Salmon; canned, smoked, etc ................ 3 2 39 12 56
Other ...................................... 246 133 4 77 460
Metallic mineral products ..................... 401 702 51 381 1,535
Copper ores and concentrates ............... 0 299 0 123 422
Molybdenum ores and concentrates ........... 26 45 48 9 128
Unwrought aluminum ......................... 54 262 1 156 473
Unwrought zinc ............................. 237 5 0 78 320
Other ...................................... 84 91 2 16 193
Energy products ............................... 3,487 442 351 567 4,847
Natural gas ................................ 2,828 0 0 0 2,828
Coal ....................................... 91 441 351 567 1,450
Electricity ................................ 382 0 0 0 382
Other ...................................... 185 1 0 1 187
Machinery and equipment ....................... 2,315 54 247 380 2,996
Motor vehicles and parts ................... 342 6 8 19 375
Electrical/electronic/communications ....... 389 22 49 154 605
Other ...................................... 1,584 26 191 216 2,017
Plastics and articles of plastic .............. 458 3 10 17 488
Apparel and accessories ....................... 194 3 4 3 204
All other commodities ......................... 2,316 153 50 632 3,151
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ...................................... 18,805 3,638 1,842 4,189 28,474
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United
Kingdom.
Source: BC STATS
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 1 -- ECONOMIC REVIEW 29
- --------------------------------------------------------------------------------
TABLE A1.8 BRITISH COLUMBIA INTERNATIONAL GOODS EXPORTS BY MARKET AREA, 2003
- --------------------------------------------------------------------------------
<Table>
<Caption>
Change Percent of Total
2001 2002 2003 2002-2003 2002 2003
- --------------------------------------------------------------------------------------------------------
($ millions) (per cent)
United Kingdom ............. 355 337 302 -10.4 1.2 1.1
Germany .................... 382 321 364 13.4 1.1 1.3
People's Republic of China.. 768 843 1,093 29.7 2.9 3.8
Hong Kong .................. 236 228 191 -16.2 0.8 0.7
Taiwan ..................... 337 354 445 25.7 1.2 1.6
Japan ...................... 4,068 3,866 3,638 -5.9 13.3 12.8
South Korea ................ 758 764 837 9.6 2.6 2.9
India ...................... 118 120 110 -8.3 0.4 0.4
Australia .................. 173 187 201 7.5 0.6 0.7
Mexico ..................... 83 79 124 57.0 0.3 0.4
United States .............. 22,111 19,694 18,805 -4.5 67.9 66.0
Other ...................... 2,426 2,231 2,364 6.0 7.7 8.3
----- ----- -----
TOTAL ................... 31,814 29,025 28,474 -1.9 100.0 100.0
----- ------ ------ ------ ---- ----- -----
Market Areas:
Western Europe (1) ......... 2,160 1,839 1,874 1.9 6.3 6.6
PACIFIC RIM (2) ............ 6,711 6,697 6,865 2.5 23.1 24.1
- -------------------------------------------------------------------------------------------------------
</Table>
(1) Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland,
Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland and the United Kingdom.
(2) Australia, Brunei Darussalam, China, Fiji, Hong Kong, Indonesia, Japan,
Laos, Macau, Malaysia, Mongolia, New Zealand, North Korea, Philippines,
Singapore, South Korea, Taiwan, Thailand and Vietnam.
Source: BC STATS
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
30 APPENDIX 1 -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
TABLE A1.9 HISTORICAL COMMODITY PRICES (IN U.S. DOLLARS)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
- -----------------------------------------------------------------------------------------------------------------------
Metals
Copper (London; $/lb) ....... 1.05 1.33 1.04 1.03 0.75 0.71 0.82 0.72 0.71 0.81
Lead (London; $/lb) ......... 0.25 0.29 0.35 0.28 0.24 0.23 0.21 0.22 0.21 0.23
Zinc (London; $/lb) ......... 0.49 0.53 0.51 0.65 0.51 0.53 0.56 0.44 0.35 0.39
Gold (London; $/troy oz) .... 384 384 388 331 294 279 280 271 310 363
Silver (London; $/troy oz)... 5.28 5.21 5.18 4.89 5.53 5.25 5.00 4.39 4.60 4.88
Molybdenum ($/lb)............ 4.50 7.42 3.61 4.18 3.31 2.65 2.51 2.31 3.59 5.21
Aluminum (London; $/lb) ..... 0.67 0.82 0.68 0.73 0.62 0.62 0.69 0.65 0.61 0.65
Forest Products
Lumber (Madison's
Lumber Reporter;
WSPF, $/1000 bd ft) ....... 342 251 351 353 287 342 256 247 235 270
Pulp (Northern Europe;
$/tonne; transaction
price) .................... 573 883 590 566 515 523 681 543 463 523
Newsprint (Pulp and
Paper Week;
$/tonne) .................. 465 674 652 560 595 513 564 588 468 501
Hemlock baby squares
(Madison's Lumber
Reporter; 3 9/16") ........ 852 862 796 821 556 585 566 583 593 535
Other
Oil (West Texas
Intermediate;
$/barrel) ................. 17 18 22 21 14 19 30 26 26 31
Natural Gas (Sumas;
$/Mmbtu) .................. 1.60 1.03 1.33 1.72 1.61 2.15 4.17 4.58 2.68 4.66
Electricity (Mid
Columbia Index
in US$ /MW. h) ......... n.a. n.a. n.a. n.a. n.a. 27 137 143 24 41
- ------------------------------------------------------------------------------------------------------------------------
</Table>
Source: Ministry of Finance, Ministry of Energy and Mines, US Federal
Reserve Bank
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 1 -- ECONOMIC REVIEW 31
- --------------------------------------------------------------------------------
TABLE A1.10 BRITISH COLUMBIA FOREST SECTOR ECONOMIC ACTIVITY INDICATORS
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------
Change (1)
Indicator 1999 2000 2001 2002 2003 2002-2003
- ------------------------------------------------------------------------------------------------------------
(million cubic meters) (per cent)
Wood production
Timber scaled .................. 76.0 77.0 72.0 73.4 61.8 -15.8
Lumber ......................... 32.4 34.3 32.6 36.1 36.1 0.0
Plywood ........................ 1.5 1.5 1.6 1.7 1.7 1.3
Timber scaled by species (million tonnes)
Lodgepole pine ................. 22.0 22.2 21.9 22.1 n.a.
Spruce ......................... 12.5 12.1 12.4 12.0 n.a.
Hemlock ........................ 10.5 11.0 10.6 7.5 n.a.
Douglas fir .................... 11.0 10.6 10.5 10.5 n.a.
Balsam ......................... 8.8 8.9 8.4 6.4 n.a.
Cedar .......................... 6.6 7.3 7.2 5.6 n.a.
All others ..................... 5.6 6.4 6.4 5.7 n.a.
--- --- --- ---
TOTAL (2) ...................... 77.0 78.5 77.4 69.8 n.a.
---- ---- ---- ----
(million tonnes)
Pulp and paper production ......... 8.0 8.3 7.6 7.4 7.7 4.1
Market pulp .................... 5.0 5.2 4.7 4.5 4.8 6.4
Newsprint, paper and ........... 3.0 3.1 2.9 2.9 2.9 0.7
paperboard.................. ...
Industrial product price indices (1997=100)
Softwood lumber -- British ..... 100.2 83.2 82.6 81.7 72.6 -11.1
Columbia .......................
Douglas fir plywood ............ 109.4 94.8 94.4 104.2 110.8 6.3
Bleached sulphate pulp ......... 99.4 127.7 105.7 96.1 97.2 1.1
NEWSPRINT FOR EXPORT ........... 96.3 105.4 123.0 96.2 89.3 -7.2
-------------------- ---- ----- ----- ---- ---- ----
</Table>
(1) Percentage change based on unrounded numbers.
(2) Total may not add due to rounding.
Sources: Timber harvest - Ministry of Forests
Lumber and plywood production - Statistics Canada
Pulp and paper production - Canadian Pulp and Paper Association
Industrial product price indices - Statistics Canada
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
32 APPENDIX 1 -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
TABLE A1.11 HISTORICAL VALUE OF MINERAL, PETROLEUM AND NATURAL GAS PRODUCTION
- --------------------------------------------------------------------------------
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
Industrial Construction Natural Gas Other oil
Year Metals Minerals 1 Aggregates 2 Coal Crude Oil 3 to Pipeline and Gas 4 Total
- -------------------------------------------------------------------------------------------------------------------------
($ millions)
1989 .......... 1,829 278 178 706 263 495 25 3,774
1990 .......... 1,623 305 163 822 319 537 43 3,813
1991 .......... 1,511 290 159 861 260 562 36 3,679
1992 .......... 1,502 212 157 706 260 592 38 3,467
1993 .......... 1,198 229 166 822 233 814 42 3,504
1994 .......... 1,354 237 180 861 235 991 44 3,902
1995 .......... 2,016 249 204 968 272 710 58 4,478
1996 .......... 1,537 251 189 1,027 441 817 75 4,337
1997 .......... 1,495 249 195 1,107 403 1,087 98 4,635
1998 .......... 1,484 245 208 956 373 1,154 47 4,467
1999 .......... 1,183 246 219 797 461 1,577 53 4,536
2000 .......... 1,571 284 224 812 843 3,826 114 7,674
2001 .......... 1,394 296 217 959 729 4,834 103 8,533
2002 .......... 1,288 310 231 1,035 714 3,458 79 7,115
2003 e ........ 1,282 340 238 1,000 716 5,383 117 9,076
</Table>
e Estimate.
(1) Shipments of gypsum and silica to Canadian cement, lime and clay plants are
not included in this table.
(2) Sand and gravel; stone.
(3) Includes Pentanes and Condensate.
(4) Liquified Petroleum Gases and Sulphur.
Sources: Natural Resources Canada and Ministry of Energy and Mines
TABLE A1.12 PETROLEUM AND NATURAL GAS ACTIVITY INDICATORS
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------------
Change
Indicator Unit of Measure 1999 2000 2001 2002 2003 2002-2003
- ------------------------------------------------------------------------------------------------------------------------------------
(per cent)
Natural gas production (wellhead) (1) ........ (billion cubic m) 25.9 26.6 29.9 32.4 30.8 -4.9
Crude oil and condensate ..................... (million cubic m) 2.4 2.7 2.6 2.6 2.6 3.2
Wells authorized ............................. (number) 828 1,010 977 876 1,399 59.7
Wells drilled ................................ (number) 620 770 875 643 1,041 61.9
Seismic crew-weeks ........................... (number) 105 140 167 160 164 2.5
Provincial reserves
Marketable gas (remaining reserves) ..... (billion cubic m) 237 240 252 255 n.a. n.a.
Oil (remaining reserves) ................ (million cubic m) 26.0 27.4 25.5 22.6 n.a. n.a.
Provincial government petroleum
And natural gas revenue 2 .................. ($ millions) 587.3 1,306.2 1,731.1 1,241.7 2,114.2 70.3
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Includes gas retrieved from storage. During 2002, 1 billion cubic metres
were produced from storage wells.
(2) Includes Crown royalties, Crown reserve disposition bonuses, fees and
rentals.
Source: Ministry of Energy and Mines
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 1 -- ECONOMIC REVIEW 33
- --------------------------------------------------------------------------------
TABLE A1.13 SUPPLY AND CONSUMPTION OF ELECTRICAL ENERGY IN BRITISH COLUMBIA
- --------------------------------------------------------------------------------
<Table>
<Caption>
Supply Consumption
--------------------------------------------------------------- -----------------------------
Net Generation
------------------------------------
Receipts Delivered
Total From Other Total To Other Total
Provincial Provinces Provincial Provinces Provincial
Year Hydro Thermal Generation and Imports Supply and Exports Consumption
- -----------------------------------------------------------------------------------------------------------------------
(gigawatt-hours)(1)
1984 .............. 50,243 2,126 52,369 1,556 53,925 8,313 45,612
1985 .............. 57,105 2,022 59,126 1,080 60,207 11,231 48,975
1986 .............. 48,923 1,836 50,759 3,345 54,104 4,709 49,395
1987 .............. 61,057 2,010 63,066 1,203 64,269 13,336 50,934
1988 .............. 58,573 2,370 60,943 2,351 63,293 9,215 54,078
1989 .............. 51,082 6,573 57,655 4,500 62,155 6,583 55,572
1990 .............. 57,245 3,417 60,662 3,233 63,895 6,689 57,206
1991 .............. 60,149 2,832 62,981 2,272 65,253 7,725 57,528
1992 .............. 60,555 3,503 64,058 2,685 66,743 9,473 57,270
1993 .............. 53,057 5,716 58,774 5,691 64,465 5,605 58,860
1994 .............. 53,979 7,036 61,015 7,836 68,851 9,541 59,311
1995 .............. 49,814 8,192 58,006 6,385 64,391 3,972 60,419
1996 .............. 67,329 4,436 71,765 3,289 75,053 10,390 64,664
1997 .............. 61,772 5,189 66,961 4,316 71,278 12,114 59,163
1998 .............. 60,849 6,861 67,710 5,056 72,766 10,619 62,147
1999 .............. 61,588 6,457 68,045 6,807 74,852 12,529 62,323
2000 .............. 59,754 8,487 68,241 6,039 74,280 10,698 63,582
2001 .............. 48,338 8,994 57,332 10,154 67,486 6,408 61,079
2002 .............. 58,627 6,318 64,945 5,769 70,714 8,078 62,636
2003 .............. 56,689 6,362 63,051 7,071 70,122 9,901 60,221
- -----------------------------------------------------------------------------------------------------------------------
</Table>
(1) Gigawatt-hour = one million kilowatt-hours
Source: Statistics Canada
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
34 APPENDIX 1 -- ECONOMIC REVIEW
- --------------------------------------------------------------------------------
TABLE A1.14 BRITISH COLUMBIA HIGH-TECHNOLOGY SECTOR ACTIVITY
- --------------------------------------------------------------------------------
<Table>
<Caption>
Change
Indicator 1997 1998 1999 2000 2001 2002 2003 2002-2003
- ------------------------------------------------------------------------------------------------------------------------------------
(per cent)
Number of Establishments(1)
Manufacturing .............. -- 973 875 863 830 814 n.a. n.a.
Services ................... -- 3,899 4,146 4,528 4,622 4,525 n.a. n.a.
-----------------------------------------------------------------------------------
TOTAL ...................... -- 4,872 5,021 5,391 5,452 5,339 n.a. n.a.
===================================================================================
Employment (persons)
Manufacturing .............. 10,900 11,800 14,400 16,000 15,900 14,500 14,600 1.0
Services ................... 23,600 22,000 24,300 27,400 29,800 30,600 32,400 5.8
-----------------------------------------------------------------------------------
TOTAL ...................... 34,600 33,800 38,700 43,500 45,800 45,100 47,000 4.3
===================================================================================
Wages and Salaries ($ millions)
Manufacturing .............. 423 490 620 697 690 652 692 6.1
Services ................... 1,232 1,144 1,298 1,516 1,613 1,669 1,800 7.8
-----------------------------------------------------------------------------------
TOTAL ...................... 1,655 1,634 1,918 2,213 2,303 2,322 2,492 7.3
===================================================================================
Real GDP ($ 1997 millions) .... 2,316 2,653 2,951 3,514 3,505 3,434 3,739 8.9
Nominal GDP ($ millions) ...... 2,316 2,597 2,725 3,197 3,282 3,343 3,577 7.0
Revenues ($ millions) ......... 4,780 4,990 5,378 6,098 6,089 6,003 6,416 6.9
EXPORTS ($ MILLIONS) .......... 581 769 840 923 748 685 628 -8.3
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Data not available prior to 1998.
Source: BC STATS
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
CHAPTER TWO
FINANCIAL REVIEW
<Page>
36 CHAPTER 2 - FINANCIAL REVIEW
- -------------------------------------------------------------------------------
2003/04 OVERVIEW
Despite significant revenue and expenditure shocks in 2003/04, the
provincial government ended the year with a deficit of $1.3 billion, a $961
million improvement over the budgeted deficit of $2.3 billion and an
improvement of $1.9 billion as compared to the previous year.
TABLE 2.1 OPERATING STATEMENT
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------
Budget Actual Actual Annual
($ millions) 2003/04(1) 2003/04 2002/03(2) Change(3)
- ---------------------------------------------------------------------------------------------------------
(per cent)
TAXPAYER-SUPPORTED PROGRAMS
AND AGENCIES:
Revenue........................................ 24,619 24,793 23,376 6.1
Expense........................................ (27,800) (28,013) (28,341) (1.2)
-------- -------- --------
TAXPAYER-SUPPORTED BALANCE.................. (3,181) (3,220) (4,965) (35.1)
Commercial Crown corporation
net income .................................. 1,381 1,881 1,766 6.5
-------- -------- --------
DEFICIT BEFORE FORECAST ALLOWANCE.............. (1,800) (1,339) (3,199) (58.1)
Forecast allowance ............................ (500) - - -
-------- -------- --------
DEFICIT.......................................... (2,300) (1,339) (3,199) (58.1)
======== ======== ========
</Table>
(1) The First Ministers' Accord on Health Care Renewal was finalized subsequent
to the February provincial budget. While the 2003/04 Health Accord funding
of $319 million was included in the May 29, 2003 SUPPLY ACT and treated as
part of the budget in three QUARTERLY REPORTS, this report reflects the
original estimates tabled on February 18, 2003.
(2) Comparative figures have been restated to reflect government accounting
policies in effect at March 31, 2004.
(3) Percentage change between 2003/04 actual and 2002/03 actual.
Subsequent to the February 18, 2003 budget, additional funding of $319
million, as part of the First Ministers' Accord on Health Care Renewal
(Health Accord), was included in the SUPPLY ACT in May 2003. In the
quarterly reports for 2003/04, this funding was included in addition to the
original budget amounts for revenue from federal transfers and Ministry of
Health Services spending. In this report, budget figures refer to the
February 18, 2003 estimates.
The final deficit of $1.3 billion included:
o taxpayer-supported program and agency revenue of $24.8 billion, $174
million higher than budget and a 6.1 per cent improvement over the
previous year;
o taxpayer-supported program and agency expense of $28.0 billion, $213
million higher than budget (but below budget if Health Accord funding
is included), and a 1.2 per cent reduction compared to the previous
year; and
o commercial Crown corporation net income of $1.9 billion, $500 million
higher than budget and a 6.5 per cent improvement over the previous
year.
As noted above, the 2003/04 deficit was $961 million lower than budget due
to a number of factors:
During 2003/04, federal transfers to the province for equalization were
$1,005 million lower than expected due to the effect of changes in tax
assessments for the 2002 tax year and 2003 economic growth. In addition,
an
===============================================================================
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
CHAPTER 2 - FINANCIAL REVIEW 37
- -------------------------------------------------------------------------------
above average year in the number and scope of natural disasters resulted
in disaster relief costs that were $410 million higher than expected.
Helping to offset these unanticipated events were a $467 million
improvement in tax revenue, $332 million of higher than expected energy
revenue, a $500 million improvement in commercial Crown corporation net
income, and other revenue improvements of $380 million, primarily due to
additional federal transfers under the Health Accord.(1)
The improvement in commercial Crown corporation net income was primarily
due to better than expected results from BC Hydro, ICBC and the Liquor
Distribution Branch.
After including the $319 million Health Accord funding approved by the
Legislature in the SUPPLY ACT, Ministry of Health Services spending was
$75 million below budget. However, based on the February 18, 2003 budget,
the Ministry of Health Services was $244 million over budget as the Health
Accord funding amounts were not finalized in time for inclusion in the
budget.
Debt interest cost reductions were a significant source of savings
totaling $341 million in ministries and taxpayer-supported agencies
(including a $188 million reduction in debt servicing costs for direct
government). Other spending savings totaled $100 million reflecting below
budget spending in many ministries, after accommodating a number of
priority initiatives (such as the acceleration of $72 million in funding
for the 2010 Winter Olympics).
The 2003/04 budget also included a $500 million forecast allowance that
was not required.
Chart 2.1 and Table 2.2 summarize the major changes from the 2003/04
budget.
CHART 2.1 2003/04 DEFICIT - MAJOR CHANGES FROM BUDGET
[Graphic]
(1) The First Ministers' Accord on Health Care Renewal (Health Accord)
was finalized subsequent to the February provincial budget. While the
2003/04 Health Accord funding of $319 million was included in the
May 29, 2003 SUPPLY ACT and treated as part of the budget in three
QUARTERLY REPORTS, this report reflects the original estimates tabled
on February 18, 2003.
===============================================================================
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
38 CHAPTER 2 - FINANCIAL REVIEW
- -------------------------------------------------------------------------------
The 2003/04 deficit of $1.3 billion was significantly lower than the $3.2
billion deficit recorded in 2002/03 (see Table 2.1), primarily due to higher
revenue from taxation and natural resources, improved commercial Crown
corporation net income (except for BC Hydro), and lower expenses for
taxpayer-supported Crown corporations and agencies.
The 2003/04 deficit was $371 million lower than the third quarter forecast
released with the 2004/05 budget on February 17, 2004. Further details on
changes from the February 2004 updated forecast are provided in Appendix Table
A2.5.
TABLE 2.2 OPERATING STATEMENT - CHANGES FROM BUDGET 2003
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
FINAL
($ MILLIONS) CHANGES RESULTS
- -----------------------------------------------------------------------------------------------------------------------------------
2003/04 FORECAST DEFICIT - BUDGET 2003 FISCAL PLAN (FEBRUARY 18, 2003) ................................. (2,300)
REVENUE CHANGES
Health Accord funding included in the May 29, 2003 SUPPLY ACT ..................................... 319
Personal income tax revenue - mainly due to higher 2002 tax assessments ........................... 155
Property transfer tax revenue - strong housing market ............................................. 150
Other taxes - all sources higher except hotel room tax ............................................ 162
Energy revenue - mainly higher sales of drilling rights, partially offset
by lower natural gas volumes ................................................................... 332
Other natural resource revenue (mainly $95 million lower forestry revenue) ........................ (75)
CHST and equalization entitlements - mainly impact of 2002 tax assessments
and 2003 economic growth:
- prior year equalization adjustment (mainly lower 2002/03 entitlements) ..................... (506)
- 2003/04 equalization entitlement ........................................................... (499)
- CHST ....................................................................................... (38)
Other federal funding (mainly $120 million in forest fire relief).................................. 78
Other revenues - mainly higher recoveries for health related expenses and other
miscellaneous sources, partially offset by lower sales of goods and services by
taxpayer-supported Crowns and reduced recoveries of interest costs ............................. 96
Commercial Crown corporation net income:
BC Hydro - improved water levels, higher sales and interest savings ............................ 147
Liquor Distribution Branch - higher sales and reduced transition costs ......................... 69
ICBC - higher revenues and lower claims and insurance operations costs ......................... 257
Other Crown corporation changes ................................................................ 27
------
TOTAL REVENUE INCREASES ...................................................................... 674
EXPENSE CHANGES
Higher disaster response costs including forest fires, floods and BSE ............................. (410)
Health Accord funding included in the May 29, 2003 SUPPLY ACT ..................................... (319)
Other health care changes ......................................................................... 75
Interest cost savings - mainly reduced debt levels ................................................ 188
Acceleration of funding for the 2010 Olympic and Paralympic Winter Games .......................... (72)
Reduced spending in other programs ................................................................ 294
------
CRF EXPENSE INCREASES .......................................................................... (244)
Taxpayer-supported Crown corporation debt interest savings ........................................ 153
Other taxpayer-supported Crown corporation and agency expenses and
adjustments - mainly higher recovered costs and new agencies ................................... (122)
------
TOTAL EXPENSE INCREASES ........................................................................ (213)
FORECAST ALLOWANCE REDUCTION ........................................................................ 500
------
NET CHANGE .......................................................................................... 961
------
ACTUAL DEFICIT - 2003/04 PUBLIC ACCOUNTS ............................................................... (1,339)
------
------
</Table>
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
CHAPTER 2 - FINANCIAL REVIEW 39
- -------------------------------------------------------------------------------
REVENUE
In 2003/04, revenue (including commercial Crown corporations net income)
totaled $26.7 billion, $674 million higher than budget ($355 million
higher than planned if the Health Accord funding is included in the
budget) and 6.1 per cent higher than 2002/03 as higher revenues from
taxation, natural resources, other miscellaneous sources, and improved net
income from commercial Crown corporations were partially offset by lower
federal government contributions.
CHART 2.2 REVENUE CHANGES FROM BUDGET
[Graphic]
Major changes from budget included:
o Revenue from taxation sources was $467 million above budget mainly due
to higher-than-expected revenues from personal income, property
transfer, insurance premium, property and corporation capital taxes.
o Personal income tax was up $155 million mainly due to higher than
expected 2002 tax assessments. Revenue was 18 per cent higher than
2002/03 mainly due to the effects of prior-year adjustments that
resulted in a $149 million increase in 2003/04 and a $299 million
decrease in 2002/03.
o Corporate income tax was up $20 million as higher entitlements for
2002 and prior tax years were partially offset by the effects of a
lower share of corporate taxable income subject to the general tax
rate and increased tax credit deductions. Revenue was 27 per cent
higher than 2002/03 mainly due to a $273 million improvement in the
settlement to the federal government for overpayments in prior years.
o Property transfer tax was $150 million above budget and 27 per cent
higher than 2002/03 reflecting the strong housing market throughout
the year due in part to lower mortgage rates and the cumulative effect
of federal and provincial income tax cuts.
o Other taxes were up $66 million as higher revenue from insurance
premium tax, mainly reflecting insurance industry rate increases, was
partially offset by the effect of reduced tourism activity on hotel
room tax revenue.
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40 CHAPTER 2 - FINANCIAL REVIEW
- -------------------------------------------------------------------------------
TABLE 2.3 REVENUE BY SOURCE
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------
Budget Actual Actual Annual
($ MILLIONS) 2003/04(1) 2003/04 2002/03(2) CHANGE(3)
- -------------------------------------------------------------------------------------------------------------
(per cent)
TAXATION
Personal income .................................... 4,722 4,877 4,150 17.5
Corporate income.................................... 755 775 612 26.6
Social service ..................................... 3,995 4,001 3,794 5.5
Fuel................................................ 866 875 687 27.4
Tobacco............................................. 635 647 606 6.8
Property............................................ 1,550 1,576 1,541 2.3
Property transfer................................... 368 518 407 27.3
Corporation capital................................. 101 124 198 (37.4)
Other............................................... 349 415 357 16.2
--- --- ---
13,341 13,808 12,352 11.8
------ ------ ------
NATURAL RESOURCES
Natural gas royalties............................... 1,289 1,230 1,056 16.5
Columbia River Treaty............................... 240 230 100 130.0
Petroleum royalties, permits, fees and minerals..... 477 878 532 65.0
Forests............................................. 1,102 1,007 1,323 (23.9)
Other resources..................................... 288 308 270 14.1
--- --- ---
3,396 3,653 3,281 11.3
----- ----- -----
OTHER REVENUE
Medical Services Plan premiums...................... 1,410 1,409 1,355 4.0
Motor vehicle licences and permits.................. 352 363 351 3.4
BC Ferries tolls.................................... - - 315 (100.0)
Other fees and licences............................. 500 655 577 13.5
Investment earnings................................. 728 582 640 (9.1)
Sales of goods and services by taxpayer-supported
Crown corporations................................ 266 229 275 (16.7)
Miscellaneous....................................... 634 748 629 18.9
--- --- ---
3,890 3,986 4,142 (3.8)
----- ----- -----
CONTRIBUTIONS FROM THE FEDERAL GOVERNMENT
Canada Health and Social Transfer - current year.... 2,763 2,941 2,639 11.4
Canada Health and Social Transfer - prior years..... - 103 (33) (412.1)
Equalization - current year......................... 675 176 543 (67.6)
Equalization - prior years.......................... - (506) - -
Other............................................... 554 632 452 39.8
--- --- ---
3,992 3,346 3,601 (7.1)
----- ----- -----
TAXPAYER-SUPPORTED PROGRAMS AND AGENCIES 24,619 24,793 23,376 6.1
------ ------ ------
COMMERCIAL CROWN CORPORATION
NET INCOME
BC Hydro (before RSA transfers)..................... (70) 77 352 (78.1)
Liquor Distribution Branch.......................... 655 724 654 10.7
BC Lotteries........................................ 725 728 671 8.5
BC Rail............................................. 61 66 (84) (178.6)
ICBC................................................ 45 225 45 400.0
Other............................................... 5 8 14 (42.9)
Accounting adjustments......................... (40) 53 114 (53.5)
---- -- ---
1,381 1,881 1,766 6.5
----- ----- -----
TOTAL REVENUE.......................................... 26,000 26,674 25,142 6.1
------ ------ ------
------ ------ ------
</Table>
(1) The First Minister's Accord on Health Care Renewal was finalized subsequent
to the February provincial budget. While the 2003/04 Health Accord funding
of $319 million was included in the May 29, 2003 SUPPLY ACT and treated as
part of the budget in three QUARTERLY REPORTS, this report reflects the
original estimates tabled in February 18, 2003.
(2) Comparative figures have been restated to reflect government's accounting
policies in effect at March 31, 2004.
(3) Percentage change between 2003/04 actual and 2002/03 actual.
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CHAPTER 2 - FINANCIAL REVIEW 41
- --------------------------------------------------------------------------------
TABLE 2.4 EXPENSE BY MINISTRY, PROGRAM AND AGENCY
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
Budget Contingencies Budget plus Actual Actual Annual
($ millions) 2003/04(1) Allocation Contingencies 2003/04 2002/03(2) Change(3)
- ---------------------------------------------------------------------------------------------------------------------------------
(per cent)
Advanced Education ....................... 1,899 - 1,899 1,897 1,897 -
Education ................................ 4,860 - 4,860 4,787 4,799 (0.3)
Health Services .......................... 10,209 - 10,209 10,453 10,206 2.4
------ --- ------ ------ ------
Subtotal 16,968 - 16,968 17,137 16,902 1.4
------ --- ------ ------ ------
Office of the Premier .................... 52 - 52 50 43 16.3
Agriculture, Food and Fisheries(4) ....... 49 3 52 55 72 (23.6)
Attorney General ......................... 506 14 520 520 531 (2.1)
Children and Family Development .......... 1,451 - 1,451 1,430 1,575 (9.2)
Community, Aboriginal and Women's Services 666 13 679 679 555 22.3
Energy and Mines ......................... 57 20 77 77 47 63.8
Finance .................................. 55 1 56 54 54 -
Forests .................................. 565 16 581 524 618 (15.2)
Human Resources .......................... 1,417 - 1,417 1,394 1,618 (13.8)
Management Services ...................... 47 14 61 61 56 8.9
Provincial Revenue ....................... 50 - 50 49 49 -
Public Safety and Solicitor General ...... 507 23 530 528 525 0.6
Skills Development and Labour ............ 26 - 26 20 24 (16.7)
Small Business and Economic Development .. 115 1 116 115 57 101.8
Sustainable Resource Management .......... 92 - 92 91 125 (27.2)
Transportation ........................... 834 - 834 820 749 9.5
Water, Land and Air Protection ........... 130 1 131 129 163 (20.9)
------ --- ------ ------ ------
Subtotal 6,619 106 6,725 6,596 6,861 (3.9)
------ --- ------ ------ ------
TOTAL MINISTRIES AND OFFICE OF THE PREMIER 23,587 106 23,693 23,733 23,763 (0.1)
Legislation ............................... 43 - 43 41 38 7.9
Officers of the Legislature ............... 23 - 23 23 25 (8.0)
BC Family Bonus ........................... 85 - 85 80 88 (9.1)
Management of public funds and debt ....... 926 - 926 738 711 3.8
Government restructuring (ministries) ..... 190 - 190 168 212 (20.8)
Contingencies and new programs ............ 170 (107) 63 - - -
Other appropriations(4) ................... 10 1 11 13 67 (80.6)
------ --- ------ ------ ------
Subtotal 25,034 - 25,034 24,796 24,904 (0.4)
Additional natural disaster funding:
Agriculture, Food and Fisheries(4) ..... - - - 24 - -
Forests(4) ............................. - - - 316 - -
Public Safety and Solicitor General(4) . - - - 70 - -
2010 Winter Olympics accelerated spending(4) - - - 72 - -
Forestry restructuring .................... - - - - 275 (100.0)
------ --- ------ ------ ------
CRF EXPENSE ............................ 25,034 - 25,034 25,278 25,179 0.4
LESS: Grants/internal transfers(5) ... (1,087) - (1,087) (730) (784) (6.9)
ADD: Expenses recovered from
external entities ........ 1,615 - 1,615 1,342 1,299 3.3
------ --- ------ ------ ------
25,562 - 25,562 25,890 25,694 0.8
Taxpayer-supported Crown corporations
and agencies (net of adjustments) ...... 1,955 - 1,955 2,120 2,647 (19.9)
Children and Family Development
goverance authorities(5) ................. 283 - 283 3 - -
------ --- ------ ------ ------
TOTAL TAXPAYER-SUPPORTED EXPENSE 27,800 - 27,800 28,013 28,341 (1.2)
====== === ====== ====== ======
</Table>
(1) The First Minister's Accord on Health Care Renewal was finalized subsequent
to the February provincial budget. While the 2003/04 Health Accord funding
of $319 million was included in the May 29, 2003 SUPPLY ACT and treated as
part of the budget in three QUARTERLY REPORTS, this report reflects the
original estimates tabled in February 18, 2003.
(2) Comparative figures have been restated to reflect government's accounting
policies in effect at March 31, 2004.
(3) Percentage change between 2003/04 actual and 2002/03 actual.
(4) Additional spending above budget authorized through SUPPLEMENTARY ESTIMATES
or statutory authority under existing ministry acts.
(5) Reflects a revised schedule for the transfer of operations by the Ministry
of Children and Family Development to authorities. Further details are
provided in the ministry's service plan.
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42 CHAPTER 2 - FINANCIAL REVIEW
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o Revenue from energy and mineral sources was up $332 million primarily
due to the record sale of natural gas and petroleum drilling rights in
September 2003. This was partially offset by lower natural gas
royalties, despite higher prices, as weaker demand resulted in lower
production.
o Forests revenue was $95 million below budget and 24 per cent lower than
2002/03 mainly due to the effects of a higher Canadian dollar exchange
rate and lower harvest volumes on the Coast and through the BC Timber
Sales program.
o Other revenue was up $96 million mainly due to improved collections for
health related expenses and other miscellaneous sources, partially
offset by lower recoveries of interest costs from commercial Crown
corporations and reduced sales of goods and services by
taxpayer-supported Crown corporations.
o Federal government contributions were down $646 million mainly due to a
$1,005 million shortfall in equalization entitlement. At negative $330
million, equalization revenue reflected a $506 million reduction in
prior-year entitlements and a $176 million entitlement in respect of
2003/04, down $499 million from budget. Reduced entitlements for prior
years are mainly due to the effects of stronger than expected BC tax
assessments and weak Ontario results for 2002. Lower entitlements in
respect of 2003/04 reflect higher than assumed 2003 BC economic growth
and relatively weak Ontario growth.
o The equalization reductions were partially offset by a $281 million
increase in Canada Health and Social Transfer (CHST) revenue, primarily
due to the Health Accord funding. Other factors affecting CHST in
2003/04 included increased prior-year entitlements, offset by a lower
entitlement in respect of 2003/04 reflecting a reduced BC share of the
national population.
o Other federal government transfers were $78 million higher than budget
as a $120 million contribution for relief of forest fire costs was
partially offset by lower recoveries in other cost sharing programs.
COMMERCIAL CROWN CORPORATION NET INCOME
Commercial Crown corporations recorded a combined net income of $1,881
million as compared to a budgeted net income of $1,381 million.
Major changes from budget included:
o BC Hydro's $77 million operating income, before deferral account
transfers, reflected a $147 million improvement over the budgeted $70
million loss. Operating results improved by $267 million primarily due
to higher domestic revenue, higher-than-expected water inflows into
hydro dam reservoirs (resulting in reduced energy costs), and lower
finance charges as a result of reduced borrowing requirements and
lower-than-expected interest rates. This improvement was offset by a
$120 million provision for BC Hydro's capitalized costs from the
Vancouver Island Generation and Georgia Strait Crossing projects.
o At $724 million, the Liquor Distribution Branch net income was a $69
million improvement over budget reflecting higher sales and a $33
million reduction in the estimated costs for the transition of retail
outlets.
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CHAPTER 2 - FINANCIAL REVIEW 43
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o BC Lotteries earnings of $728 million were $3 million higher than
budget. Lottery revenue was $30 million lower than expected, reflecting
the maturity of that market. However, the reduction was partially
offset by increases in bingo and casino revenue and lower direct
expenses for prizes and commissions. Operating costs were $5 million
lower than budget.
BC Lotteries' impact on the provincial government's bottom line is
less than its net income due to the distribution of gaming revenue to
third parties. In 2003/04, the province distributed $132 million to
charities, $53 million to local governments, and $8 million to the
federal government. Of the $535 million retained by the province, $147
million was dedicated to the Health Special Account and the remainder
to general revenue. Amounts provided to the Health Special Account are
used to fund the administration, operation and delivery of health
care, health research, health promotion and health education services.
o On government's fiscal year basis, BC Rail's results were $10 million
below the budget forecast.
For the year ended December 31, 2003, BC Rail reported net income of
$66 million - a $5 million improvement over their plan for the year.
An $11 million increase in operating income was partially offset by
lower than expected results from discontinued operations.
BC Rail's results for the first quarter of 2004 were $15 million lower
than the same period in 2003, resulting in a negative adjustment to
match the corporation's fiscal year to that of the provincial
government.
BC Rail's results do not reflect the BC Rail Investment Partnership as
this transaction was delayed until July 2004.
o On government's fiscal year basis, ICBC's results were $257 million
ahead of the budget forecast.
ICBC reported a net income of $225 million for the calendar year ended
December 31, 2003, a $180 million improvement over their budgeted net
income of $45 million. The change from budget was mainly due to
increases in premium revenue due to purchases of more coverage and the
retention of market share, decreases in claims costs due to better
driving conditions and changes in deductibles, reduced operating costs
and higher than expected gains on sale of property.
ICBC's results for the first quarter of 2004 were significantly higher
than the same period in 2003, resulting in a $77 million positive
adjustment to match the corporation's fiscal year to that of the
provincial government.
Five-year financial statements for the above Crown corporations are
presented in Appendix Tables A2.13 to A2.17.
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- -------------------------------------------------------------------------------
CONSOLIDATED REVENUE FUND EXPENSE
In 2003/04, spending for ministries and other areas totaled $24.8 billion,
or $238 million below budget before factoring in additional spending
related to natural disasters and the acceleration of a portion of the
government's funding commitment to the 2010 Winter Olympics. This
represents a decrease of 0.4 per cent from comparable spending in 2002/03,
which excludes a one-time forestry restructuring provision (see Table 2.4).
After including $482 million of additional spending for natural disasters
and the 2010 Winter Olympics, consolidated revenue fund spending totaled
$25.3 billion in 2003/04 and was $244 million higher than budget (but $75
million lower than planned if the Health Accord funding is included in the
budget). Including one-time items, overall spending increased 0.4 per cent
from 2002/03.
Major changes from budget included:
o $410 million of additional spending for responding to forest fires,
floods and BSE (bovine spongiform encephalopathy) by the Ministries of
Forests, Public Safety and Solicitor General, and Agriculture, Food and
Fisheries;
o $244 million in additional Ministry of Health Services spending,
reflecting the Health Accord; and
o $72 million of additional contributions in support of the government's
funding commitment to the 2010 Winter Olympics;
partially offset by
o $231 million below budget spending in ministries and other
appropriations;
o $63 million of unused contingencies vote funding; and
o $188 million of reduced operating debt interest costs.
As a result of effective management of ministry budgets and
earlier-than-expected progress in meeting three-year service plan targets,
ministries also addressed some one-time funding needs in a number of
priority areas. This included:
o $32 million of additional contributions to school districts to
partially address unfunded accumulated employee benefits;
o $26 million to provide support for research by Genome BC;
o $25 million to provide support for research by the Michael Smith
Foundation;
o $22 million to reimburse Health Authorities for SARS costs and to
address waitlists and other priorities;
o $23 million to support LEGACIES NOW, seniors housing and services and
ACTION SCHOOLS; and
o $14 million for facilities maintenance and other initiatives in support
of the post-secondary education sector.
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CHAPTER 2 - FINANCIAL REVIEW 45
- -------------------------------------------------------------------------------
In 2003/04, six ministries - Health Services, Education, Advanced
Education, Human Resources and Children and Family Development - accounted
for nearly 80 per cent of total CRF expense. Interest payments on the
government's direct operating debt accounted for about 3 per cent of
spending.
During 2003/04 the contingencies vote funded $107 million of new
initiatives and unforeseen requirements. In addition, SUPPLEMENTARY
ESTIMATES, together with statutory authority in various programs, allowed
the government to provide for additional costs of responding to disasters,
to flow through additional contributions received from the federal
government for health care, and to provide for the acceleration of some of
the government's funding commitment to the 2010 Winter Olympics.
Significant areas of spending and changes from budget included:
o Ministry of Advanced Education spending was slightly below budget.
Spending primarily reflected higher-than-planned contributions to
educational institutions. This was offset by lower interest costs for
capital-related debt and other areas. Spending was unchanged from the
previous year. Total post-secondary full-time equivalent student spaces
increased to 161,484 in 2003/04 from 160,320 in the previous year (up
0.7 per cent). During 2003/04 an additional $12 million of operating
funding was provided to support the increase in student spaces.
o Ministry of Education spending was $73 million below budget. Of this
variance, $52 million was due to a change in provincial accounting for
federal contributions received on account of K-12 education for
aboriginal children. Previously, the province recorded as revenue and
expenditure amounts transferred directly to school boards from the
federal government and First Nations for the education of aboriginal
children. Effective 2003/04, provincial revenue and expense will no
longer reflect federal or First Nation funding directly received by
school boards. Total funding received by school boards is unaffected by
this change. The rest of the spending variance was primarily due to
lower interest costs for capital-related debt. In 2003/04, public
school full-time enrolment declined to 580,483 from 587,247 (1.2 per
cent decrease), while independent school enrolment rose to 63,387 from
62,601 (1.3 per cent increase). Average per pupil funding for public
schools increased by 1.2 per cent.
o Ministry of Health Services spending was $244 million higher than
budget, but $75 million lower than planned if the Health Accord funding
is included in the budget. The Health Accord increase was partially
offset by lower spending for the regional health sector, due to the
reallocation of capital spending from the operating budget to the
capital budget and the deferral of a portion of the federal equipment
funding to subsequent fiscal years. As well, there were reductions in
Medical Services Plan, Pharmacare and capital-related debt interest
costs, partially offset by higher spending for emergency health care
services. In total, ministry spending was up 2.5 per cent from 2002/03.
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46 CHAPTER 2 - FINANCIAL REVIEW
- -------------------------------------------------------------------------------
o Ministry of Children and Family Development spending was $21 million
below budget as higher costs for community living services were more
than offset by lower costs in children-in-care and other programs.
During the year, the children-in-care average caseload declined 4.2 per
cent and the average cost per child-in-care declined by 4 per cent. In
addition, an increase in out-of-care placements for children (e.g.
adoptions) reduced overall expenditures in children and family
development services.
o Ministry of Energy and Mines spending was on budget and 64 per cent
higher than the previous year mainly due to additional investments in
oil and natural gas development initiatives and higher payments
required under the Vancouver Island Natural Gas Pipeline Assistance
Agreement due to higher-than-assumed natural gas prices in 2003/04.
o Ministry of Forests expense was down $57 million from budget, excluding
forest fire costs. The change primarily reflects a lower amount of
inventoried costs expensed during the year through the BC Timber Sales
Program as a result of reduced sales, and a larger portion of
development costs capitalized and deferred to future sales.
o Ministry of Human Resources spending was $23 million below budget and 8
per cent lower than the previous year. This reflects a continuing
downward trend in the employment assistance caseload and average costs
per case. The average monthly assistance caseload of 116,014 was 2.1
per cent below budget and 11.1 per cent lower than in 2002/03.
o Ministry of Small Business and Economic Development spending was
slightly below budget and $58 million higher than the previous year
mainly due to the start of contributions towards the Vancouver
Convention and Exhibition Centre.
o The Contingencies and New Programs Vote accommodates funding for
unanticipated events or items where the timing and amounts involved are
uncertain. In 2003/04, this vote funded $107 million of new initiatives
and unforeseen requirements in 2003/04. Significant items included
funding for the Air India, Pickton and other trials; the missing
persons investigation; new oil and gas initiatives and higher payments
required under the Vancouver Island Natural Gas Pipeline Assistance
Agreement; interest liabilities related to protected areas
compensation; and unusually high year-end adjustments to recognize
accumulated pre-retirement and leave liability costs. At year-end, $63
million of this vote was unspent.
o Management of Public Funds and Debt (debt interest) was $188 million
below budget due to significantly lower-than-assumed borrowing
requirements, lower interest rates and a stronger Canadian dollar.
Government operating debt requirements were $2 billion below budget.
The average long-term interest rate was 0.9 percentage points lower
than assumed, while the average short-term interest rate was 1.1
percentage points lower.
o Government Restructuring (All Ministries) - 2003/04 was the final year
of the three-year $550 million restructuring plan for the Consolidated
Revenue Fund (CRF) set out in the 2002/03 budget. CRF expenses for
2003/04 were $21 million below budget due to lower requirements of
ministries and agencies. Appendix Table A2.11 provides details on total
restructuring
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- -------------------------------------------------------------------------------
expenses (including Crown corporations). The topic box at the end of
this chapter provides a summary of restructuring costs over the
three-year period.
o Natural Disasters - 2003/04 marked a record year for provincial
disasters which included an unprecedented severe forest fire season and
responding to the impacts of flooding and BSE. Table 2.5 provides a
breakdown of costs and a forest fires topic box is provided at the end
of this chapter.
TABLE 2.5 NATURAL DISASTER COSTS
<Table>
<Caption>
CHANGE
ACTUAL AVAILABLE FROM
($ MILLIONS) COSTS BUDGET BUDGET
- ------------ ----- ------ ------
FIRES
MINISTRY OF FORESTS
Direct fire costs ....................................... 363
Forest remediation ...................................... 8
---
371 55 316
---
MINISTRY OF PUBLIC SAFETY AND SOLICITOR GENERAL
Emergency response ...................................... 61 3 58
Related compensation .................................... 5 - 5
FLOODS
MINISTRY OF PUBLIC SAFETY AND SOLICITOR GENERAL
Prior year floods and other ............................. 12
2003 Floods ............................................. 10
---
22 15 7
---
BOVINE SPONGIFORM ENCEPHALOPATHY (BSE) ASSISTANCE
MINISTRY OF AGRICULTURE, FOOD AND FISHERIES
Bovine Spongiform Encephalopathy (BSE) assistance ....... 7
Contribution to the Agriculture Income Stabilization
Trust Fund - recognition of BSE claims ............... 17
---
24 - 24
--- --- ---
TOTAL.................................................... 483 73 410
=== === ===
</Table>
In total, spending for responding to natural disasters amounted to $483
million in 2003/04, of which approximately $410 million of additional
spending was authorized through statutory authority under various
ministry acts or SUPPLEMENTARY ESTIMATES. As a result, a number of
exemptions to penalties under the BALANCED BUDGET AND MINISTERIAL
ACCOUNTABILITY ACT were provided for the Ministries of Forests; Public
Safety and Solicitor General; and Agriculture, Food and Fisheries in
respect of the 2003/04 fiscal year.
Due to the severity of the 2003 fire season, the provincial government
was able to obtain federal cost-sharing assistance estimated at $120
million. In addition, the federal government also provided military
support personnel at no cost to the province.
o 2010 Winter Olympics Accelerated Spending - Vancouver was selected as
the host city for the 2010 Winter Olympics in July 2003. Due to
expenditure savings across government, and in particular lower debt
interest costs, the provincial government accelerated $72 million of
its future commitment to the 2010 Winter Olympics by obtaining a
SUPPLEMENTARY ESTIMATE and an
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48 CHAPTER 2 - FINANCIAL REVIEW
- -------------------------------------------------------------------------------
exemption under the BALANCED BUDGET AND MINISTERIAL ACCOUNTABILITY ACT
at year-end. In total, spending for the 2010 Winter Olympics was $111
million in 2003/04 and included the $72 million SUPPLEMENTARY ESTIMATE
plus $39 million of budgeted spending in the Ministry of Community,
Aboriginal and Women's Services.
TAXPAYER-SUPPORTED CROWN CORPORATIONS AND AGENCY EXPENSES
Taxpayer-supported Crown corporations and agencies provide a number of
services to the public. These agencies are primarily funded from ministry
sources, but may also have outside sources of revenue. Some of the services
provided by taxpayer-supported Crowns are highway construction (BC
Transportation Financing Authority), property management (BC Buildings),
property assessment, (B.C. Assessment Authority), social housing (BC
Housing Management Commission), transit services (BC Transit), and legal
services (Legal Services Society).
Revenue and spending of taxpayer-supported Crown corporations are combined
with CRF revenue and expenses in Tables 2.3 and 2.4. Revenues and expenses
for individual taxpayer-supported Crown corporations are detailed in
Appendix Table A2.12.
As most taxpayer-supported Crowns are funded in part from ministry budgets,
their impact on total government spending is the amount by which their
total spending exceeds any grants and transfers made to these organizations
by the ministries and special offices.
The net spending (total spending less grants and internal transfers) impact
of taxpayer-supported Crowns was $1,393 million in 2003/04 - $242 million
higher than budget. This was offset by a $273 million decrease in expenses
for which costs were directly recovered from external parties.
The increase in net spending impact was primarily due to the introduction
of two new agencies and higher spending by a number of other Crowns. The
spending increases were partially offset by higher revenue. The decrease in
cost recovered expenses was primarily due to lower interest costs on loans
for which the government acts as a fiscal agent on behalf of its commercial
Crown corporations. The government expenses the interest and reports the
recovery as offsetting revenue.
Expenses recovered from external entities are ministry expenses that have a
dedicated source of revenue. While ministry budgets are shown net of
recoveries, generally accepted accounting principles require these expenses
and the associated revenue to be separately disclosed in government's
financial statements. Changes to budgeted recoveries result from
fluctuations in demand and/or introduction of new or short term programs
under section 25 of the FINANCIAL ADMINISTRATION ACT. However, as recovered
expenses cannot exceed the revenue received for the program, any change in
expense is matched by an equal and offsetting change in revenue, resulting
in no bottom line impact.
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FULL-TIME EQUIVALENTS (FTES)
Staff utilization is measured in full-time equivalents. FTEs are calculated
by dividing the total hours of employment paid for in a given period by the
number of hours an individual, full-time person would normally work in that
period. In 2003/04, FTEs were 1,215 below budget and 4,244 lower than the
previous year (see Table 2.6).
TABLE 2.6 FULL-TIME EQUIVALENTS (FTES) UTILIZATION
<Table>
<Caption>
Budget Actual Actual Annual
2003/04 2003/04 2002/03(1) Change(2)
------- -------- -------- --------
(per cent)
Ministries and special offices (CRF).................. 29,049 28,684 29,751 (3.6)
Taxpayer-supported Crown
corporations and agencies ......................... 5,270 4,570 7,747 (41.0)
Regional authorities ................................. 150 - - -
------ ------ ------
TOTAL FTES ........................................... 34,469 33,254 37,498 (11.3)
====== ====== ======
</Table>
(1) Comparative figures for taxpayer-supported Crown corporations and
agencies have been restated to include the Forensic Psychiatric
Services Commission (448 FTEs) and Partnerships BC Ltd. (25 FTEs).
(2) Percentage change between 2003/04 actual and 2002/03 actual.
Ministry and special offices utilization was 365 FTEs lower than budget.
Higher-than-expected participation in voluntary departure and early
retirement programs more than offset the higher than normal requirements
to fight forest fires and a delay in transferring 150 FTEs to the Children
and Family Development governance authorities.
Actual FTE utilization for taxpayer-supported Crown corporations and
agencies was 700 FTEs lower than budget. The decrease was primarily due to
actual utilization amounts for the Canadian Blood Services not being
available at year-end to compare against the budgeted estimate of 545 FTEs
and a planned 82 FTE workforce reduction strategy for the Legal Services
Society that was not reflected in the budget.
Transfers of Ministry of Children and Family Development personnel (150
FTEs) to the new regional governance authorities have been delayed until
the authorities are able to fulfill their role based on ministry readiness
criteria.
The reduction in ministry and special offices FTEs as compared to the
previous year (1,067 FTEs) reflects the final phase of the three-year
workforce reduction strategy. The reduction in Crown corporation and agency
FTEs from the previous year (3,177 FTEs) was primarily due to the
devolution of BC Ferries to a private sector operator.
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PROVINCIAL CAPITAL SPENDING
Capital spending is required to build, acquire or replace assets such as
roads, schools, post-secondary facilities, hospitals and related major
equipment.
Capital spending does not flow directly to the government's annual surplus
or deficit as generally accepted accounting principles require capital
costs to be spread out over the useful lives of the related assets through
annual amortization expenses.
TABLE 2.7 CAPITAL SPENDING (1)
<Table>
<Caption>
Budget Actual Actual Annual
($ millions) 2003/04 2003/04 2002/03 Change
------- ------- ------- ------
(per cent)
TAXPAYER-SUPPORTED
Education ....................................................... 407 354 367 (3.5)
Health .......................................................... 203 140 117 19.7
BC Transportation Financing Authority ........................... 298 370 255 45.1
BC Ferries ...................................................... - - 58 (100.0)
Rapid Transit Project 2000 ...................................... 42 14 59 (76.3)
Vancouver Convention Centre Expansion Project ................... 67 44 - -
Government operating (ministries) ............................... 325 185 183 1.1
Other(2) ........................................................ 108 19 92 (79.3)
----- ----- -----
TOTAL TAXPAYER-SUPPORTED ........................................ 1,450 1,126 1,131 (0.4)
----- ----- -----
SELF-SUPPORTED COMMERCIAL
BC Hydro ........................................................ 820 636 741 (14.2)
BC Rail ......................................................... 39 33 52 (36.5)
Columbia River power projects(3) ................................ 76 100 54 85.2
Insurance Corporation of British Columbia(4) .................... 71 26 41 (36.6)
BC Lotteries .................................................... 52 49 30 63.3
Liquor Distribution Branch ...................................... 5 2 9 (77.8)
----- ----- -----
TOTAL SELF-SUPPORTED COMMERCIAL .................................... 1,063 846 927 (8.7)
----- ----- -----
TOTAL CAPITAL SPENDING ............................................. 2,513 1,972 2,058 (4.2)
===== ===== =====
</Table>
(1) Net of expenditures funded by non-provincial government sources
including the federal government, hospital districts, universities and
the Greater Vancouver Transportation Authority (TRANSLINK).
(2) Includes BC Housing Management Commission, Provincial Rental Housing
Corporation, BC Buildings, Ministry of Attorney General, Ministry of
Public Safety and Solicitor General, Ministry of Children and Family
Development and BC Transit.
(3) Columbia Power Corporation and Columbia Basin Trust.
(4) Includes ICBC Properties Ltd.
Capital spending in 2003/04 totaled $2.0 billion, $541 million below
budget. Power generation and transmission projects accounted for 37 per
cent of the total, schools and health facilities for 25 per cent, and
transportation projects for 22 per cent (see Chart 2.3).
Taxpayer-supported capital spending includes schools, hospitals,
post-secondary facilities and transportation projects, plus minor capital
spending by ministries and other minor taxpayer-supported agencies. In
2003/04, spending of $1.1 billion was $324 million below budget due to
reduced spending for health and education facilities, SKYTRAIN, and
ministry minor capital purchases. This was partially offset by the
reclassification to capital spending of certain BC Transportation Authority
expenses to better reflect procurement and investment strategies.
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CHART 2.3 CAPITAL SPENDING, 2003/04
[Graphic]
Self-supported commercial Crown corporation capital spending includes
projects undertaken by BC Hydro, BC Rail, ICBC and for Columbia River power
projects. Spending for these agencies totaled $846 million, $217 million
below budget mainly due to delayed spending by BC Hydro as proposals to
supply Vancouver Island with additional power are evaluated. Lower spending
was partially offset by Columbia River power project expenditures that were
deferred from prior years.
Table 2.8 shows a summary of capital spending changes since the 2003/04
budget.
TABLE 2.8 CAPITAL SPENDING - CHANGES FROM BUDGET 2003
<Table>
<Caption>
FINAL
($ MILLIONS) CHANGE RESULTS
- ------------ ------ -------
CAPITAL SPENDING - BUDGET 2003 2,513
Taxpayer-supported
BC Transportation Financing Authority - mainly accounting treatment to
reflect current procurement and investment strategies....................... 72
Education - mainly delayed construction of school facilities ................ (53)
Health - mainly delayed project starts as regional plans are developed ...... (63)
Rapid Transit Project 2000 - delayed SkyTrain expenditures .................. (28)
Government operating - reduced ministry minor capital spending .............. (140)
Other(1)..................................................................... (112) (324)
-----
Self-supported commercial
BC Hydro - mainly deferred spending for the Vancouver Island generation
project .................................................................... (184)
Columbia power projects - mainly additional spending deferred from
previous years ............................................................. 24
ICBC - reduced requirements and lower building improvements costs for
Surrey Central City ........................................................ (45)
Other ....................................................................... (12) (217)
---- -----
TOTAL CHANGE ..................................................................... (541)
-----
CAPITAL SPENDING - ACTUAL ........................................................... 1,972
=====
</Table>
(1) Includes BC Buildings, Vancouver Convention Centre Expansion Project
and other taxpayer-supported Crown corporations.
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52 CHAPTER 2 - FINANCIAL REVIEW
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PROVINCIAL DEBT
CHART 2.4 PROVINCIAL DEBT COMPONENTS
[Graphic]
(1) Amount includes debt to finance deficits, ministry minor capital
spending and operating activities. It also includes ferry
infrastructure debt and a portion of roads infrastructure debt incurred
up to 1994/95.
The government and its Crown corporations borrow to finance their own
operations (for example, when revenues fall short of expenses), to finance
construction of capital projects or other investments, to refinance
maturing debt and to finance working capital needs.
Provincial debt increased $798 million to total $37.3 billion at March 31,
2004, or 26.2 per cent of provincial GDP (see Chart 2.5, Table 2.9 and
Appendix Table A2.18). Approximately $28 billion or 75 per cent of total
debt reflects investments in capital assets - schools, hospitals, roads,
transportation, utilities, and other forms of provincial infrastructure.
The remaining $9.3 billion represents accumulated borrowing to fund public
services.
CHART 2.5 PROVINCIAL DEBT INCREASE
[Graphic]
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TABLE 2.9 PROVINCIAL DEBT SUMMARY(1)
<Table>
<Caption>
Budget Actual Actual Annual
($ millions) 2003/04 2003/04 2002/03 Change
------- ------- ------- ------
(per cent)
TAXPAYER-SUPPORTED DEBT
Provincial government direct operating ..................... 17,782 15,754 15,477 1.8
Education facilities ....................................... 6,170 6,072 5,793 4.8
Health facilities .......................................... 2,205 2,084 2,004 4.0
Highways and public transit ................................ 4,987 4,880 4,786 2.0
Other(2) ................................................... 902 808 1,027 (21.3)
------ ------ ------
TOTAL TAXPAYER-SUPPORTED DEBT ................................... 32,046 29,598 29,087 1.8
------ ------ ------
SELF-SUPPORTED DEBT
Commercial Crown corporations and agencies ................. 8,420 7,739 7,452 3.9
------ ------ ------
TOTAL SELF-SUPPORTED DEBT ....................................... 8,420 7,739 7,452 3.9
----- ----- -----
FORECAST ALLOWANCE .............................................. 500 - - -
------ ------ ------
TOTAL PROVINCIAL DEBT ........................................... 40,966 37,337 36,539 2.2
====== ====== ======
</Table>
(1) Debt is after deduction of sinking funds, unamortized discounts and
unrealized foreign exchange gains/(losses), and excludes accrued
interest. Government direct and fiscal agency debt accrued interest is
reported in the government's accounts as an accounts payable. Figures
for 2002/03 have been restated to conform with the presentation used
for 2003/04 and to reflect changes in underlying data.
(2) Includes government services Crown corporations and agencies, other
fiscal agency loans, student assistance loans, loan guarantees to
agricultural producers, guarantees issued under economic development
and home mortgage assistance programs, and loan guarantee provisions.
Total debt was $3.6 billion below budget reflecting lower-than-forecast
debt balances at the end of the 2002/03 fiscal year, improved government
operating results, reduced capital spending, reduced working capital
requirements and non-utilization of the forecast allowance.
TAXPAYER-SUPPORTED DEBT
Taxpayer-supported debt increased by $511 million to total $29.6 billion at
year-end (20.8 per cent of GDP). This was $2.4 billion below budget, mainly
reflecting:
o lower-than-forecast debt balances at the end of the 2002/03 fiscal
year;
o lower borrowing requirements for government's consolidated revenue fund
due to better-than-expected operating results, lower ministry minor
capital spending, reduced working capital requirements and higher cash
balances at the start of the fiscal year;
o reduced capital spending for education and health facilities; and
o lower working capital requirements for transportation projects.
SELF-SUPPORTED DEBT
Self-supported debt totaled $7.7 billion at March 31, 2004 (5.4 per cent of
GDP). Debt at year-end was up $287 million from the previous year and $681
million below plan mainly reflecting:
o lower-than-forecast debt balances at the end of the 2002/03 fiscal
year; and
o better operating results and decreased working capital requirements for
BC Hydro.
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54 CHAPTER 2 - FINANCIAL REVIEW
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TABLE 2.10 DEBT - CHANGES FROM BUDGET 2003
<Table>
<Caption>
FINAL
($ millions) CHANGE RESULTS
------ -------
PROVINCIAL DEBT AT MARCH 31, 2004 - BUDGET 2003 ............................................ 40,966
March 31, 2003 year-end changes between budget forecast and the 2002/03 PUBLIC ACCOUNTS :
Taxpayer-supported debt ................................................................. (221)
Self-supported commercial .............................................................. (190)
-----
ADJUSTED PROVINCIAL DEBT FORECAST AT MARCH 31, 2004 - POST PUBLIC ACCOUNTS 40,555
TAXPAYER-SUPPORTED DEBT CHANGES:
Government operating:
- Improved operating results .......................................................... (544)
- Health accord funding - cash/accrual differences .................................... (390)
- BC Hydro dividend - cash/accrual differences ........................................ (285)
- Reduced working capital requirements ................................................ (370)
- Higher cash balances at the start of the year ....................................... (104)
- Reduced loans and advances .......................................................... (84)
- Reduced minor capital spending ...................................................... (140)
Education facilities (mainly lower capital spending) .................................... (78)
Health facilities (mainly lower capital spending) ....................................... (103)
Transportation (mainly lower working capital requirements) .............................. (62)
BC Buildings (mainly lower working capital requirements and capital spending) ........... (50)
Other (mainly lower working capital requirements) ....................................... (17)
-----
Total taxpayer-supported .............................................................. (2,227)
SELF-SUPPORTED DEBT CHANGES:
BC Hydro operating results/working capital requirements ................................. (480)
Other ................................................................................... (11)
-----
Total self-supported .................................................................. (491)
Debt forecast allowance not needed ...................................................... (500)
-------
PROVINCIAL DEBT AT MARCH 31, 2004 - 2003/04 PUBLIC ACCOUNTS................................. 37,337
=======
</Table>
Table 2.10 shows a summary of debt changes from the 2003/04 budget.
Although the summary accounts deficit was $1.3 billion, total provincial
debt only increased $798 million. This was due to numerous factors
including non-cash items included in the deficit (primarily amortization
costs), timing differences between accrued revenue/expenses and actual cash
receipts/disbursements, and changes in working capital items such as
accounts receivable and accounts payable. Table 2.11 provides a
reconciliation between the summary accounts deficit and the total
provincial debt increase.
TABLE 2.11 RECONCILIATION OF SUMMARY DEFICIT TO DEBT INCREASE - 2003/04
<Table>
<Caption>
($ millions)
SUMMARY DEFICIT .................................................. 1,339
Non-cash items included in the deficit (mainly amortization) ..... (1,154)
Federal government equalization advance .......................... (733)
Supplemental CHST payment deferred ............................... (390)
Taxpayer-supported capital expenditures .......................... 1,126
Other working capital and investment requirements ................ 323
Self-supported Crown corporations debt changes ................... 287
-------
TOTAL PROVINCIAL DEBT INCREASE ................................... 798
=======
</Table>
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CREDIT RATING
A credit rating is an evaluation of a borrower's ability to pay interest
and to repay principal. A credit rating affects the borrower's debt
servicing costs and the investor's rate of return since an investor will
demand a higher interest rate on a higher-risk, lower-rated security. Table
2.12 provides an interprovincial comparison of credit ratings.
TABLE 2.12 INTERPROVINCIAL COMPARISON OF CREDIT RATINGS, JUNE 2004
<Table>
<Caption>
RATING AGENCY(1)
------------------------------------------------------------
MOODY'S INVESTORS STANDARD AND DOMINION BOND
PROVINCE SERVICE POOR'S RATING SERVICE
- -------- ------- ------ --------------
British Columbia............. Aa2 AA- AA (Low)
Alberta...................... Aaa AAA AAA
Saskatchewan................. Aa3 AA- A
Manitoba..................... Aa2 AA- A (High)
Ontario...................... Aa2 AA AA
Quebec....................... A1 A+ A
New Brunswick................ Aa3 AA- A
Nova Scotia.................. A3 A- BBB (High)
Prince Edward Island......... A2 Not Rated A (Low)
Newfoundland................. A3 A- BBB
</Table>
(1) The rating agencies assign letter ratings to borrowers. The major
categories, in descending order of credit quality are: AAA/Aaa; AA/Aa;
A; BBB/Baa; BB/Ba; and B. The "1", "2", "3", "high", "low", "+", and
"-" modifiers show relative standing within the major categories. For
example, AA+ exceeds AA and Aa2 exceeds Aa3.
The ratio of taxpayer-supported debt relative to gross domestic product is
a measure often used by investors and credit rating agencies when analyzing
a province's ability to manage its debt load. British Columbia's
taxpayer-supported debt to gross domestic product ratio is one of the
lowest in Canada, translating into a strong credit rating and lower debt
service costs.
DEBT INDICATORS
Table 2.13 provides a historical summary of financial indicators that are
used to depict the province's debt position, recent borrowing trends and
the impact of debt on fiscal operating results.
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TABLE 2.13 KEY DEBT INDICATORS - 1999/2000 TO 2003/04(1)
<Table>
<Caption>
Budget Actual
1999/2000 2000/01 2001/02 2002/03 2003/04 2003/04
--------- ------- ------- ------- ------- -------
Debt to revenue (per cent)
Total provincial ........................... 101.4 82.7 94.8 108.9 112.1 104.2
Taxpayer-supported ......................... 100.6 90.0 104.2 116.2 124.4 112.4
Debt per capita ($)(2)
Total provincial ........................... 8,549 8,321 8,764 8,879 9,800 9,003
Taxpayer-supported ......................... 6,247 6,172 6,668 7,069 7,667 7,137
Debt to GDP (per cent)(3)
Total provincial ........................... 28.4 25.6 27.1 27.0 29.4 26.2
Taxpayer-supported ......................... 20.7 19.0 20.6 21.5 23.0 20.8
Interest bite (cents per dollar of revenue)(4)
Total provincial ........................... 7.5 6.4 6.4 6.7 7.3 6.3
Taxpayer-supported ......................... 7.2 6.8 6.6 6.6 7.7 6.5
Interest costs ($ millions)
Total provincial ........................... 2,528 2,604 2,423 2,233 2,666 2,241
Taxpayer-supported ......................... 1,785 1,871 1,724 1,662 1,982 1,707
Interest rate (per cent)(5)
Taxpayer-supported ......................... 7.4 7.5 6.6 5.9 6.5 5.8
BACKGROUND INFORMATION:
Revenue ($ millions)
Total provincial(6),(7) ................... 33,804 40,618 37,689 33,545 36,528 35,824
Taxpayer-supported(8) ..................... 24,909 27,690 26,108 25,034 25,757 26,334
Total debt ($ millions)
Total provincial .......................... 34,289 33,609 35,741 36,539 40,966 37,337
Taxpayer-supported(9) ..................... 25,057 24,930 27,193 29,087 32,046 29,598
Provincial GDP ($ millions)(10) .............. 120,921 131,086 132,050 135,552 139,540 142,418
Population (thousands at July 1)(11) ......... 4,011 4,039 4,078 4,115 4,180 4,147
</Table>
(1) Figures for prior years have been restated to conform with the
presentation used for 2004 and to include the effects of changes in
underlying data and statistics.
(2) The ratio of debt to population (e.g. debt at March 31, 2004 divided by
population at July 1, 2003).
(3) The ratio of debt outstanding at fiscal year end to provincial nominal
gross domestic product (GDP) for the calendar year ending in the fiscal
year (e.g. debt at March 31, 2004 divided by 2003 GDP).
(4) The ratio of interest costs (less sinking fund interest) to revenue.
Figures include capitalized interest expense in order to provide a more
comparable measure to outstanding debt.
(5) Weighted average of all outstanding debt issues.
(6) Includes revenue of the consolidated revenue fund plus revenue of all
Crown corporations and agencies.
(7) Total provincial revenue has been restated to reflect a change in
accounting policy for power utilities. Electricity trade activities
that are supported by derivative purchases and sales are now reported
on a net basis (no bottom line impact). This resulted in a revenue
decrease (and offseting decrease in expense) of $1.3 billion in 2002/03
and $1.1 billion in 2003/04 for BC Hydro. Amounts for prior years have
not been restated as information is not available. This restatement
affects the calculation of two indicators: total provincial debt to
revenue and total provincial interest bite.
(8) Excludes revenue of commercial Crown corporations and agencies.
(9) Excludes debt of commercial Crown corporations and agencies and funds
held under the province's warehouse borrowing program.
(10)GDP for the calendar year ending in the fiscal year (e.g. GDP for 2003
is used for the fiscal year ended March 31, 2004).
(11)Population at July 1st within the fiscal year (e.g. population at July
1, 2003 is used for the fiscal year ended March 31, 2004).
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FOREST FIRES IN BRITISH COLUMBIA, 2003
WORST FIRE SEASON ON RECORD
TABLE 1: BRITISH COLUMBIA FOREST FIRES 1993 - 2003
<Table>
<Caption>
FIRE FIGHTING
YEAR FIRES HECTARES COSTS(1)
- ---- ----- -------- -------------
(Number) (Number) ($ millions)
2003.................. 2,479 264,747 371
2002.................. 1,781 8,581 38
2001.................. 1,266 9,677 54
2000.................. 1,539 17,673 53
1999.................. 1,207 11,581 21
1998.................. 2,665 76,574 154
1997.................. 1,175 2,960 19
1996.................. 1,358 20,669 37
1995.................. 1,474 48,080 38
1994.................. 4,088 30,310 91
1993.................. 1,497 5,183 25
AVERAGE (1993 TO 2002) 1,805 23,129 53
</Table>
(1) Includes direct fire fighting costs in the Ministry of Forests (excluding
year-end overhead chargebacks). Does not include additional costs for
emergency response under the Provincial Emergency Program in the Ministry
of Public Safety and Solicitor General or other ministries.
In British Columbia, 2003 was the worst fire season on record with 2,479 fires
and over 260,000 hectares damaged. From 1993 through 2003 the annual average
number of fires was under 2,000 with an annual average of about 23,000 hectares
burned. However, describing an average or typical fire season is difficult given
the significant variation from year to year in number of fires, their size and
proximity to communities.
Forest fires that threaten homes and communities are referred to as urban
interface fires. Interface fires are generally more expensive to fight and
require response by the Forest Service, RCMP, B.C. Ambulance Service, local
government fire departments, and the Provincial Emergency Program. In 2003,
there were 25 interface fires, compared to less than five per year historically.
Total direct fire fighting costs were about $363 million, and at the height of
fire fighting efforts in late August the province was spending almost $9 million
a day on fire suppression. The province-wide state of emergency, which was
declared on August 2, 2003, was extended to September 15 due to the extreme fire
hazard conditions. At the peak of the disaster, 5,500 personnel were engaged in
the fire suppression efforts, including Canadian military personnel.
DIRECT IMPACT ON FISCAL PLAN AND FUNDING SOURCES
Despite record fire-related costs for the year, improvements in other areas of
the budget, such as ministry program savings, higher than budgeted revenues and
Crown corporation improvements, helped to ensure that these costs were managed
within the overall fiscal plan. The following table provides an overview of
costs for forest fire response and remediation in 2003/04. Certain costs, such
as clean up and remediation related to the 2003 season, will continue into the
2004/05 fiscal year.
TABLE 2: FOREST FIRE RESPONSE AND REMEDIATION COSTS - 2003/04
<Table>
<Caption>
CHANGE
ACTUAL AVAILABLE FROM
$ MILLIONS COSTS BUDGET BUDGET
- ---------- ------ ----- -----
Ministry of Forests:
Direct fire fighting ...................... 363 55 308
Clean up and remediation .................. 8 - 8
Ministry of Public Safety and
Solicitor General:
Emergency response ........................ 66 3 63
------ ----- -----
Total 437 58 379
====== ===== =====
</Table>
The federal government designated the firestorms as an event eligible for
federal assistance. Based on the Disaster Financial Assistance Agreement between
the province and the federal government, $120 million was recorded as a
provincial revenue recovery under this agreement in 2003/04. Further recoveries
may be recorded in 2004/05 as the province continues with remediation and clean
up resulting from the 2003 events.
Both the Ministry of Forests and the Ministry of Public Safety and Solicitor
General may access additional funds under what is known as statutory spending
authority if their budgets for
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emergencies like fires and floods are insufficient to meet actual costs for fire
suppression or emergency response. This type of spending authority was expressly
put into the legislation so that there would be no delay in responding to
emergency situations.
Due to the extraordinary nature of the forestfire related costs in 2003/04,
exemptions were provided to the responsible ministers for the purposes of the
BALANCED BUDGET AND MINISTERIAL ACCOUNTABILITY ACT.
FIRESTORM 2003 PROVINCIAL REVIEW
With dry weather in 2003, wildfires were a threat to British Columbia
communities, particularly in the Interior. The government undertook a review of
its wildfire policies and procedures after the catastrophic events of 2003. The
Filmon Firestorm 2003 Provincial Review discussed and recommended how the
government can be better prepared to deal with future wildfires. As a result,
the government began the process of implementing all 42 of the review's
recommendations. For more information on these recommendations, please see the
report at:
http://www.2003firestorm.gov.bc.ca/firestormreport/FirestormReport.pdf.
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GOVERNMENT RESTRUCTURING UPDATE
In January 2002, the government announced its three-year restructuring plan. The
plan, which forecast an average reduction to ministry spending targets, apart
from health and education, of 25 per cent over the next three years and a
reduction of approximately 11,800 full time equivalents (FTEs), required most
ministries to restructure their programs and activities.
During the same time period, a number of Crown corporations also undertook
restructuring activities, primarily in response to direction provided through
government's detailed core services review.
Over the three-year period, restructuring costs for ministries and Crown
corporations totaled $883 million, of which $790 million related to exit costs
(1). The remaining $93 million related to restructuring activities of ongoing
benefit to government.
MINISTRY RESTRUCTURING
TABLE 1: GOVERNMENT RESTRUCTURING COSTS
<Table>
<Caption>
3-Year
($ MILLIONS) 2001/02 2002/03 2003/04 TOTAL
- ------------ ------- ------- ------- -----
Ministries
- Workforce adjustment strategy ................ 96 91 81 268
- Accommodation restructuring .................. 61 107 89 257
- Other restructuring costs .................... 11 22 16 49
------- ------- ------- -----
TOTAL MINISTRY RESTRUCTURING COSTS ............. 168 220 186 574
Taxpayer-supported Crown corporations ............ 63 (19) (9) 35
Commercial Crown corporations .................... 211 79 (16) 274
------- ------- ------- -----
TOTAL GOVERNMENT RESTRUCTURING COSTS ............. 442 280 161 883
======= ======= ======= =====
</Table>
As part of the restructuring initiative, government authorized the expenditure
of $550 million over three years to assist in ministry restructuring activities.
After annual updates to the plan to address timing issues with respect to
ministry restructuring activity, actual ministry restructuring costs over the
three-year period totaled $574 million.
Ministry restructuring focused on three areas - workforce reduction,
accommodation restructuring and other restructuring activities.
In November 2001, the government introduced a workforce adjustment strategy
targeted at addressing 11,800 in FTE reductions. The strategy included voluntary
departures, early retirement, reduction of auxiliary employees and attrition. It
was also expected that, as ministries explored options for alternate service
delivery, some pubic servants affected by ministry reductions would secure
employment with new service providers. Taking into account auxiliary employees,
attrition and transfers to organizations outside the government reporting
entity, it was anticipated that approximately 7,300 employees would be impacted
by the reduction plan.
During the three-year period, over 6,500 employees took advantage of the
voluntary and early retirement programs, creating vacant positions and better
placement options for other employees. As a result, the number of involuntary
severances was smaller than anticipated. In total, approximately 7,600 employees
have left government, exceeding the initial target of 7,300, at an average
severance cost of $35,000 per FTE, including all support and related transition
costs.
CHART 1 THREE-YEAR MINISTRY EMPLOYEE REDUCTIONS
[Graphic]
(1) Exit costs are incremental one-time costs that have no future benefit to
government due to the exit from an operation, location or function.
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60 CHAPTER 2 - FINANCIAL REVIEW
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The second largest area of restructuring was related to accommodation and
primarily included costs associated with space reductions and rearrangements as
a result of ministry downsizing, staffing reductions and changes in service
delivery. Over the three-year period, more than 1,100 accommodation projects
were completed resulting in a reduction of approximately 270,000 square meters
of space previously occupied by government ministries. The total cost for this
initiative was $257 million. Of this amount, $184 million, or 72 per cent, was
attributable to lease payouts. Planning and implementation, tenant improvements
and other miscellaneous costs accounted for the remaining $73 million.
Ministries also accessed a total of $49 million over the three-year period for
other costs required to support their restructuring plans. These included asset
write-offs, contract payouts and/or terminations for services no longer provided
by government, changes in business processes to improve efficiencies as well as
costs to relocate displaced employees to other positions within government.
CROWN CORPORATION RESTRUCTURING
Primarily in response to direction provided through government's detailed core
services review, a number of taxpayer-supported and commercial Crown
corporations engaged in a series of restructuring activities during this
three-year period.
Total restructuring expenses for Crown corporations totaled $309 million.
Commercial Crown corporations, including BC Hydro, ICBC and BC Rail, incurred
the majority of these costs, accounting for $274 million or 89 per cent of all
Crown corporation costs. The remaining $35 million related to restructuring
expenses for taxpayer-supported Crown corporations.
Restructuring activities were funded and overseen by individual Crown
corporations, as compared to centrally for government ministries.
FISCAL PLAN IMPLICATIONS
An improving economy together with continued prudent fiscal management have
enabled government to not only improve upon its deficit and debt targets in each
of the past three years but also to re-direct some of the additional fiscal room
created back into ministry budgets. As a result, at the end of the three-year
period, the average reduction to ministry budgets, apart from health and
education, was 14 per cent, as compared to the initial reduction target of 25
per cent.
Ongoing ministry savings as a result of the workforce adjustment strategy are
anticipated to be between $500 - $600 million annually, beginning in 2004/05.
Additional savings are expected in commercial Crown corporations. Annualized
savings from ministry accommodation restructuring are projected to be in excess
of $63 million.
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<Page>
APPENDIX 2
<Page>
62 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
GOVERNMENT'S FINANCIAL STATEMENTS
GOVERNMENT REPORTING ENTITY
The provincial government conducts its activities through:
o ministries;
o Crown corporations and agencies; and
o the SUCH sector (school districts; universities; colleges, university
colleges and institutes; and health authorities and hospital
societies).
The accounts relating to the ministries and other direct activities of
government are contained in the Consolidated Revenue Fund (CRF), whose
financial results are reported as a separate entity in the PUBLIC ACCOUNTS.
The CRF comprises all money over which the legislature has direct power of
appropriation. The operations of Crown corporations and agencies and the
SUCH sector entities are recorded in their own financial statements, which
are subject to audit by the Auditor General or by private-sector auditors.
The relationship between the Crown corporations and the legislature is
guided by governance agreements between the Crown corporation boards and
their responsible ministers. The relationship between the SUCH sector
entities and the legislature is set out in statute.
According to generally accepted accounting principles (GAAP) for senior
governments as established by the Public Sector Accounting Board (PSAB) of
the Canadian Institute of Chartered Accountants, the province's financial
reporting should consolidate the financial results of all these entities
into a single set of financial statements.
The provincial government publishes its financial statements annually in
the PUBLIC ACCOUNTS. Currently, as is the practice of other jurisdictions
in the rest of Canada, the financial statements only reflect the
consolidated results of the CRF and the Crown corporations and agencies.
They do not include the financial results of the SUCH sector, although the
government publishes SUCH sector financial information in supplemental
schedules to the PUBLIC ACCOUNTS.
British Columbia's BUDGET TRANSPARENCY AND ACCOUNTABILITY ACT (BTAA)
requires all financial documents produced by the province under that
legislation to fully comply with GAAP starting with the 2004/05 fiscal
year. This requirement is now being complied with as the February 2004
Budget consolidates SUCH sector financial results into the province's
financial statements.
IMPLEMENTATION OF GAAP
For the most part, British Columbia's 2003/04 financial documents comply
with GAAP. Revenue and expenditure are recorded on an accrual basis of
accounting except when the accruals cannot be determined with a reasonable
degree of certainty or when their estimation is impracticable, as is the
case with corporation income tax that is recorded on a cash basis. Assets
are recorded to the extent that they represent financial claims by
government upon outside parties; are items held for resale, prepaid
expenses, deferred charges, or prepaid capital advances; or are tangible
capital assets. Similarly, liabilities are recorded only if they represent
actual or probable financial claims against the government.
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- --------------------------------------------------------------------------------
Where the accounting policies of taxpayer-supported Crown corporations and
agencies differ from those used by the central government in preparing its
own consolidated revenue fund financial statements, the Crown corporation
and agency financial statements are adjusted to conform to government's
accounting policies unless they are following normal standards for their
industry.
For 2003/04, the main exceptions to GAAP are:
o the exclusion of the SUCH sector from the government reporting entity;
and
o the use of prepaid capital advances to provide capital funding to SUCH
organizations.
The provincial government issues advances to the SUCH sector for investment
in capital assets. Prior to 1997/98, these advances were categorized as
loans. Beginning with the 1997/98 PUBLIC ACCOUNTS, these advances were
capitalized in the balance sheet as prepaid capital advances. Prepaid
capital advances are amortized in similar fashion to capital assets. With
the inclusion of the SUCH sector beginning in 2004/05, prepaid capital
advances will be eliminated from the balance sheet and replaced with the
actual value of the related tangible capital assets as reported by the SUCH
organizations.
FINANCIAL STATEMENT PRESENTATION
In 2003/04, the province adopted a GAAP approach to disclosing the revenue
and expenses of the government reporting entity in the ESTIMATES, BUDGET
AND FISCAL PLAN and QUARTERLY REPORTS. Under the GAAP format,
taxpayer-supported entities(1) are consolidated with the CRF on a
line-by-line basis for both the income statement and balance sheet.
Self-supported entities are disclosed on a modified equity basis - i.e.
their net income is reported as revenue and their retained earnings as an
investment. This enables the net effect of government's commercial
enterprises to be separated from its taxpayer-supported activities.
The 2003/04 presentation differs from previous years where the consolidated
revenue fund, taxpayer-supported Crown corporations and agencies, and
self-supported Crown corporations were shown separately on a net basis. The
change does not affect the bottom line, only the presentation of revenue
and expenses.
While fully consolidating the government's CRF with the taxpayer-supported
Crown corporations and agencies, the new presentation maintains CRF
ministry expenses (which are detailed in the Estimates for legislative
approval) as a key element of the expense statement. In keeping with GAAP
requirements, an operating statement using the expense-by-function format
is also provided.
- --------------------------------
(1) Crown corporations and agencies may be classified as either taxpayer-
supported or self-supported. Crown corporations and agencies are considered
self-supported if:
o the majority of their operating revenue comes from non-government
sources; and
o their operating revenue is sufficient to cover operating and debt
service costs, without the need for government grants or other forms of
assistance.
Crown corporations and agencies that do not meet these criteria are classified
as taxpayer-supported. (All SUCH sector entities are considered
taxpayer-supported.)
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64 APPENDIX 2 - FINANCIAL REVIEW
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The change in presentation is a year ahead of the 2004/05 legislated
deadline for full GAAP compliance in order to clearly separate the changes
relating to the Crown/agency consolidation from the entity expansion that
will take place in 2004/05. The change in 2003/04 will have minimal impact
on the PUBLIC ACCOUNTS since the taxpayer-supported Crown corporations and
agencies are already fully consolidated in that document. Chart A2.1
outlines the change in presentation formats.
CHART A2.1 CHANGES IN ACCOUNTING PRESENTATION
[Graphic]
In this appendix, unless otherwise noted, current and historical operating
results are presented in accordance with the province's accounting polices
effective March 31, 2004.
THE FINANCIAL CYCLE
The BTAA outlines the province's reporting requirements during the
financial cycle and imposes specific reporting deadlines or release dates
for these publications. In particular, fixed dates for presentation of the
Throne Speech and budget, as well as dates for quarterly and annual
reports, are set by law.
Under the BTAA, the provincial government focuses its budgeting and
reporting on a summary accounts basis. The BTAA requirements include
reporting on the advice of the Economic Forecast Council, presentation of
the annual ESTIMATES, BUDGET AND FISCAL PLAN and QUARTERLY REPORTS in
accordance with GAAP by 2004/05, publication of QUARTERLY REPORTS with
revised forecasts, presentation of the PUBLIC ACCOUNTS, annual three-year
service plans and service plan reports for each ministry and government
organization, and an annual three-year government strategic plan and
report.
Chart A2.2 summarizes the annual financial process of the province. This
process consists of four main stages.
O PLANNING AND BUDGET PREPARATION --Treasury Board reviews longer-term
estimates of revenue, expense, capital and debt, and establishes a
preliminary fiscal plan within the framework of the government's
overall
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APPENDIX 2 - FINANCIAL REVIEW 65
- --------------------------------------------------------------------------------
CHART A2.2 FINANCIAL PLANNING AND REPORTING CYCLE
GRAPHIC
strategic plan. Preliminary high-level targets are provided to ministries and
received from Crown corporations. Ministries and Crown corporations prepare
three-year service plans, including performance measures and targets, and
operating and capital budgets, for review by Treasury Board and/or government
Caucus committees. Treasury Board makes decisions on budget allocations for
ministries and assesses Crown corporation net income benchmarks based on
government revenue forecasts, spending and capital priorities, and debt
targets within the context of the fiscal plan. Included as inputs into this
process are a consultation paper published by September 15th that invites
public comment on issues that need to be addressed in the fiscal and service
plans, and province-wide public hearings held by a committee of the
legislature. A report outlining the results of the budget consultation
process is made public by November 15th of each year.
O IMPLEMENTATION AND REPORTING -- The government's revenue, expense and capital
plans for the next three fiscal years, as well as other information on the
government's finances, are presented to the Legislative Assembly by the
Minister of Finance in a budget document called the BUDGET AND FISCAL PLAN.
The financial plan for the next fiscal year is included in the document
called the ESTIMATES, which describes the individual appropriations to be
voted on by the Legislative Assembly. The service plans and a report on major
capital projects (those where government contribution exceeds $50 million)
must also be tabled. Throughout the year, the authorized funding as specified
in
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66 APPENDIX 2 - FINANCIAL REVIEW
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the ESTIMATES and ministry service plans is spent on programs and services.
Crown corporations follow approved service plans under the direction of
their own Boards of Directors. QUARTERLY REPORTS, including full-year
forecasts, are published by legislated dates to provide regular updates to
the public on the government's finances.
o EVALUATION -- At the end of the fiscal year, the PUBLIC ACCOUNTS are
prepared by the Comptroller General and examined by the Auditor General
to ensure that the financial statements fairly present the government's
financial position. The PUBLIC ACCOUNTS are augmented by the BRITISH
COLUMBIA FINANCIAL AND ECONOMIC REVIEW, which provides an overview of
annual and historical financial and economic results. In addition,
annual service plan reports are made public that compare actual results
with ministry and Crown corporation performance targets.
o ACCOUNTABILITY-- The PUBLIC ACCOUNTS are presented to the Legislative
Assembly and are reviewed by two committees of the Legislative
Assembly (the Select Standing Committee on the PUBLIC ACCOUNTS and the
Select Standing Committee on Crown corporations). At the same time,
the MINISTERIAL ACCOUNTABILITY REPORT is published detailing the
individual and collective financial performance of cabinet ministers,
and the performance and revenue results achieved by the Ministers of
State and the Minister of Provincial Revenue. In addition, when the
PUBLIC ACCOUNTS are tabled, ministries and most Crown corporations
release their service plan reports detailing results for the previous
fiscal year. A report on the government's strategic plan is also
presented.
UNFUNDED PENSION LIABILITIES
The province contributes to four defined benefit pension plans for most of
its employees. These pension plans are managed under joint trusteeship with
the plan members.
The plans and the date of their last actuarial valuation are:
o Public Service Pension Plan, March 31, 2002;
o Municipal Pension Plan, December 31, 2000;
o Teachers' Pension Plan, December 31, 2002; and
o College Pension Plan, August 31, 2003.
Under joint trusteeship, the provincial government has no formal claim on
plan surpluses or assets. In the event that a plan is determined to be in a
deficit position by an actuarial valuation (performed every three years),
the pension boards, by agreement, are required to address the deficit
through contribution adjustments or other measures. As a result, it is
expected that any unfunded pension liability in the future would be
short-term in nature. No unfunded liability exists for the future indexing
of pensions, as the obligation is limited to the amount of available assets
in separate inflation accounts.
The estimated financial positions of each plan (based on extrapolations of
the most recent actuarial valuations) as at March 31, 2004 are as follows:
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- --------------------------------------------------------------------------------
TABLE A2.1 PENSION PLAN BALANCES
- --------------------------------------------------------------------------------
<Table>
<Caption>
PENSION PLAN
-----------------------------------------------------
($ millions) PUBLIC SERVICE MUNICIPAL TEACHERS' COLLEGE TOTAL
- -----------------------------------------------------------------------------------------------------------
Accrued benefit obligation............... (8,986) (9,049) (10,566) (1,331) (29,932)
Pension fund assets...................... 11,069 10,300 10,182 1,523 33,074
---------- --------- --------- ------- -------
SUBTOTAL.............................. 2,083 1,251 (384) 192 3,142
Unamortized actuarial gain............... - - 776 196 972
---------- --------- --------- ------- -------
ACCRUED NET ASSET........................ 2,083 1,251 392 388 4,114
========== ========= ========= ======= =======
</Table>
In addition to pension benefits, each of the plans provide some group
health and/or dental benefits to retired members. During 2003/04, all of
the plans reviewed and curtailed some of these post-retirement group
benefits in response to rising costs.
ADJUSTMENTS TO THE ACCUMULATED DEFICIT
During 2003/04, a number of retroactive adjustments were made to the
province's financial statements to reflect changes in accounting policy and
to correct previously published information. Table A2.2 provides a summary
of the changes that have been reviewed and approved by the Office of the
Auditor General.
TABLE A2.2 SUMMARY OF CHANGES IN ACCUMULATED DEFICIT FROM THE 2003/04
PUBLIC ACCOUNTS REPORTED BALANCE
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------
FINAL
($ millions) CHANGE RESULTS
- --------------------------------------------------------------------------------------------------------
ACCUMULATED DEFICIT ON MARCH 31, 2002 AS REPORTED IN THE 2002/03 PUBLIC ACCOUNTS. (4,785)
OPENING BALANCE ADJUSTMENTS DUE TO ACCOUNTING POLICY CHANGES IN 2003/04:
Recognition of leave liability for the Health Care Benefits Trust............ (30)
Change from cash to accrual accounting for safety inspection fees............ 8
Transfer Crop Insurance Fund trust account to government operations.......... (8)
Adjust land account to remove land held on behalf of the federal government.. (1) (31)
-------- --------
ACCUMULATED DEFICIT ON MARCH 31, 2002 AS REPORTED IN THE 2003/04 PUBLIC ACCOUNTS (4,816)
2002/03 DEFICIT:
AS REPORTED IN THE 2002/03 PUBLIC ACCOUNTS................................... (3,169)
ADJUSTMENTS DUE TO ACCOUNTING POLICY CHANGES IN 2003/04:
Recognition of an increase in Health Care Benefits Trust leave liability... (23)
Adjust expenses for School District Building Envelope Program.............. (7) (3,199)
-------- --------
ACCUMULATED DEFICIT ON MARCH 31, 2003 AS REPORTED IN THE 2003/04 PUBLIC ACCOUNTS (8,015)
========
- --------------------------------------------------------------------------------------------------------
</Table>
The main adjustment to the prior year accumulated deficit relates to the
inclusion of the outstanding leave liability for the Healthcare Benefits
Trust (HBT). HBT provides sick leave and other collective agreement
benefits on behalf of healthcare and social service organizations.
While most of the liability for these benefits rests with the health
authorities, some of the agencies covered by HBT are funded directly by the
province. Since the province is the sole source of revenue for these
agencies, it assumes their share of the HBT liability.
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68 APPENDIX 2 - FINANCIAL REVIEW
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IMPACT OF INCLUDING THE SUCH SECTOR
Expanding the government reporting entity to include SUCH organizations
requires full consolidation of the financial results of those organizations
into the provincial government's budget and financial reports.
As noted in Chart A2.3, the inclusion of the SUCH sector over the past five
years would have resulted in a positive impact on the province's bottom
line.
CHART A2.3 NET OPERATING IMPACT OF SUCH(1)
[Graphic]
(1) For comparative purposes, historical amounts exclude Regional Hospital
Districts to match the presentation used for 2003/04.
While the SUCH sector entities receive 85 per cent of their funding from
the provincial government, they also raise direct revenue to help fund
their operations. This includes contributions from the federal and
municipal governments as well as own-source revenue, such as fees and
licences. Including direct SUCH sector revenue would have added
approximately $2.3 billion to total provincial government revenue in
2003/04.
Spending by the SUCH sector entities reflects the costs incurred to deliver
health and education programs on behalf of the province, in keeping with
statutory obligations. These programs are funded by a combination of
government grants and direct revenue. SUCH sector entities also deliver
enhancements to the government-mandated programs, or provide other related
services. The impact on total provincial government spending reflects SUCH
entity spending that exceeds the grant funding provided to them. In
2003/04, this amounted to just under $2.0 billion.
The year-over-year variances in net operating impact reflect both decisions
on own source revenue as well as timing impacts for program implementation.
For example, increases in direct revenue from 2001/02 to 2003/04 are due,
in part, to fee increases at post-secondary institutes.
At the same time, revenue may be received in one fiscal year, with the
related program being implemented in the next. For example, in 2002/03
direct revenue increased from the previous year, while expense in excess of
grant funding declined. In 2003/04, this trend was reversed.
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APPENDIX 2 - FINANCIAL REVIEW 69
- --------------------------------------------------------------------------------
TABLE A2.3 FINANCIAL IMPACT OF SUCH
- --------------------------------------------------------------------------------
<Table>
<Caption>
1999/00 2000/01 2001/02 2002/03 2003/04
BEFORE INCLUSION OF SUCH
Revenue........................................................... 24,658 27,804 25,574 25,142 26,674
Expense........................................................... (24,503) (26,334) (28,337) (28,341) (28,013)
-------- -------- -------- -------- --------
Surplus/(Deficit) before joint trusteeship........................ 155 1,470 (2,763) (3,199) (1,339)
======== ======== ======== ======== ========
Taxpayer-supported capital spending............................... 1,900 2,028 1,415 1,131 1,126
Taxpayer-supported debt........................................... 25,057 24,930 27,193 29,087 29,598
AFTER INCLUSION OF SUCH
Revenue........................................................... 26,527 29,665 27,770 27,615 28,974
Expense........................................................... (26,349) (28,064) (30,357) (30,279) (29,976)
-------- -------- -------- -------- --------
Surplus/(Deficit) before joint trusteeship........................ 178 1,601 (2,587) (2,664) (1,002)
======== ======== ======== ======== ========
Taxpayer-supported capital spending............................... 2,443 2,383 2,070 1,924 1,932
Taxpayer-supported debt........................................... 25,266 25,147 27,558 29,456 30,091
NET FISCAL PLAN IMPACT OF SUCH
Revenue (direct revenue).......................................... 1,869 1,861 2,196 2,473 2,300
Expense (in excess of grant funding).............................. (1,846) (1,730) (2,020) (1,938) (1,963)
-------- -------- -------- -------- --------
Surplus/(Deficit) before joint trusteeship........................ 23 131 176 535 337
======== ======== ======== ======== ========
Taxpayer-supported capital spending............................... 543 355 655 793 806
Taxpayer-supported debt........................................... 209 217 365 369 493
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
The province provides annual capital grant funding to SUCH organizations
towards the acquisition of capital infrastructure and equipment. This
funding is provided through a prepaid capital advance. Upon consolidation,
this advance is eliminated and replaced by the capital assets of the SUCH
organizations. Capital assets for these organizations are funded through
both provincial and non-provincial sources.
Although the assets of the SUCH sector are reflected on government's
balance sheet, some of the assets owned by these organizations have
external restrictions on their use and therefore cannot be used to meet
government's general obligations. Examples include endowment funds of
post-secondary institutions, and assets owned by denominational hospitals
that are used in the delivery of provincial health care services.
CHART A2.4 TAXPAYER-SUPPORTED DEBT IMPACT OF SUCH
[Graphic]
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70 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
As noted in Table A2.3, the addition of SUCH sector debt to the province's
balance sheet increases taxpayer-supported debt. This debt is used
primarily to finance the construction of post-secondary institutions,
hospitals and long-term care facilities. Chart A2.4 illustrates the impact
of the additional debt on taxpayer-supported debt to GDP ratios.
In many cases, methods employed by SUCH organizations in tracking employees
are different to how government monitors its staffing levels. For this
reason, SUCH employees will not be included in government's annual staff
utilization (FTEs).
SUPPLEMENTARY SCHEDULES
The following tables provide multi-year financial information of the
Government of British Columbia including revenue, expense, debt and
summarized operating results of major Crown corporations. Information on
provincial taxes as of July 2004 is also presented at the end of this
appendix.
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<Page>
APPENDIX 2 - FINANCIAL REVIEW 71
- --------------------------------------------------------------------------------
TABLE A2.4 OPERATING STATEMENT - 1999/2000 TO 2003/04(1)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------
($ millions) 1999/2000 2000/01 2001/02 2002/03 2003/04
- ---------------------------------------------------------------------------------------------------------------
TAXPAYER-SUPPORTED PROGRAMS AND AGENCIES:
Revenue.............................................. 23,363 26,079 24,489 23,376 24,793
Expense..............................................(24,503) (26,334) (28,337) (28,341) (28,013)
-------- -------- -------- -------- --------
TAXPAYER-SUPPORTED BALANCE.......................... (1,140) (255) (3,848) (4,965) (3,220)
Commercial Crown corporation net income.............. 1,295 1,725 1,085 1,766 1,881
-------- -------- -------- -------- --------
SURPLUS/(DEFICIT) BEFORE JOINT TRUSTEESHIP............ 155 1,470 (2,763) (3,199) (1,339)
Joint trusteeship................................... - (52) 1,464 - -
-------- -------- -------- -------- --------
SURPLUS/(DEFICIT)..................................... 155 1,418 (1,299) (3,199) (1,339)
======== ======== ======== ======== ========
- --------------------------------------------------------------------------------------------------------------
</Table>
(1) Comparative figures have been restated to reflect government's accounting
policies in effect at March 31, 2004.
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72 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.5 OPERATING STATEMENT UPDATE SINCE THE THIRD QUARTERLY REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
UPDATED
($ millions) CHANGES FORECAST
- ----------------------------------------------------------------------------------------------------------------------
BUDGET 2003 FISCAL PLAN (FEBRUARY 18, 2003)............................................ (2,300)
FIRST MINISTERS' ACCORD ON HEALTH CARE RENEWAL:
Additional revenues from the federal government..................................... 319
Additional BC commitments to health care............................................ (319) -
-------- --------
FISCAL PLAN (MAY 29, 2003 SUPPLY ACT).................................................. (2,300)
Revenue increases up to the third QUARTERLY REPORT.................................. 495
Expense increases up to the third QUARTERLY REPORT.................................. (305)
Forecast allowance changes up to the third QUARTERLY REPORT......................... 400 590
-------- --------
2003/04 DEFICIT - THIRD QUARTERLY REPORT (FEBRUARY 17, 2004)........................... (1,710)
--------
2003/04 PUBLIC ACCOUNTS UPDATE:
REVENUE CHANGES
Social service tax revenue - strong fourth quarter sales............................ 56
Corporation capital tax revenue - mainly higher audit recoveries.................... 23
Other taxes - mainly Insurance premium tax.......................................... 60
Energy revenue - mainly lower natural gas volumes................................... (29)
CHST and equalization entitlements - mainly impact of higher BC economic growth
and weaker Ontario economic growth in 2003:
- prior year equalization adjustment.............................................. 43
- 2003/04 equalization entitlement................................................ (224)
- CHST (lower 2003/04 entitlement, partially offset by increase for prior years).. (104)
Federal funding for First Nations' K-12 education sent directly to school districts.. (52)
All other taxpayer-supported revenue - mainly higher recoveries for health related
expenses and other miscellaneous sources, partially offset by lower sales of goods
and services by taxpayer-supported Crown corporations............................... 240
Commercial Crown corporation operating results:
BC Hydro - provision for VIGP/GSX project costs................................... (120)
BC Rail - delayed completion of investment partnership............................ (182)
ICBC - higher revenues and lower claims and insurance operations costs............ 134
Other Crown corporation changes - primarily LDB operating improvements............ 15
--------
NET REVENUE DECREASE........................................................... (140)
EXPENSE CHANGES
BC Rail delayed completion of investment partnership - reinvestment in Northern and
First Nations communities, and other initiatives deferred to 2004/05.............. 182
BC Rail delayed completion of investment partnership - cash distribution to the
BC Transportation Financing Authority deferred to 2004/05......................... 200
First Nations K-12 education costs funded directly be federal contribution.......... 52
Additional interest cost savings.................................................... 17
Other ministry savings.............................................................. 285
--------
CRF expense decreases.......................................................... 736
Delayed BC Rail cash distribution to the BC Transportation Financing Authority (200)
Other taxpayer-supported Crown corporation and agency expenses and adjustments (125)
--------
NET EXPENSE DECREASE........................................................... 411
FORECAST ALLOWANCE REDUCTION........................................................ 100
--------
TOTAL CHANGE...................................................................... 371
--------
2003/04 DEFICIT - PUBLIC ACCOUNTS...................................................... (1,339)
========
- ----------------------------------------------------------------------------------------------------------------------
</Table>
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- --------------------------------------------------------------------------------
TABLE A2.6 STATEMENT OF FINANCIAL POSITION - 1999/2000 TO 2003/04(1)
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
($ millions) 1999/2000 2000/01 2001/02 2002/03 2003/04
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS
Cash and temporary investments.................................... 1,569 548 780 327 430
Other financial assets............................................ 4,150 4,519 4,405 4,034 4,789
Investments in commercial Crown corporations
Retained earnings............................................... 2,820 3,001 2,520 2,629 2,989
Recoverable capital loans....................................... 7,434 7,234 7,359 7,381 7,602
------ ------ ------ ------ ------
10,254 10,235 9,879 10,010 10,591
Warehouse borrowing program assets................................ 1,320 1,312 1,067 - -
------ ------ ------ ------ ------
17,293 16,614 16,131 14,371 15,810
------ ------ ------ ------ ------
LIABILITIES
Accounts payable & accrued lliabilities........................... 5,605 4,842 3,559 3,881 4,778
Deferred revenue.................................................. 537 590 631 718 1,292
Debt:
Taxpayer-supported debt......................................... 25,057 24,930 27,193 29,087 29,598
Self-supported debt............................................. 9,232 8,679 8,548 7,452 7,739
------ ------ ------ ------ ------
Total provincial debt............................................. 34,289 33,609 35,741 36,539 37,337
LESS : guarantees and non-guaranteed debt....................... (934) (597) (464) (415) (399)
------ ------ ------ ------ ------
33,355 33,012 35,277 36,124 36,938
------ ------ ------ ------ ------
39,497 38,444 39,467 40,723 43,008
------ ------ ------ ------ ------
NET LIABILITIES..................................................... (22,204) (21,830) (23,336) (26,352) (27,198)
------ ------ ------ ------ ------
CAPITAL AND OTHER ASSETS
Prepaid capital advances.......................................... 6,517 6,905 7,033 7,108 7,136
Tangible capital assets........................................... 10,475 11,090 11,205 10,949 10,482
Other assets...................................................... 277 318 282 280 226
------ ------ ------ ------ ------
17,269 18,313 18,520 18,337 17,844
------ ------ ------ ------ ------
ACCUMULATED SURPLUS (DEFICIT)....................................... (4,935) (3,517) (4,816) (8,015) (9,354)
====== ====== ====== ====== ======
</Table>
- --------------------------------
(1) Comparative figures have been restated to reflect government's accounting
policies in effect at March 31, 2004.
TABLE A2.6A CHANGES IN FINANCIAL POSITION - 1999/2000 TO 2003/04
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 1999/2000 2000/01 2001/02 2002/03 2003/04
------------ --------- ------- ------- ------- -------
(SURPLUS) DEFICIT FOR THE YEAR....................................... (155) (1,418) 1,299 3,199 1,339
------ ------ ------ ------ ------
WORKING CAPITAL CHANGES
Increase (reduction) in cash and temporary investments............. 778 (1,021) 232 (453) 103
Other working capital changes...................................... 508 1,120 1,092 (782) (770)
------ ------ ------ ------ ------
1,286 99 1,324 (1,235) (667)
------ ------ ------ ------ ------
CAPITAL ASSET AND INVESTMENT CHANGES
Increase in taxpayer-supported capital investments................. 1,900 2,028 1,415 1,131 1,126
LESS: amortization and other accounting changes..................(1,074) (1,025) (1,172) (1,312) (1,565)
------ ------ ------ ------ ------
826 1,003 243 (181) (439)
------ ------ ------ ------ ------
Increase in total investment in commercial Crown corporations..... 771 771 410 984 1,206
LESS: loan repayments and other accounting changes............. (1,400) (790) (766) (853) (625)
------ ------ ------ ------ ------
(629) (19) (356) 131 581
------ ------ ------ ------ ------
Increase (decrease) in warehouse borrowing investments............ 662 (8) (245) (1,067) -
------ ------ ------ ------ ------
859 976 (358) (1,117) 142
------ ------ ------ ------ ------
INCREASE (DECREASE) IN GUARANTEES AND NON-GUARANTEED DEBT........... 227 (337) (133) (49) (16)
------ ------ ------ ------ ------
INCREASE (DECREASE) IN TOTAL PROVINCIAL DEBT........................ 2,217 (680) 2,132 798 798
===== ====== ====== ====== ======
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
74 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.7 REVENUE BY SOURCE(1) - 1999/2000 TO 2003/04
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 1999/2000 2000/01 2001/02 2002/03 2003/04
- ---------------------------------------------------------------------------------------------------------------------------
TAXATION REVENUE
Personal income................................................... 5,824 5,963 5,366 4,150 4,877
Corporate income.................................................. 943 1,054 1,522 612 775
Social service.................................................... 3,332 3,626 3,552 3,794 4,001
Fuel.............................................................. 702 715 659 687 875
Tobacco........................................................... 498 460 499 606 647
Property.......................................................... 1,433 1,452 1,481 1,541 1,576
Property transfer................................................. 245 262 303 407 518
Other(2).......................................................... 770 771 728 555 539
------ ------ ------ ------ ------
13,747 14,303 14,110 12,352 13,808
------ ------ ------ ------ ------
NATURAL RESOURCE REVENUE
Natural gas royalties............................................. 328 1,249 836 1,056 1,230
Columbia River Treaty............................................. 100 632 360 100 230
Other energy and minerals......................................... 402 669 533 532 878
Forests........................................................... 1,693 1,341 1,253 1,323 1,007
Other resources................................................... 311 308 298 270 308
------ ------ ------ ------ ------
2,834 4,199 3,280 3,281 3,653
------ ------ ------ ------ ------
OTHER REVENUE
Medical Services Plan premiums.................................... 867 894 954 1,355 1,409
Motor vehicle licences and permits................................ 334 339 342 351 363
BC Ferries tolls.................................................. 292 292 306 315 -
Other fees and licences........................................... 568 655 619 577 655
Investment earnings............................................... 984 975 811 640 582
Sales of goods and services....................................... 240 545 335 275 229
Miscellaneous(3).................................................. 520 787 651 629 748
------ ------ ------ ------ ------
3,805 4,487 4,018 4,142 3,986
------ ------ ------ ------ ------
CONTRIBUTIONS FROM THE FEDERAL GOVERNMENT
Canada Health and Social Transfer................................. 2,438 2,619 2,445 2,606 3,044
Equalization...................................................... 125 - 158 543 (330)
Other cost shared agreements(4)................................... 414 471 478 452 632
------ ------ ------ ------ ------
2,977 3,090 3,081 3,601 3,346
------ ------ ------ ------ ------
TAXPAYER-SUPPORTED
PROGRAMS AND AGENCIES............................................. 23,363 26,079 24,489 23,376 24,793
------ ------ ------ ------ ------
COMMERCIAL CROWN CORPORATIONS
BC Hydro (before transfers)........................................ 545 549 258 352 77
Liquor Distribution Branch......................................... 617 642 637 654 724
BC Lotteries....................................................... 532 562 606 671 728
BC Rail............................................................ (582) (7) (107) (84) 66
ICBC............................................................... 96 139 (251) 45 225
Other.............................................................. 1 4 - 14 8
Accounting adjustments............................................. 86 (164) (58) 114 53
------ ------ ------ ------ ------
1,295 1,725 1,085 1,766 1,881
------ ------ ------ ------ ------
TOTAL REVENUE.........................................................24,658 27,804 25,574 25,142 26,674
====== ====== ====== ====== ======
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Comparative figures have been restated to reflect government's accounting
policies in effect at March 31, 2004.
(2) Includes revenue from corporation capital, insurance premium and hotel room
taxes.
(3) Includes asset dispositions, other services provided to external agencies
and other recoveries.
(4) Includes contributions for health, education, housing and social service
programs, for transportation projects, and for coastal ferry services.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 75
- --------------------------------------------------------------------------------
TABLE A2.8 FIVE-YEAR REVENUE BY SOURCE(1) - SUPPLEMENTARY INFORMATION
- --------------------------------------------------------------------------------
<Table>
<Caption>
1999/2000 2000/01 2001/02 2002/03 2003/04
- --------------------------------------------------------------------------------------------------------------------------
PER CENT OF GDP:(2) (per cent)
Taxation................................................. 11.4 10.9 10.7 9.0 9.7
Natural resource......................................... 2.3 3.2 2.5 2.4 2.6
Other.................................................... 3.1 3.4 3.0 3.1 2.8
Contributions from the federal government................ 2.5 2.4 2.3 2.7 2.3
Commercial Crown operating results....................... 1.1 1.3 0.8 1.3 1.3
--------- ------- ------- ------- -------
TOTAL REVENUE....................................... 20.4 21.2 19.4 18.5 18.7
========= ======= ======= ======= =======
GROWTH RATES: (per cent)
Taxation................................................. 1.6 4.0 -1.3 -12.5 11.8
Natural resource......................................... 40.2 48.2 -21.9 0.0 11.3
Other.................................................... -2.6 17.9 -10.5 3.1 -3.8
Contributions from the federal government................ 27.0 3.8 -0.3 16.9 -7.1
Commercial Crown operating results....................... -14.8 33.2 -37.1 62.8 6.5
TOTAL REVENUE....................................... 5.7 12.8 -8.0 -1.7 6.1
PER CAPITA REVENUE:(3) (dollars)
Taxation................................................. 3,426 3,541 3,459 3,002 3,330
Natural resource......................................... 707 1,040 804 797 881
Other.................................................... 949 1,111 985 1,007 961
Contributions from the federal government................ 742 765 755 875 807
Commercial Crown operating results....................... 323 427 266 429 454
--------- ------- ------- ------- ------
TOTAL REVENUE....................................... 6,147 6,884 6,271 6,110 6,433
========= ======= ======= ======= =======
REAL PER CAPITA REVENUE (2003 DOLLARS)(4) 6,653 7,316 6,553 6,241 6,433
- growth rate (per cent)............................... 3.8 10.0 -10.4 -4.8 3.1
- --------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Revenue has been restated to reflect the government's accounting policy at
March 31, 2004. Figures exclude dedicated revenue collected on behalf of,
and transferred to, the Greater Vancouver Transportation Authority
(TRANSLINK ) and other public bodies outside of the government reporting
entity.
(2) Revenue as a per cent of GDP is calculated using GDP for the calendar year
ending in the fiscal year (e.g. 2003/04 revenue divided by GDP for the 2003
calendar year). Totals may not add due to rounding.
(3) Per capita revenue is calculated using July 1 population (e.g. 2003/04
revenue divided by population on July 1, 2003).
(4) Revenue is converted to real (inflation-adjusted) terms using the consumer
price index (CPI) for the corresponding calendar year (e.g. 2003 CPI for
2003/04 revenue). Totals may not add due to rounding.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
76 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.9 EXPENSE BY FUNCTION(1) - 1999/2000 TO 2003/04
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------
($ millions) 1999/2000 2000/01 2001/02 2002/03 2003/04
- -------------------------------------------------------------------------------------------------------------------
Health..................................................... 8,113 9,104 10,093 10,724 10,945
Education.................................................. 6,004 6,385 6,871 6,898 6,899
Social services............................................ 3,142 3,279 3,484 3,151 2,871
Protection of persons and property......................... 1,297 1,314 1,366 1,422 1,565
Transportation............................................. 1,698 1,560 1,556 1,744 1,267
Natural resources and economic development................. 1,450 1,794 1,852 1,533 1,496
Other...................................................... 600 590 664 667 906
Government restructuring(2)................................ - - 224 169 122
General government......................................... 430 435 564 539 491
Debt servicing............................................. 1,769 1,873 1,663 1,494 1,451
--------- ------- ------- ------- -------
TOTAL EXPENSE.............................................. 24,503 26,334 28,337 28,341 28,013
========= ======= ======= ======= =======
------------------------------------------------------------------------------------------------------------------
</Table>
(1) Comparative figures have been restated to reflect government's accounting
policies in effect at March 31, 2004.
(2) Exit costs only. Restructuring costs that benefit ongoing government
operations are allocated to the appropriate function. See Table A2.11a for
details on total government restructuring expense.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 77
- --------------------------------------------------------------------------------
TABLE A2.10 FIVE-YEAR EXPENSE BY FUNCTION(1) -- SUPPLEMENTARY INFORMATION
- --------------------------------------------------------------------------------
<Table>
<Caption>
1999/2000 2000/01 2001/02 2002/03 2003/04
- -------------------------------------------------------------------------------------------------------------------------------
PER CENT OF GDP: (per cent)
Health care.................................................... 6.7 6.9 7.6 7.9 7.7
Education...................................................... 5.0 4.9 5.2 5.1 4.8
Social services................................................ 2.6 2.5 2.6 2.3 2.0
Protection of persons and property............................. 1.1 1.0 1.0 1.0 1.1
Transportation................................................. 1.4 1.2 1.2 1.3 0.9
Natural resources and economic development..................... 1.2 1.4 1.4 1.1 1.1
Other expense.................................................. 0.5 0.5 0.5 0.5 0.6
General government(2).......................................... 0.4 0.3 0.6 0.5 0.4
Debt servicing................................................. 1.5 1.4 1.3 1.1 1.0
---- ---- ---- ---- ----
TOTAL EXPENSE............................................. 20.3 20.1 21.5 20.9 19.7
==== ==== ==== ==== ====
GROWTH RATES: (per cent)
Health care.................................................... 7.4 12.2 10.9 6.3 2.1
Education...................................................... 3.0 6.3 7.6 0.4 0.0
Social services................................................ -1.0 4.4 6.3 -9.6 -8.9
Protection of persons and property............................. 14.0 1.3 4.0 4.1 10.1
Transportation................................................. -17.4 -8.1 -0.3 12.1 -27.4
Natural resources and economic development..................... -7.2 23.7 3.2 -17.2 -2.4
Other expense.................................................. -0.2 -1.7 12.5 0.5 35.8
General government(2).......................................... -2.1 1.2 81.1 -10.2 -13.4
Debt servicing................................................. -10.2 5.9 -11.2 -10.2 -2.9
TOTAL EXPENSE............................................. 0.7 7.5 7.6 0.0 -1.2
PER CAPITA EXPENSE: (dollars)
Health care.................................................... 2,023 2,254 2,475 2,606 2,640
Education...................................................... 1,497 1,581 1,685 1,676 1,664
Social services................................................ 783 812 854 766 692
Protection of persons and property............................. 323 325 335 346 377
Transportation................................................. 423 386 382 424 306
Natural resources and economic development..................... 361 444 454 373 361
Other expense.................................................. 150 146 163 162 218
General government(2).......................................... 107 108 193 172 148
Debt servicing................................................. 441 464 408 363 350
----- ----- ----- ----- -----
TOTAL EXPENSE............................................. 6,108 6,520 6,948 6,887 6,756
===== ===== ===== ===== =====
REAL PER CAPITA EXPENSE (2003 DOLLARS) 6,610 6,929 7,260 7,035 6,756
- growth rate (per cent)(2).................................. -1.1 4.8 4.8 -3.1 -4.0
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Comparative figures have been restated to reflect government's accounting
policies in effect at March 31, 2004.
(2) Includes restructuring costs.
NOTE: Per capita expense is calculated using July 1 population (e.g.
2003/04 expense divided by population on July 1, 2003). Similarly, expense
as a per cent of GDP is calculated using GDP for the calendar year ending
in the fiscal year (e.g. 2003/04 expense divided by GDP for the 2003
calendar year). Expense is converted to real (inflation-adjusted) terms
using the consumer price index (CPI) for the corresponding calendar year
(e.g. 2003 CPI for 2003/04 expense). Totals may not add due to rounding.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
78 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.11A GOVERNMENT RESTRUCTURING COSTS
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 2001/02 2002/03 2003/04
- ---------------------------------------------------------------------------------------------------------------------
TAXPAYER-SUPPORTED EXIT EXPENSE:(1)
Consolidated Revenue Fund:
Government Restructuring (All Ministries) Vote................................. 81 185 124
Ministry budgets............................................................... 23 3 7
CONTINGENCIES VOTE............................................................. 57 - -
------- ------- -------
161 188 131
------- ------- -------
Taxpayer-supported Crown corporations and agencies:
BC Buildings Corporation....................................................... 5 51 5
BC Health Research Foundation.................................................. - 4 -
BC Pavilion Corporation........................................................ - 1 3
Forest Renewal BC.............................................................. 37 - -
Legal Services Society......................................................... 6 2 -
Okanagan Valley Tree Fruit Authority........................................... - 10 -
Other.......................................................................... 15 - -
LESS : expenses funded by ministry grants and transfers...................... - (87) (17)
------- ------- -------
63 (19) (9)
------- ------- -------
TOTAL TAXPAYER-SUPPORTED EXIT EXPENSE........................................... 224 169 122
Ministry non-exit restructuring expense - operating(2)......................... 7 31 44
Ministry non-exit restructuring costs - capital(2)............................. - 1 11
------- ------- -------
TOTAL TAXPAYER-SUPPORTED RESTRUCTURING COSTS 231 201 177
======= ======= =======
COMMERCIAL CROWN CORPORATION EXIT EXPENSE:(3)
BC Hydro....................................................................... - 37 8
BC Liquor Distribution Branch.................................................. 6 26 (25)
BC Lottery Corporation......................................................... - 1 1
BC Rail........................................................................ 165 - -
Insurance Corporation of BC.................................................... 40 15 -
------- ------- -------
211 79 (16)
======= ======= =======
TOTAL GOVERNMENT RESTRUCTURING COSTS............................................ 442 280 161
======= ======= =======
- ---------------------------------------------------------------------------------------------------------------------
</Table>
(1) Includes one-time expenses relating to staffing, building occupancy and
other restructuring activities that have no future value to government. See
Table A2.11b for ministry details.
(2) Includes changes to ongoing operations which have a future benefit to
government.
(3) Reflected in government's accounts as part of changes to investments in
commercial Crown corporations.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 79
- --------------------------------------------------------------------------------
TABLE A2.11B CONSOLIDATED REVENUE FUND RESTRUCTURING EXPENSE - 2003/04(1)
- --------------------------------------------------------------------------------
<Table>
<Caption>
RESTRUCTURING EXIT EXPENSE(2)
----------------------------
Accom-
Workforce modation Other Total
($ millions) Adjustment Restructuring Restructuring Exit
- ------------ ---------- ------------- ------------- -----
GOVERNMENT RESTRUCTURING
(ALL MINISTRIES) VOTE:
Legislation............................ - - - -
Officers of the Legislature............ 1.1 0.1 - 1.2
Office of the Premier.................. 0.3 - - 0.3
Advanced Education..................... 0.4 - - 0.4
Agriculture, Food and Fisheries........ 0.7 0.1 - 0.8
Attorney General....................... 4.8 - - 4.8
Children and Family
Development......................... 8.7 8.3 0.3 17.3
Community, Aboriginal and
Women's Services.................... 2.2 0.1 3.6 5.9
Education.............................. 0.3 - - 0.3
Energy and Mines....................... 0.7 - - 0.7
Finance................................ 1.5 - - 1.5
Forests................................ 5.9 6.5 - 12.4
Health Services........................ 3.0 - - 3.0
Human Resources........................ 8.1 0.7 - 8.8
Management Services.................... 4.6 - - 4.6
Provincial Revenue..................... 1.2 0.1 - 1.3
Public Safety and
Solicitor General................... 7.7 3.7 0.5 11.9
Skills Development and Labour.......... 1.0 - - 1.0
Small Business and Economic
Development......................... 1.7 0.1 - 1.8
Sustainable Resource
Management.......................... 4.3 0.4 - 4.7
Transportation......................... 3.6 3.2 - 6.8
Water, Land and Air Protection......... 3.5 0.3 0.5 4.3
Other Appropriations................... 0.2 - - 0.2
Cross-Government(4).................... 11.9 17.9 0.1 29.9
- -------------------------------------------------------------------------------------------------------
TOTAL VOTE 77.4 41.5 5.0 123.9
MINISTRY BUDGETS:
Health Services....................... 0.9 - 5.9 6.8
- -------------------------------------------------------------------------------------------------------
TOTAL FROM MINISTRY BUDGETS........... 0.9 - 5.9 6.8
- -------------------------------------------------------------------------------------------------------
TOTAL................................. 78.3 41.5 10.9 130.7
=======================================================================================================
</Table>
<Table>
<Caption>
NON-EXIT RESTRUCTURING EXPENSE(3)
--------------------------------
Accom-
Workforce modation Other Total
($ millions) Adjustment Restructuring Restructuring Non-Exit Total
- ------------ ---------- ------------- ------------- -------- -----
GOVERNMENT RESTRUCTURING
(ALL MINISTRIES) VOTE:
Legislation............................ - - - - -
Officers of the Legislature............ - 0.4 0.4 1.6
Office of the Premier.................. - - - - 0.3
Advanced Education..................... - - 0.1 0.1 0.5
Agriculture, Food and Fisheries........ - - - - 0.8
Attorney General....................... - 0.7 - 0.7 5.5
Children and Family
Development......................... - 1.9 0.2 2.1 19.4
Community, Aboriginal and
Women's Services.................... 0.1 0.2 - 0.3 6.2
Education.............................. - 0.3 0.1 0.4 0.7
Energy and Mines....................... - 0.1 - 0.1 0.8
Finance................................ - 0.3 - 0.3 1.8
Forests................................ 0.1 6.2 0.9 7.2 19.6
Health Services........................ - 0.1 - 0.1 3.1
Human Resources........................ 0.4 1.4 0.1 1.9 10.7
Management Services.................... - 2.3 0.1 2.4 7.0
Provincial Revenue..................... - 0.4 - 0.4 1.7
Public Safety and
Solicitor General................... - 14.9 0.1 15.0 26.9
Skills Development and Labour.......... - 0.2 0.1 0.3 1.3
Small Business and Economic
Development......................... - 0.1 - 0.1 1.9
Sustainable Resource
Management.......................... 0.3 0.8 0.3 1.4 6.1
Transportation......................... - 1.4 0.1 1.5 8.3
Water, Land and Air Protection......... 0.1 3.6 0.1 3.8 8.1
Other Appropriations................... - - - - 0.2
Cross-Government(4).................... 1.6 1.4 2.5 5.5 35.4
- ----------------------------------------------------------------------------------------------------------------
TOTAL VOTE 2.6 36.7 4.7 44.0 167.9
MINISTRY BUDGETS:
Health Services....................... - - - - 6.8
- ----------------------------------------------------------------------------------------------------------------
TOTAL FROM MINISTRY BUDGETS........... - - - - 6.8
- ----------------------------------------------------------------------------------------------------------------
TOTAL................................. 2.6 36.7 4.7 44.0 174.7
================================================================================================================
</Table>
(1) Operating expenses only. Capital costs of $11 million are reflected on the
balance sheet as part of tangible capital assets.
(2) Restructuring exit costs are non-recurring incremental expenses that provide
no future benefit to the province, and are direct result of government's
restructuring plan.
(3) Non-exit restructuring costs also result from the restructuring plan and
include changes to ongoing operations which do have a future benefit to
government.
(4) Cross-Government expense includes government-wide charges for enhanced
pension eligibility and other transition costs not attributable to a
specific ministry.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
80 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.12 TAXPAYER-SUPPORTED ENTITY OPERATING STATEMENTS -1999/2000 TO 2003/04
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 1999/2000 2000/01 2001/02 2002/03 2003/04
- ---------------------------------------------------------------------------------------------------
TAXPAYER-SUPPORTED CROWN CORPORATIONS AND
AGENCIES:
BC TRANSPORTATION FINANCING AUTHORITY
Revenue............................ 400 477 466 419 604
Expense............................ (378) (476) (466) (439) (479)
----- ----- ----- ----- -----
22 1 - (20) 125
----- ----- ----- ----- -----
BRITISH COLUMBIA ASSESSMENT AUTHORITY
Revenue........................... 65 65 66 66 65
Expense........................... (62) (62) (64) (64) (63)
----- ----- ----- ----- -----
3 3 2 2 2
----- ----- ----- ----- -----
BRITISH COLUMBIA BUILDINGS CORPORATION
Revenue............................. 464 462 465 485 517
Expense............................. (419) (411) (428) (433) (470)
----- ----- ----- ----- -----
45 51 37 52 47
----- ----- ----- ----- -----
BRITISH COLUMBIA FERRY CORPORATION
Revenue............................. 443 457 473 490 -
Expense............................. (502) (446) (456) (466) -
Write-down of PacifiCatferries...... (240) - (40) (53) -
----- ----- ----- ----- -----
(299) 11 (23) (29) -
----- ----- ----- ----- -----
BRITISH COLUMBIA HOUSING MANAGEMENT
COMMISSION
Revenue............................. 228 228 260 263 279
Expense............................. (228) (228) (260) (263) (279)
----- ----- ----- ----- -----
BRITISH COLUMBIA TRANSIT
Revenue............................ 120 120 118 136 138
Expense............................ (120) (120) (119) (136) (138)
----- ----- ----- ----- -----
- - (1) - -
----- ----- ----- ----- -----
LEGAL SERVICES SOCIETY
Revenue............................ 88 88 101 76 71
Expense............................ (87) (87) (95) (73) (69)
---- ---- ---- ---- ----
1 1 6 3 2
----- ----- ----- ----- -----
OTHER TAXPAYER-SUPPORTED CROWN CORPORATIONS
AND AGENCIES
Revenue............................ 1,424 1,667 1,469 1,106 649
Expense............................ (1,770) (1,675) (1,753) (1,134) (625)
------- ------- ------- ------- -----
(346) (8) (284) (28) 24
----- --- ----- ---- --
NET OPERATING STATEMENTS OF TAXPAYER-SUPPORTED CROWN CORPORATIONS AND AGENCIES
Revenue............................ 2,789 3,107 2,945 2,551 2,323
ACCOUNTING ADJUSTMENTS.......... (110) (185) (157) (118) (103)
----- ----- ----- ----- -----
Net revenue..................... 2,679 2,922 2,788 2,433 2,220
----- ----- ----- ----- -----
Expense............................ (3,064) (3,059) (3,185) (2,542) (2,123)
ACCOUNTING ADJUSTMENTS.......... (21) (21) 152 (86) (7)
---- ---- --- ---- ---
Net expense..................... (3,085) (3,080) (3,033) (2,628) (2,130)
------- ------- ------- ------- -------
NET FISCAL PLAN IMPACT............. (406) (158) (245) (195) 90
======= ======= ======= ======= ======
- ---------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 81
- --------------------------------------------------------------------------------
TABLE A2.13 BRITISH COLUMBIA HYDRO AND POWER AUTHORITY
FIVE-YEAR INCOME STATEMENT FOR THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------------------
Revenue:
Domestic............................... 2,327.5 2,431.0 2,450.0 2,475.0 2,553.0
Electricity trade (gross).............. 1,129.1 5,458.0 3,861.0 1,932.0 1,924.0
------- ------- ------- ------- -------
3,456.6 7,889.0 6,311.0 4,407.0 4,477.0
------- ------- ------- ------- -------
Expenses:
Energy costs........................... 1,354.9 5,162.0 4,407.0 2,426.0 2,633.0
Operating expenses..................... 612.4 929.0 716.0 718.0 768.0
Depreciation........................... 365.0 380.0 386.0 417.0 539.0
Finance charges........................ 578.8 559.0 544.0 457.0 452.0
------- ------- ------- ------- -------
2,911.1 7,030.0 6,053.0 4,018.0 4,392.0
------- ------- ------- ------- -------
Operating results 545.5 859.0 258.0 389.0 85.0
Restructuring costs.................... - - - (37.0) (8.0)
Customer profit sharing................ - (310.0) - - -
Transfer (to) from RSA................. (129.3) (103.0) 145.0 66.0 21.0
------- ------- ------- ------- -------
Net income........................... 416.2 446.0 403.0 418.0 98.0
======= ======= ======== ======== ========
- --------------------------------------------------------------------------------------------
</Table>
Source: British Columbia Hydro and Power Authority.
TABLE A2.14 LIQUOR DISTRIBUTION BRANCH
FIVE-YEAR INCOME STATEMENT FOR THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 2000 2001 2002 2003 2004
- ---------------------------------------------------------------------------------------
Provincial liquor sales........... 1,663.3 1,719.2 1,792.9 1,885.3 1,998.2
Less: Cost of sales(1)......... 864.8 891.6 929.6 981.0 1,061.7
----- ----- ----- ----- -------
Gross margin...................... 798.5 827.6 863.3 904.3 936.5
Operating expenses................ (188.4) (197.9) (231.9) (254.9) (218.3)
Other income...................... 7.3 12.7 5.3 4.8 5.5
----- ----- ----- ----- -------
Net income..................... 617.4 642.4 636.7 654.2 723.7
===== ===== ===== ===== =======
- ---------------------------------------------------------------------------------------
</Table>
(1) Includes discounts and commissions.
Source: Liquor Distribution Branch.
TABLE A2.15 BRITISH COLUMBIA LOTTERY CORPORATION
FIVE-YEAR INCOME STATEMENT FOR THE YEARS ENDED MARCH 31
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 2000 2001 2002 2003 2004
- ----------------------------------------------------------------------------------------------------------------
Gaming revenue.......................................... 1,401.5 1,483.0 1,607.4 1,792.4 1,889.6
Less: Prizes and direct costs........................ 745.9 796.1 863.5 987.0 1,015.0
------- ------- ------- ------- -------
Gross margin............................................ 655.6 686.9 743.9 805.4 874.6
Operating expenses (net)................................ (123.6) (124.9) (137.8) (134.5) (147.0)
------- ------- ------- ------- -------
Net income.............................................. 532.0 562.0 606.1 670.9 727.6
------- ------- ------- ------- -------
Allocation of net income
Government of Canada................................. 7.2 7.4 7.6 7.8 7.9
Funding for provincial gaming programs............... 1.9 3.7 4.1 3.2 0.5(1)
Transfers to charities/local governments............. 106.9 137.2 145.6 171.1 184.7
Contribution to provincial revenue................... 416.0 413.7 448.8 488.8 534.5
------- ------- ------- ------- -------
532.0 562.0 606.1 670.9 727.6
======= ======= ======= ======= =======
- ----------------------------------------------------------------------------------------------------------------
</Table>
(1) Commencing in 2003/04, the funding for most programs was provided by the
ministry responsible for delivery from its voted appropriation.
Source: British Columbia Lottery Corporation.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
82 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.16 BRITISH COLUMBIA RAILWAY COMPANY
FIVE-YEAR INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31(1)
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------------------------------------------------
Revenue................................................... 341.1 333.5 301.8 366.7 364.0
Expenses.................................................. 271.3 293.1 266.6 301.2 285.5
------ ----- ----- ----- -----
Operating income.......................................... 69.8 40.4 35.2 65.5 78.5
Non-operating expenses................................. (22.6) (28.7) (29.7) (17.2) (37.7)
------ ----- ----- ----- -----
Income from continuing operations before special charges.. 47.2 11.7 5.5 48.3 40.8
Special charges........................................ (605.8)(2) (8.0)(3) (79.8)(4) (118.9)(5) -
------ ----- ----- ----- -----
Income (loss) from continuing operations................... (558.6) 3.7 (74.3) (70.6) 40.8
Results of discontinued operations...................... (23.5) (10.4) (32.6) (13.6) 25.6
------ ----- ----- ----- -----
Net income (loss).......................................... (582.1) (6.7) (106.9) (84.2) 66.4
====== ===== ===== ===== =====
- --------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Prior years are restated to be consistent with the current presentation.
(2) Asset impairment charge on northern British Columbia rail assets.
(3) Provision to reflect anticipated future costs of environmental remediation.
(4) Restructuring costs.
(5) Write-down of investment in Vancouver Wharves Limited Partnership.
Source: British Columbia Railway Company.
TABLE A2.17 INSURANCE CORPORATION OF BRITISH COLUMBIA
FIVE-YEAR INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31
- --------------------------------------------------------------------------------
<Table>
<Caption>
($ millions) 1999 2000 2001 2002 2003
- ----------------------------------------------------------------------------------------------------------------------
Revenue:
Net premiums............................. 2,382.4 2,387.0 2,447.1 2,628.5 2,859.5
Investment income............................. 449.2 625.7 454.0 327.3 329.9
------- ------- ------- ------- ------
2,831.6 3,012.7 2,901.1 2,955.8 3,189.4
------- ------- ------- ------- ------
Claims and expenses:
Claims incurred....................... 2,080.3 2,006.2 2,126.3 2,193.5 2,208.1
Prior years' Claims adjustments....... (238.2) (266.3) 2.2 (24.8) 10.4
------- ------- ------- ------- ------
Net claims incurred...................... 1,842.1 1,739.9 2,128.5 2,168.7 2,218.5
Claims operations expense................ 334.3 333.0 316.6 268.5 273.7
Operating costs - insurance.............. 466.8 479.2 472.6 374.7 383.9
OPERATING COSTS - NON-INSURANCE.......... 92.7 103.4 94.4 83.7 102.6
------- ------- ------- ------- ------
2,735.9 2,655.5 3,012.1 2,895.6 2,978.7
------- ------- ------- ------- ------
Income before unusual items................... 95.7 357.2 (111.0) 60.2 210.7
Unusual items................................. - (218.5)(1) (139.5)(2) (15.2)(3) 14.1(4)
------- ------- ------- ------- ------
Net income (loss)............................. 95.7 138.7 (250.5) 45.0 224.8
======= ======= ======= ======= ======
- ----------------------------------------------------------------------------------------------------------------------
</Table>
(1) Road Safety Dividend.
(2) Includes restructuring costs ($39.5 million) and a provision for a reduction
in investment value ($100 million).
(3) Restructuring costs.
(4) Gain on sale of property and equipment.
Source: Insurance Corporation of British Columbia.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 83
- --------------------------------------------------------------------------------
TABLE A2.18 FIVE-YEAR PROVINCIAL DEBT SUMMARY(1)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Budget Actual
($ millions) 1999/2000 2000/01 2001/02 2002/03 2003/04 2003/04
- ---------------------------------------------------------------------------------------------------------------------------------
TAXPAYER-SUPPORTED DEBT
Provincial government direct operating.................... 13,735 12,045(2) 13,805 15,477 17,782 15,754
------ ------ ------ ------ ------ ------
Education facilities(3)
Schools................................................. 3,609 3,880 4,092 4,294 4,468 4,384
Post-secondary institutions............................. 1,369 1,383 1,425 1,499 1,702 1,688
------ ------ ------ ------ ------ ------
4,978 5,263 5,517 5,793 6,170 6,072
------ ------ ------ ------ ------ ------
Health facilities(3)...................................... 1,451 1,780 1,920 2,004 2,205 2,084
------ ------ ------ ------ ------ ------
Highways, ferries and public transit
BC Transportation Financing Authority................... 1,843 2,197 2,514 2,661 2,812 2,764
BC Ferries.............................................. 24 21(2) 19 - - -
BC Transit.............................................. 79 75 79 87 82 83
Public transit(3)....................................... 952 948 936 930 923 914
SKYTRAIN extension(3)................................... 488 836 1,044 1,105 1,170 1,119
Rapid Transit Project 2000 Ltd.......................... 101 114 47 3 - -
------ ------ ------ ------ ------ ------
3,487 4,191 4,639 4,786 4,987 4,880
------ ------ ------ ------ ------ ------
Other
BC Buildings............................................ 615 610 596 456 372 317
552513 British Columbia Ltd. (Skeena Cellulose Inc.)(4). - 337 - - - -
Social housing(5)....................................... 205 265 299 161 178 156
Homeowner Protection Office............................. 34 71 113 123 134 129
Universities and colleges - fiscal agency loans......... 130 124 114 105 108 90
Other(6)................................................ 422 244 190 182 110 116
------ ------ ------ ------ ------ ------
1,406 1,651 1,312 1,027 902 808
------ ------ ------ ------ ------ ------
TOTAL TAXPAYER-SUPPORTED DEBT................................ 25,057 24,930 27,193 29,087 32,046 29,598
------ ------ ------ ------ ------ ------
SELF-SUPPORTED DEBT
Commercial Crown corporations and agencies
BC Hydro................................................ 6,880 6,649 6,670 6,784 7,689 7,040
BC Rail................................................. 655 603 614 494 478 477
552513 British Columbia Ltd. (Skeena Cellulose Inc.)(4). 280 - - - - -
Columbia Basin Power Company(7)......................... 94 93 120 118 243 215
Columbia Power Corporation.............................. - 20 64 47 - -
Liquor Distribution Branch.............................. 3 2 13 9 10 7
------ ------ ------ ------ ------ ------
7,912 7,367 7,481 7,452 8,420 7,739
Warehouse borrowing program............................... 1,320 1,312 1,067 - - -
------ ------ ------ ------ ------ ------
TOTAL SELF-SUPPORTED DEBT.................................... 9,232 8,679 8,548 7,452 8,420 7,739
------ ------ ------ ------ ------ ------
FORECAST ALLOWANCE........................................... - - - - 500 -
- - - - --- -
TOTAL PROVINCIAL DEBT........................................ 34,289 33,609 35,741 36,539 40,966 37,337
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Debt is after deduction of sinking funds, unamortized discounts and
unrealized foreign exchange gains/(losses), and excludes accrued interest.
Government direct and fiscal agency debt accrued interest is reported in the
government's accounts as an accounts payable. Figures for earlier years have
been restated to conform with the presentation used for 2004 and to reflect
changes in underlying data.
(2) Effective March 31, 2000, the provincial government assumed responsibility
for the fiscal agency loans of BC Ferries ($1,080 million) and 580440
British Columbia Ltd. (Vancouver Trade and Convention Centre) ($70 million).
Although this resulted in a change to debt composition, debt totals were not
affected.
(3) Represents government direct debt incurred for capital financing purposes.
(4) Based on a revised outlook for world pulp prices and its potential impact
on the finances of 552513 British Columbia Ltd. (Skeena Cellulose Inc.),
the company's debt was reclassified as being taxpayer-supported in 2000/01.
In March 2002, the company's debt was assumed by the provincial government
($260 million) and by the minority shareholder ($94 million) as Skeena
Cellulose Inc. was sold to the private sector.
(5) Includes the BC Housing Management Commission and the Provincial Rental
Housing Corporation.
(6) Includes other taxpayer-supported Crown corporations and agencies, student
loan guarantees, loan guarantees to agricultural producers, guarantees
issued under economic development and home mortgage assistance programs, and
loan guarantee provisions.
(7) A joint venture of the Columbia Power Corporation and Columbia Basin Trust.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
84 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.19 FIVE-YEAR PROVINCIAL DEBT SUMMARY - SUPPLEMENTARY INFORMATION
- --------------------------------------------------------------------------------
<Table>
<Caption>
1999/2000 2000/01 2001/02 2002/03 2003/04
- --------------------------------------------------------------------------------------------------------------------------
PER CENT OF GDP: (per cent)
TAXPAYER-SUPPORTED DEBT
Provincial government direct......................... 11.4 9.2 10.5 11.4 11.1
Education............................................ 4.1 4.0 4.2 4.3 4.3
Health facilities ................................... 1.2 1.4 1.5 1.5 1.5
Highways, ferries and public transit................. 2.9 3.2 3.5 3.5 3.4
Other debt........................................... 1.2 1.3 1.0 0.8 0.6
--- --- --- --- ---
Total taxpayer-supported debt...................... 20.7 19.0 20.6 21.5 20.8
---- ---- ---- ---- ----
SELF-SUPPORTED DEBT
Commercial Crown corporations and agencies........... 6.5 5.6 5.7 5.5 5.4
Warehouse borrowing program.......................... 1.1 1.0 0.8 - -
--- --- --- - -
Total self-supported debt.......................... 7.6 6.6 6.5 5.5 5.4
--- --- --- --- ---
TOTAL PROVINCIAL DEBT................................ 28.4 25.6 27.1 27.0 26.2
---- ---- ---- ---- ----
GROWTH RATES: (per cent)
TAXPAYER-SUPPORTED DEBT
Provincial government direct......................... 12.4 -12.3 14.6 12.1 1.8
Education............................................ 8.3 5.7 4.8 5.0 4.8
Health facilities ................................... 13.2 22.7 7.9 4.4 4.0
Highways, ferries and public transit................. -4.2 20.2 10.7 3.2 2.0
Other debt........................................... -4.2 17.4 -20.5 -21.7 -21.3
Total taxpayer-supported debt...................... 8.0 -0.5 9.1 7.0 1.8
SELF-SUPPORTED DEBT
Commercial Crown corporations and agencies........... -5.8 -6.9 1.5 -0.4 3.9
Warehouse borrowing program.......................... 100.6 -0.6 -18.7 -100.0 -
Total self-supported debt.......................... 1.9 -6.0 -1.5 -12.8 3.9
TOTAL PROVINCIAL DEBT................................ 6.3 -2.0 6.3 2.2 2.2
PER CAPITA DEBT: (dollars)
TAXPAYER-SUPPORTED DEBT
Provincial government direct......................... 3,424 2,982 3,385 3,761 3,799
Education............................................ 1,241 1,303 1,353 1,408 1,464
Health facilities ................................... 362 441 471 487 503
Highways, ferries and public transit................. 869 1,038 1,138 1,163 1,177
Other debt........................................... 351 409 322 250 195
--- --- --- --- ---
Total taxpayer-supported debt...................... 6,247 6,172 6,668 7,069 7,137
----- ----- ----- ----- -----
SELF-SUPPORTED DEBT
Commercial Crown corporations and agencies........... 1,973 1,824 1,834 1,811 1,866
Warehouse borrowing program.......................... 329 325 262 - -
----- ----- ----- ----- -----
Total self-supported debt.......................... 2,302 2,149 2,096 1,811 1,866
----- ----- ----- ----- -----
TOTAL PROVINCIAL DEBT................................ 8,549 8,321 8,764 8,879 9,003
===== ===== ===== ===== =====
- --------------------------------------------------------------------------------------------------------------------
</Table>
Note: Totals may not add due to rounding.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 85
- --------------------------------------------------------------------------------
TABLE A2.20 CAPITAL SPENDING AND DEBT UPDATE SINCE THE THIRD QUARTERLY REPORT
- --------------------------------------------------------------------------------
<Table>
<Caption>
Final
($ MILLIONS) Change Results
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SPENDING - THIRD QUARTER UPDATED FORECAST 2,319
Taxpayer-supported
Education - mainly delayed construction of school facilities........................................... (24)
BC Transportation Financing Authority - delayed spending............................................... (29)
Government operating - reduced ministry minor capital spending......................................... (62)
Other.................................................................................................. (42) (157)
----
Self-supported commercial
BC Hydro - mainly deferred spending for the Vancouver Island generation project........................ (133)
ICBC - reduced requirements and lower building improvements costs for Surrey Central City.............. (33)
Other.................................................................................................. (24) (190)
---- -----
CAPITAL SPENDING - ACTUAL...................................................................................... 1,972
=====
PROVINCIAL DEBT AT MARCH 31, 2004 - THIRD QUARTER UPDATED FORECAST............................................. 37,328
TAXPAYER-SUPPORTED DEBT
Provincial government operating - improved results of the CRF and reduced
working capital requirements......................................................................... (268)
Education and health facilities - mainly reduced capital spending...................................... (67)
Transportation - mainly delayed completion of the BC Rail partnership agreement........................ 119
Delayed completion of the BC Rail partnership - tax attributes guarantee not required.................. (255)
Other - higher working capital requirements............................................................ 2 -
Total taxpayer-supported (469)
SELF-SUPPORTED COMMERCIAL
Delayed completion of the BC Rail partnership agreement................................................ 477
Other.................................................................................................. 1
----
Total self-supported................................................................................... 478
------
PROVINCIAL DEBT AT MARCH 31, 2004 - 2003/04 PUBLIC ACCOUNTS.................................................... 37,337
======
- --------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
86 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.21 HISTORICAL SUMMARY ACCOUNTS SURPLUS (DEFICIT)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Crown Summary Surplus
Consolidated Revenue Fund Corporations Joint Accounts (Deficit)
--------------------------------- and Trusteeship Surplus as a Per Cent
($ millions) Revenue Expenditure Balance Agencies Arrangements (Deficit)(1) of GDP
- ----------------------------------------------------------------------------------------------------------------------------
1969/70....... 1,248 1,244 4 - - - -
1970/71....... 1,373 1,274 99 - - - 1.0
1971/72....... 1,558 1,474 84 - - - 0.8
1972/73....... 1,772 1,675 97 - - - 0.8
1973/74....... 2,217 2,071 146 - - - 0.9
1974/75....... 2,769 2,779 (10) - - - (0.1)
1975/76....... 3,124 3,534 (410) - - - (2.1)
1976/77....... 3,785 3,691 94 - - - 0.4
1977/78....... 4,372 4,168 204 - - - 0.8
1978/79....... 4,853 4,582 271 - - - 0.9
1979/80(1).... 5,860 5,318 542 (88) - 454 1.3
1980/81....... 5,982 6,239 (257) 45 - (212) (0.5)
1981/82....... 7,139 7,323 (184) 43 - (141) (0.3)
1982/83....... 7,678 8,662 (984) (257) - (1,241) (2.8)
1983/84....... 8,335 9,347 (1,012) 49 - (963) (2.0)
1984/85....... 8,807 9,801 (994) 172 - (822) (1.6)
1985/86....... 9,160 10,127 (967) 110 - (857) (1.6)
1986/87....... 9,463 10,624 (1,161) 526 - (635) (1.1)
1987/88....... 11,007 11,055 (48) 119 - 71 0.1
1988/89....... 12,570 11,834 736 194 - 930 1.3
1989/90....... 13,656 13,200 456 40 - 496 0.7
1990/91....... 14,236 15,010 (774) 107 - (667) (0.8)
1991/92....... 14,570 17,101 (2,531) 192 - (2,339) (2.9)
1992/93....... 16,172 17,858 (1,686) 210 - (1,476) (1.7)
1993/94....... 17,923 18,833 (910) 11 - (899) (1.0)
1994/95....... 19,506 19,953 (447) 219 - (228) (0.2)
1995/96....... 19,698 20,054 (356) 38 - (318) (0.3)
1996/97....... 20,126 20,241 (115) (270) - (385) (0.4)
1997/98....... 20,216 20,135 81 (248) - (167) (0.1)
1998/99....... 20,306 20,581 (275) (722) - (997) (0.9)
1999/2000..... 21,911 22,161 (250) 405 - 155 0.1
2000/01....... 23,970 22,431 1,539 (69) (52) 1,418 1.1
2001/02....... 22,844 24,859 (2,015)2 (748)(2) 1,464 (1,299) (1.0)
2002/03....... 22,104 25,179 (3,075) (124) - (3,199) (2.4)
2003/04....... 23,525 25,278 (1,753) 414 - (1,339) (0.9)
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The provincial government began publishing summary financial statements in
1979/80. Figures for prior years are unavailable. For 1970/71 to 1978/79,
the CRF balance is used in place of the summary accounts surplus/(deficit).
(2) Does not include the $256 million transfer to the CRF for the wind-up of
Forest Renewal BC and Fisheries Renewal BC.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 87
- --------------------------------------------------------------------------------
TABLE A2.22 HISTORICAL REVENUE BY SOURCE - CONSOLIDATED REVENUE FUND(1)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Contributions Contributions
from from
Natural Other Government the Federal
Year Taxation Resource Revenue Enterprises Government Total
- --------------------------------------------------------------------------------------------------------------------------------
($ millions)
1984/85....... 5,015 721 886 360 1,825 8,807
1985/86....... 5,237 704 965 398 1,856 9,160
1986/87....... 5,354 658 979 448 2,024 9,463
1987/88....... 6,200 1,223 1,060 470 2,054 11,007
1988/89....... 6,973 1,272 1,729 447 2,149 12,570
1989/90....... 8,095 1,249 1,464 727 2,121 13,656
1990/91....... 8,702 1,171 1,433 834 2,096 14,236
1991/92....... 8,997 1,101 1,573 701 2,198 14,570
1992/93....... 9,897 1,264 1,580 1,016 2,415 16,172
1993/94....... 11,101 1,772 1,733 1,048 2,269 17,923
1994/95....... 11,937 2,244 1,835 1,028 2,462 19,506
1995/96....... 12,509 2,026 1,801 968 2,394 19,698
1996/97....... 13,094 2,186 1,743 1,148 1,955 20,126
1997/98....... 13,103 2,197 1,799 1,280 1,837 20,216
1998/99....... 13,134 1,829 1,831 1,362 2,150 20,306
1999/2000..... 13,364 2,517 1,889 1,454 2,687 21,911
2000/01....... 13,880 3,975 1,863 1,500 2,752 23,970
2001/02....... 13,652 3,108 1,913 1,437 2,734 22,844
2002/03....... 11,846 3,255 2,209 1,517 3,277 22,104
2003/04....... 13,219 3,616 2,332 1,371 2,987 23,525
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Revenue has been restated to reflect the government's accounting policy at
March 31, 2004. Figures exclude dedicated revenue collected on behalf of,
and transferred to, Crown corporations and agencies. These revenues are
included as part of the operations of the Crown corporations and agencies.
Figures are based on PUBLIC ACCOUNTS information.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
88 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.23 HISTORICAL EXPENSE BY FUNCTION - CONSOLIDATED REVENUE FUND(1)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Social Debt
Year Health Services Education Transportation Servicing Other(2) Total
- ----------------------------------------------------------------------------------------------------------------------
($ millions)
1984/85....... 3,042 1,266 2,455 1,263 275 1,500 9,801
1985/86....... 3,161 1,298 2,385 1,157 342 1,784 10,127
1986/87....... 3,446 1,298 2,495 905 384 2,096 10,624
1987/88....... 3,684 1,349 2,663 928 525 1,906 11,055
1988/89....... 4,012 1,440 2,920 844 530 2,088 11,834
1989/90....... 4,502 1,496 3,228 1,199 457 2,318 13,200
1990/91....... 5,028 1,669 4,113 1,188 478 2,534 15,010
1991/92....... 5,617 1,994 4,521 1,262 590 3,117 17,101
1992/93....... 6,003 2,366 4,804 1,078 736 2,871 17,858
1993/94....... 6,287 2,704 4,984 1,024 844 2,990 18,833
1994/95....... 6,584 2,890 5,252 907 931 3,389 19,953
1995/96....... 6,778 3,033 5,492 852 887 3,012 20,054
1996/97....... 7,038 2,969 5,750 844 867 2,773 20,241
1997/98....... 7,224 3,048 5,766 770 834 2,493 20,135
1998/99....... 7,479 3,113 5,825 790 838 2,536 20,581
1999/2000..... 8,018 3,093 5,922 1,697 835 2,596 22,161
2000/01....... 8,754 3,212 6,299 611 889 2,666 22,431
2001/02....... 9,858 3,385 6,790 701 761 3,364 24,859
2002/03....... 10,377 3,096 6,817 750 711 3,428 25,179
2003/04....... 10,607 2,807 6,813 819 738 3,494 25,278
- --------------------------------------------------------------------------------------------------------------
</Table>
(1) Expense has been restated to reflect the government's accounting policy at
March 31, 2004. Figures are based on PUBLIC ACCOUNTS information.
(2) Other includes: protection of persons and property, natural resources and
economic development, general government and other expenses.
- --------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 89
- -------------------------------------------------------------------------------
TABLE A2.24 HISTORICAL PROVINCIAL DEBT SUMMARY(1)
- -------------------------------------------------------------------------------
<Table>
<Caption>
Taxpayer-Supported Debt
-----------------------
Provincial Education Health
Government Facilities Facilities Highways,
Direct Capital Capital Ferries and
Year Operating Financing Financing Public Transit
- ---- --------- --------- --------- -------------
1969/70......... - 338 42 142
1970/71......... - 362 64 172
1971/72......... - 380 85 233
1972/73......... - 408 105 288
1973/74......... - 425 117 340
1974/75......... - 485 133 386
1975/76......... - 557 178 544
1976/77......... 261 658 236 649
1977/78......... 261 710 291 656
1978/79......... 261 778 334 653
1979/80......... 235 836 401 730
1980/81......... 209 919 461 729
1981/82......... 183 1,067 561 844
1982/83......... 883 1,204 660 1,024
1983/84......... 1,596 1,321 712 1,392
1984/85......... 2,476 1,308 717 691
1985/86......... 3,197 1,276 680 1,034
1986/87......... 4,802 1,268 681 1,097
1987/88......... 5,017 1,278 716 1,192
1988/89......... 4,919 1,322 763 1,213
1989/90......... 4,209 1,367 837 1,244
1990/91......... 4,726 1,565 959 1,287
1991/92......... 6,611 1,939 1,040 1,527
1992/93......... 8,969 2,426 1,141 1,719
1993/94......... 10,257 3,054 1,181 1,862
1994/95......... 10,181 3,631 1,318 2,158
1995/96......... 10,237 3,990 1,399 2,598
1996/97......... 11,030 4,230 1,431 3,144
1997/98......... 11,488 4,352 1,417 3,463
1998/99......... 12,217 4,597 1,282 3,641
1999/2000....... 13,735 4,978 1,451 3,487
2000/01......... 12,045 5,263 1,780 4,191
2001/02......... 13,805 5,517 1,920 4,639
2002/03......... 15,477 5,793 2,004 4,786
2003/04......... 15,754 6,072 2,084 4,880
- ---------------------------------------------------------------------------
</Table>
<Table>
<Caption>
Total Taxpayer-
Total Debt Supported
Taxpayer- Self- Total as a Debt as a
Supported Supported Provincial per Cent Per Cent
Year Other(2) Debt Debt(3) Debt of GDP of GDP
- ---- ------- ---- ------ ---- ------ ------
(millions) (per cent)
1969/70......... 100 622 1,661 2,283 24.7 6.7
1970/71......... 99 697 1,808 2,505 25.6 7.1
1971/72......... 95 793 1,948 2,741 24.9 7.2
1972/73......... 87 888 2,062 2,950 23.8 7.2
1973/74......... 145 1,027 2,228 3,255 21.1 6.7
1974/75......... 149 1,153 2,650 3,803 21.3 6.5
1975/76......... 145 1,424 3,144 4,568 23.1 7.2
1976/77......... 188 1,992 3,787 5,779 24.4 8.4
1977/78......... 215 2,133 4,464 6,597 24.9 8.1
1978/79......... 91 2,117 4,838 6,955 23.3 7.1
1979/80......... 195 2,397 5,704 8,101 23.3 6.9
1980/81......... 270 2,588 5,956 8,544 21.6 6.5
1981/82......... 291 2,946 7,227 10,173 22.7 6.6
1982/83......... 894 4,665 7,692 12,357 27.4 10.4
1983/84......... 1,174 6,195 8,440 14,635 30.8 13.0
1984/85......... 1,276 6,468 9,082 15,550 31.2 13.0
1985/86......... 1,376 7,563 8,990 16,553 30.9 14.1
1986/87......... 812 8,660 8,485 17,145 30.3 15.3
1987/88......... 660 8,863 8,149 17,012 27.2 14.2
1988/89......... 842 9,059 7,396 16,455 23.7 13.1
1989/90......... 1,262 8,919 7,340 16,259 21.5 11.8
1990/91......... 1,281 9,818 7,444 17,262 21.8 12.4
1991/92......... 1,431 12,548 7,493 20,041 24.5 15.3
1992/93......... 1,641 15,896 7,526 23,422 26.8 18.2
1993/94......... 1,627 17,981 7,946 25,927 27.6 19.1
1994/95......... 1,749 19,037 8,013 27,050 26.9 18.9
1995/96......... 1,695 19,919 8,847 28,766 27.2 18.9
1996/97......... 1,440 21,275 8,096 29,371 27.0 19.5
1997/98......... 1,431 22,151 8,204 30,355 26.5 19.4
1998/99......... 1,467 23,204 9,057 32,261 27.9 20.1
1999/2000....... 1,406 25,057 9,232 34,289 28.4 20.7
2000/01......... 1,651 24,930 8,679 33,609 25.6 19.0
2001/02......... 1,312 27,193 8,548 35,741 27.1 20.6
2002/03......... 1,027 29,087 7,452 36,539 27.0 21.5
2003/04......... 808 29,598 7,739 37,337 26.2 20.8
- ------------------------------------------------------------------------------------------
</Table>
(1) Debt is after deduction of sinking funds, unamortized discounts and
unrealized foreign exchange gains/(losses), and excludes accrued interest.
Government direct and fiscal agency debt accrued interest is reported in
the government's accounts as an accounts payable. Figures for earlier years
have been restated to conform with the presentation used for 2004 and to
reflect changes in underlying data.
(2) Includes BC Buildings, BC Housing Management Commission, Provincial Rental
Housing Corporation and other taxpayer-supported Crown corporations and
loan guarantee provisions.
(3) Includes commercial Crown corporations and agencies and, beginning in
1995/96, funds held under the province's warehouse borrowing program.
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
90 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.25 PROVINCIAL TAXES (AS OF JULY 2004)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Type and
Statute Reference Tax Base Tax Rate Characteristics and Exemptions
- ------------------------------------------------------------------------------------------------------------------------------------
Income -- Taxable Income 13.5% of taxable income The Canada Revenue Agency administer both personal
INCOME TAX ACT (1) Corporate. (small business rate: 4.5%). and corporate taxes under an agreement between the
province and the federal government.
Corporate tax credits include the scientific research and
experimental development tax credit, book publishing tax
credit and the film tax credit. In addition, the political
contributions tax credit, royalty tax credit, the mining
exploration tax credit, logging tax credit and venture
capital tax credits are available to both individuals and
corporations.
BC provides a set of non-refundable credits equivalent to
all federal non-refundable credits.
(2) Personal. Tax rates of 6.05%, 9.15%,
11.7%, 13.7% and 14.7% BC Family Bonus and BC Earned Income Benefit are
corresponding to tax brackets combined with the federal government's Canada Child
of up to $32,476, $32,476 to Tax Benefit in a single monthly payment to families. Tax
$64,954, $64,954 to $74,575, credits for claims against personal income taxes include
$74,575 to $90,555 and over the refundable sales tax credit, mining flow-through share
$90,555. tax credit and employee venture capital tax credits.
- ------------------------------------------------------------------------------------------------------------------------------------
Capital -- Net BC paid-up Banks, trust companies and Associated groups of corporations with net paid-up
CORPORATION capital. credit unions with net paid-up capital of less than $10 million are exempt from the tax.
CAPITAL TAX ACT capital: greater than $1 The tax rate is phased in for corporations with net
billion -- 3%; $1 billion or British Columbia paid-up capital between $10 million and
less or headquartered in $10.25 million. There is a special flat fee for
British Columbia 1%. corporations above the exemption threshold but with net
paid-up capital allocated to British Columbia below the
threshold.
- ------------------------------------------------------------------------------------------------------------------------------------
Real Property Fair market value 1% on the first $200,000 of Exemptions include: transfers of principal residences,
Transfers -- of property or value transferred and 2% on recreational residences and family farms to related
PROPERTY interest in amounts in excess of individuals; transfers of property between spouses
TRANSFER TAX ACT property $200,000. pursuant to written separation agreements or court orders;
transferred. transfers of property to local governments, registered
charities and educational institutions; transfers of
property to veterans under the VETERANS' LAND ACT (Canada);
transfers of land to be protected, preserved, conserved or
kept in a natural state; and transfers of leases less than
31 years in duration. A number of technical exemptions are
also provided. Eligible first time home-buyers are exempt
from tax on transfers of eligible properties.
- ------------------------------------------------------------------------------------------------------------------------------------
Retail Sales -- Purchase and lease General rate is 7.5%. Collected through vendors and lessors registered under
SOCIAL SERVICE price of tangible Liquor 10%. the act and paid by purchasers and lessees. The
TAX ACT personal property, Passenger vehicles: exemptions generally fall into four categories: (1) items
repair labour and under $47,000-- 7.5%; considered to be basic necessities of life such as food and
legal services. $47,000 to $48,000-- 8%; prescription and non-prescription drugs; (2) specified
$48,000 to $49,000-- 9%; inputs for certain sectors to enhance competitiveness such
over $49,000--10%. as the exemption for machinery and equipment used in
manufacturing and in the natural resource industries and
the exemption of specified equipment used by bona fide
farmers, fishers and aquaculturists; (3) safety-related
equipment designed to be worn by a worker, such as high-
visibility vests and steel-toed boots, and specified general
safety equipment such as life jackets;
(4) energy conservation materials and equipment such as
insulation material for buildings, and eligible wind, solar
and micro-hydro equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Accommodation Purchase price of 8%. Local governments may Exemptions include accommodation rented for a period in
- -- HOTEL ROOM accommodation. apply to have the province excess of two months; lodging provided in hospitals and
TAX ACT levy an additional tax of up nursing homes; lodging supplied to employees by
to 2% on their behalf. employers; lodging on ships or trains; hotel rooms not
used for accommodation; charges of $20 or less per day;
charitable institutions; trailer parks and campsites; cabins
without utilities and other amenities; and establishments
with accommodation for less than four tenants.
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 91
- --------------------------------------------------------------------------------
TABLE A2.25 PROVINCIAL TAXES (AS OF JULY 2004) -- Continued
- --------------------------------------------------------------------------------
<Table>
<Caption>
Type and
Statute Reference Tax Base Tax Rate Characteristics and Exemptions
- ------------------------------------------------------------------------------------------------------------------------------------
Tobacco -- By cigarette, cigar 17.9 cents per cigarette and
TOBACCO TAX ACT retail price, and tobacco stick; 77% of retail
weight on other price on cigars to a maximum
tobacco products. tax of $5 per cigar; 17.9 cents
per gram of loose tobacco.
- ------------------------------------------------------------------------------------------------------------------------------------
Motor Fuel -- Tax generally applies to all fuels used in internal
MOTOR FUEL TAX combustion engines. Qualifying persons with disabilities
ACT who own or lease a vehicle are entitled to refunds of
provincial tax paid up to an annual maximum of $500. In
the Vancouver Regional Transit service area the province
collects an additional 6 cents per litre tax on clear
gasoline and motive fuel on behalf of TRANSLINK to help
fund regional public and private transportation system
costs. In the Victoria Regional Transit service area the
province collects (collected on behalf of) an additional 2.5
cents per litre on behalf of BC Transit to help fund the
public transit system.
Clear gasoline 14.5 cents per litre. Includes
(unleaded gasoline 6.75 cents per litre collected
only). on behalf of the BC
Transportation Financing
Authority. Of the tax
collected in the Greater
Vancouver Regional District,
6 cents is collected on behalf
of TRANSLINK.
Motive fuel. 15.0 cents per litre. Includes Tax applies to diesel fuel or a combination of fuels
6.75 cents per litre collected including diesel fuels, but does not include alternative
on behalf of the BC motor fuels or coloured fuels. Refunds of 0.5 cents per
Transportation Financing litre are available for motive fuel used in private
Authority. Of the tax passenger vehicles.
collected in the Greater
Vancouver Regional District,
6 cents is collected on behalf
of TRANSLINK.
Alternative motor Propane 2.7 cents per litre. Natural gas and 85% methanol blends are exempt from
fuels. tax.
Ethanol is exempt from tax when blended with gasoline or
diesel fuel if the ethanol portion is at least 5% but less
than 25%. Biodiesel is exempt from tax when blended
with diesel fuel if the biodiesel portion is at least 5% and
not more than 50%.
Coloured fuel, 3 cents per litre. Coloured fuel may only be used for specified primary
marine diesel fuel. production and industrial uses. BONA FIDE farmers are
exempt from paying the tax when fuel is used for farming
purposes.
Locomotive fuel. 3 cents per litre. Tax applies to fuel specifically for use in locomotives.
Jet and aviation 2 cents per litre. Jet fuel tax applies to fuel produced specifically for use
fuel. in a turbine aircraft engine.
Aviation fuel tax applies to fuel produced specifically for
use in a non-turbine aircraft engine.
Natural gas used 7% of price if purchased. 1.1 Tax applies to natural gas used in stationary engines other
in stationary cents per 810.32 litres if than pipeline compressors.
engines. used but not purchased.
Natural gas used 1.9 cents per 810.32 litres. Tax applies to natural gas used in a stationary engine at a
in pipeline pipeline compressor station.
compressors to
transmit marketable
gas.
Natural gas used Exempt
in pipeline
compressors to
extract and transmit
raw gas from wells
to processing plants.
Natural gas used Exempt.
in compressors to
re-inject sour gas
into depleted wells.
- ------------------------------------------------------------------------------------------------------------------------------------
Marine bunker. Exempt Exemption applies to bunker fuel, or a combination of
bunker and other fuels used as fuel in a ship.
Marine gas oil. Exempt Exemption applies to marine gas oil when used in primary
gas turbine engines to propel passenger and cargo vessels.
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
2004 FINANCIAL AND ECONOMIC REVIEW -- JULY 2004
<Page>
92 APPENDIX 2 - FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TABLE A2.25 PROVINCIAL TAXES (AS OF JULY 2004) -- Continued
- --------------------------------------------------------------------------------
<Table>
<Caption>
Type and
Statute Reference Tax Base Tax Rate Characteristics and Exemptions
- ------------------------------------------------------------------------------------------------------------------------------------
Natural resources Net income from 10% (fully recoverable Net income from logging after deducting non-forestry
- -- LOGGING TAX logging in BC against federal and income and a processing allowance.
ACT provincial corporation
and personal income tax).
- ------------------------------------------------------------------------------------------------------------------------------------
- -- MINERAL LAND Assessed value of Undesignated mineral land-- Rates of tax set on sliding scale, dependent on size and
TAX ACT freehold mineral $1.25 to $4.94 per hectare. designation of land.
land and Designated production areas
production areas. -- $4.94 per hectare.
- -- MINERAL TAX Cash flow from 2% of net current proceeds Tax calculated on a mine-by-mine basis. NCP tax paid on
ACT individual metal (NCP). 13% of net revenue current operating cash flow until all current and capital
and coal mines (NR). costs, plus any investment allowance, are recovered. NR
(other than placer tax paid thereafter on cumulative cash flow. NCP tax
gold mines). creditable against NR tax.
Volume of $0.15 per tonne removed An operator may deduct 25,000 tonnes from the total
production of from all quarries operated. number of tonnes removed from all quarries operated by
limestone, that operator. However the amount deducted from any
dolomite, marble, one quarry by all operators of that quarry must not exceed
shale, clay, 25,000 tonnes.
volcanic ash,
diatomaceous earth,
sandstone,
quartzite and
dimension stone.
Value of minerals 0.5% of value of minerals
sold by placer sold.
gold mines.
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance -- Direct premiums 4.4% for vehicle and property Exemptions -- benefit societies; mutual corporations with
INSURANCE written. insurance; 2% for life, 50% of income from farm or 100% from religious,
PREMIUM TAX ACT sickness, personal accident educational or charitable institutions; marine,
and loss of salary and wages pleasure craft; approved medical or hospitalization plans.
insurance and 4 percent for
other insurance.
- ------------------------------------------------------------------------------------------------------------------------------------
Real property -- Assessed value of Rates are set annually as a Some exemptions apply under various statutes.
TAXATION (RURAL land and percentage of assessed value.
AREA) ACT improvements in For residential properties the
rural areas rates are set to increase
(outside average residential rural taxes
municipalities). by the rate of inflation. For
Assessment 2004, the rates are 0.05% for
determined under farms and managed forest
the ASSESSMENT land; 0.095% for residential;
ACT. 0.17% for recreational
property/non-profit
organizations; 0.37% for light
industry, business and other
property not contained in any
other class; 0.42% for
utilities; 0.45% for major
industry and unmanaged
forest land.
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Assessed value Rates are set annually to Basic rates are calculated using a formula to moderate
school tax -- of residential increase average gross effects of varying average assessments on school district
SCHOOL ACT land and residential taxes by the rate taxes. School districts may levy additional tax if
improvements. of inflation. The rates vary authorized by local referendum. Amendments to the
Assessment by school district. For 2004 School Act in 2002 allow the Minister of Finance to apply
determined under rates range from about different tax rates within a school district. Tofino is the
the ASSESSMENT 0.224% to 0.9%; weighted only municipality with a rate that differs from the rest of
ACT. average 0.33%. the school district
- ------------------------------------------------------------------------------------------------------------------------------------
Non-residential Assessed value of Rates are set annually. For Some exemptions apply under various statutes.
school tax -- non-residential 2004 the rates are 0.45% for
SCHOOL ACT land and recreational property/non-
improvements. profit organizations; 0.23%
Assessment for managed forest land;
determined under 0.68% for farms; 0.99% for
the ASSESSMENT light industry, business and
ACT. other property not contained
in any other class; 1.2% for
unmanaged forest land;
1.25% for major industry;
1.5% for utilities.
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
2004 FINANCIAL AND ECONOMIC REVIEW -- JULY 2004
<Page>
APPENDIX 2 - FINANCIAL REVIEW 93
- -------------------------------------------------------------------------------
TABLE A2.26 INTERPROVINCIAL COMPARISONS OF TAX RATES - 2004
(RATES KNOWN AS OF JUNE 30, 2004)(1)
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
PRINCE
BRITISH SASKAT- NEW NOVA EDWARD NEW-
TAX COLUMBIA(2) ALBERTA CHEWAN MANITOBA ONTARIO QUEBEC BRUNSWICK SCOTIA ISLAND FOUNDLAND
- ---------------------------------------------------------------------------------------------------------------------------
Corporation income tax
(per cent of
taxable income)(3)
General Rate ............ 13.5 11.5 17 15.5 14 8.9/16.25 13 16 16 14
Manufacturing Rate....... 13.5 11.5 10 15.5 12 8.9 13 16 7.5 5
Small Business Rate...... 4.5 3 5.5 5 5.5 8.9 3 5 7.5 5
Small Business
Threshold ($000s)...... 300 400 300 360 400 n/a 400 250 250 250
Corporation Capital Tax(4)
Non-financial............ NIL NIL .6 .3/.5 .3 .6 .3 .25/.5 NIL NIL
Financial................ 1.0/3.0 NIL .7/3.25 3.0 .6/.72/.9 1.2 3.0 3.0 3.0 4.0
Health Care Premiums(5)
Individual/family........ 54/108 44/88 NIL NIL NIL NIL NIL NIL NIL NIL
Payroll tax(6) (per cent).. NIL NIL NIL 2.15 1.95 4.26 NIL NIL NIL 2.0
Insurance premium tax
(per cent)(7)............ 2-4.4 2-3 3-4 2-3 2-3.5 2-3 2-3 3-4 3.5 4
Fuel tax (cents per litre)
Gasoline(8).............. 14.5 9.0 15.0 11.5 14.7 19.2 14.5 15.5 14.0 16.5
Diesel................... 15.0 9.0 15.0 10.9 14.3 20.2 16.9 15.4 13.5 16.5
Sales tax (per cent)
General rate............. 7.5 NIL 7 7 8 7.5 8 8 10 8
Liquor................... 10 NIL 10 7 12 7.5 8 8 37.5 8
Meals.................... NIL NIL NIL 7 8 7.5 8 8 10 8
Accommodation............ 8 5 6 7 5 7.5 8 8 10 8
Tobacco tax (dollars
per carton of
200 cigarettes)(9)....... 35.80 32.00 39.20 39.90 22.20 20.60 28.10 36.30 34.90 37.30
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Rates shown are those known as of June 30, 2004 and that are in effect
for 2004.
(2) British Columbia rates are those announced in the February 17, 2004
Budget.
(3) Saskatchewan has announced a reduction in its small business rate to
5 per cent in 2005; and Manitoba plans to reduce its general rate to
15 per cent in 2005.
(4) Ontario has a deduction of $5 million for all corporations; Manitoba has
a $5 million deduction and the higher rate applies to corporations with
taxable capital in excess of $10 million; Saskatchewan has a $10
million deduction; Quebec has a $600,000 deduction. Large Saskatchewan
resource corporations are assessed a surcharge on the value of
Saskatchewan resource sales. Ontario and Quebec have an additional
surcharge or compensation tax on financial institutions.
(5) British Columbia has a two-person rate of $96. British Columbia and
Alberta offer premium assistance in the form of lower rates or an
exemption from premiums for lower income individuals and families.
(6) Provinces with payroll taxes provide payroll tax relief for small
businesses.
(7) The lower rate applies to premiums for life, sickness and accident
insurance; the higher rate applies to premiums for property insurance
including automobile insurance. In Ontario, Quebec and Newfoundland
specific sales taxes also apply to insurance premiums, except those
related to individual life and health.
(8) Tax rate is for regular fuel used on highways. The British Columbia
rate includes 6.75 cents per litre dedicated to the BC Transportation
Financing Authority. The rates do not include regional taxes. The
Quebec rate includes estimated sales tax.
(9) Includes estimated provincial sales tax where applicable.
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
94 APPENDIX 2 - FINANCIAL REVIEW
- -------------------------------------------------------------------------------
Table A2.27 Summary of Major Tax Changes Announced in 2004
- -------------------------------------------------------------------------------
INCOME TAX ACT
o The BC Scientific Research and Experimental Development Tax Credit was
extended for five more years to August 2009.
INTERNATIONAL FINANCIAL ACTIVITY ACT
o The INTERNATIONAL FINANCIAL ACTIVITY ACT (IFAA) was introduced to
replace the INTERNATIONAL FINANCIAL BUSINESS (TAX REFUND) ACT and the
INTERNATIONAL FINANCIAL BUSINESS ACT. Under the IFAA, the international
financial business program is broadened to include new financial
activities, the range of corporations that are allowed to register is
expanded, and the Greater Vancouver location restriction has been
removed.
HOME OWNER GRANT ACT
o The threshold value at which the home owner grant begins to be phased
out was increased to $585,000 from $525,000 beginning in the 2004 tax
year.
PORTS PROPERTY TAX ACT
o On October 15, 2003, the province announced a Ports Competitiveness
Initiative effective January 1, 2004. The initiative caps the
municipal property tax rates for existing ports facilities at $27.50
per $1,000 of assessed value and for new investment in ports
facilities at $22.50 per $1,000 of assessed value. Affected
municipalities are compensated annually for the tax cap on existing
ports facilities based on the impact of the cap in 2003. The
initiative, which will be reviewed after three years, also provides
a property tax exemption for berth corridors and a remission of
school tax on berth corridors back to 2002.
MOTOR FUEL TAX ACT
o Effective February 18, 2004, alternative motor fuel tax regulations
were revised to improve the emissions reduction criteria and add an
additional alternative motor fuel category.
o Effective July 1, 2004, the ethanol and biodiesel portions of fuels
when blended with gasoline or diesel fuel are exempt. For the
exemption, ethanol blends with gasoline or diesel must contain at least
5 per cent ethanol but no more than 25 per cent. Biodiesel blends must
contain at least 5 per cent and no more than 50 per cent biodiesel.
TOBACCO TAX ACT
o As of December 20, 2003, the tax rate on cigarettes was increased to
$35.80 from $32 per carton of 200 cigarettes and the tax rate on
fine-cut tobacco was increased to 17.9 cents from 16 cents per gram.
- -------------------------------------------------------------------------------
2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 3
CONSTITUTIONAL
FRAMEWORK
<Page>
96 APPENDIX 3 - CONSTITUTIONAL FRAMEWORK
- -------------------------------------------------------------------------------
CONSTITUTIONAL FRAMEWORK
The structure of the British Columbia government is based
on British parliamentary tradition and precedent. Prior to
1866, BC was composed of two British-controlled Crown
colonies, one on Vancouver Island and a second on the
mainland. In 1866, the Union Proclamation joined these two
colonies to form the Crown Colony of British Columbia, and
on July 20, 1871, BC entered into Confederation with
Canada. Although the Colony of Vancouver Island had a
parliamentary form of government as far back as 1856, the
first fully elected government was not instituted in BC
until the autumn after Confederation with Canada.
Responsible government was achieved in late 1872, when the
Lieutenant Governor acquiesced to an executive council that
was responsible to the legislative assembly.
Upon entering Confederation, BC came under the authority of
the BRITISH NORTH AMERICA ACT, 1867 (BNA ACT), a statute of
the British parliament. Until 1982, the BNA ACT defined the
major national institutions and established the division of
authority between the federal and provincial governments.
In 1982, the BNA ACT was renamed the CONSTITUTION ACT, 1867
and its amendments were incorporated into the CONSTITUTION
ACT, 1982. The CONSTITUTION ACT, 1982, which also includes
the Canadian Charter of Rights and Freedoms, is companion
legislation to the CANADA ACT, 1982. With the passage of
the CANADA ACT, 1982, the British Parliament ended its
legal right to legislate for Canada. Canada, as a federal
state, divides legislative powers between the federal and
provincial governments.
PROVINCIAL GOVERNMENT
BC's government is modeled after the British system.
Functionally there are three main branches: the
legislature, the executive and the judiciary.
LEGISLATURE
Legislative powers in British Columbia are exercised by a
single legislative chamber, which is elected for a term of
four years. British Columbia, the first province in Canada
to legislate fixed election dates, requires an election on
the second Tuesday in May every four years. An election may
also be called if the government loses a vote of confidence
in the legislative assembly.
The legislature consists of the Lieutenant Governor and 79
elected members of the legislative assembly. The
legislative assembly represents the people of BC in the
conduct of the province's affairs. The assembly is required
by law to meet at least once a year with a normal session
lasting several months. However, special sessions can last
just a few days or many months, depending on the nature of
the government's business.
The legislature operates on a fixed schedule -- the second
Tuesday in February each year is reserved for the Throne
Speech and the third Tuesday in February each year is
reserved for the Budget Speech.
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
APPENDIX 3 - CONSTITUTIONAL FRAMEWORK 97
- -------------------------------------------------------------------------------
EXECUTIVE
The executive is composed of the Lieutenant Governor and
the executive council. The Lieutenant Governor is the
Queen's representative in British Columbia and holds a
largely ceremonial place in modern provincial government.
By constitutional custom, the Lieutenant Governor is
appointed by the Governor General of Canada for a term
usually lasting five years.
The Lieutenant Governor, on the advice of the premier,
appoints members of the executive council and is guided by
the executive council's advice as long as it holds the
confidence of the legislative assembly. Following a general
election, the Lieutenant Governor calls upon the leader of
the political party with the largest number of elected
members to serve as premier and to form the provincial
government.
The Lieutenant Governor, on recommendation of the premier,
convenes, prorogues and dissolves the legislative assembly
and gives Royal Assent to all measures and bills passed by
the assembly before they become law.
The executive council, or cabinet, is headed by the premier
and is composed of selected members of the ruling party.
Ministers are the head of government ministries, and are
usually members of cabinet.
Cabinet determines government policy and is held
responsible by the legislative assembly for the operation
of the provincial government. Deputy ministers are the
chief operating officers of ministries and are appointed by
cabinet. Deputy ministers are responsible for carrying out
government policies and for managing the work of their
ministries.
JUDICIARY
The judiciary performs functions that are central to the
orderly operation of society. Judges hear and give judgment
in criminal prosecutions and in actions arising from
disputes between private citizens or between the government
and private citizens. Judges apply both judge-made law,
known as "common law," and laws made by the Parliament of
Canada and provincial legislatures. The judiciary is
increasingly called on to determine whether laws passed by
governments conform to the values expressed in the Canadian
Charter of Rights and Freedoms.
BC's judicial system is made up of the Provincial Court of
British Columbia, the Supreme Court of British Columbia and
the Court of Appeal of British Columbia. The Provincial
Court includes Small Claims, Adult Criminal, Youth and
Family divisions. The provincial government appoints
Provincial Court judges, and the federal government
appoints Court of Appeal and Supreme Court judges.
The federal judicial system includes the Tax Court of
Canada, the Federal Court of Canada (Appeals division and
Trial division) and the Supreme Court of Canada. The
Federal Court of Canada hears cases in limited areas
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004
<Page>
98 APPENDIX 3 - CONSTITUTIONAL FRAMEWORK
- -------------------------------------------------------------------------------
of exclusively federal jurisdiction, for example, reviewing
decisions made by federal tribunals such as the Canada
Labour Relations Board. The Supreme Court of Canada is the
court of final resort and hears selected appeals from the
Federal Court of Appeal and provincial Courts of Appeal.
PROVINCIAL GOVERNMENT JURISDICTION
Under Canada's constitutional framework, BC has ownership
and jurisdiction over natural resources and is responsible
for education, health and social services, municipal
institutions, property and civil rights, the administration
of justice and other matters of purely provincial or local
concern.
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2004 FINANCIAL AND ECONOMIC REVIEW - JULY 2004