Two credit rating downgrades in a week indicate a loss of trust in state financial management
When the BC Finance Minister filed the budget last month at a record-breaking deficit and debt level, she was asked whether the Red Ink ocean, which owns its fiscal plan, would lead to a downgrade of the state’s credit level.
“I don’t guess credit ratings,” Brenda Bailey told budget audiences on March 4th.
It doesn’t seem close enough as the two biggest institutions have roared back this week, strongly condemning the lack of fiscal discipline in the NDP government.
“The rise in deficits and rising debts is largely due to local policy choices, which we consider to be high to high as evidence of continued weakening of governance and fiscal and debt management.
“We see this as a significant deviation from the state’s historic budgeting approach, focusing on limiting debt growth and protecting its financial position,” Moody’s said. “The lack of clarity by the government on the path to balance further weakens fiscal control.”
S&P Global had similar concerns.
“We believe that the state’s commitment to fiscal discipline and stability has been shaking in recent years as BC has effectively increased its spending on both its business and capital investments to an unparalleled level,” S&P downgraded its rating from AA- to A+, marking its fourth downgrade in its fourth year.
The downgrade makes it more expensive for the BC government to rent to build projects such as roads, hospitals, bridges and more. The state already spends more ($5 billion) on debt services costs each year than the entire child welfare system.
Both rating agencies had a common complaint. BC had been running the deficit over the past two years, but now it was predicting another three years.
However, Bailey seemed hesitant to accept criticism. She sought to condemn the international uncertainty caused by US tariffs.
The rating agency mentioned tariffs in its report, but has truly and firmly established the rationale for a downgrade at the feet of the NDP government’s spending options.
Downplay exercise continued into the troubled period.
“We recorded four flaws and four downgrades under this Prime Minister’s surveillance, from the surplus and stable credit ratings under Prime Minister (John) Hogan,” said BC Conservative Financial Commentary Peter Miloval.
“This despite the fact that record revenue comes to the government behind taxpayers in British Columbia. A simple question to the Prime Minister: How high is the acceptable deficit for this government to tolerate?”
Bailey tried to avoid it.
“It’s very important that we get back on the path to balance,” the finance minister said. “But I would like to point out to the opposing members that there are multiple types of deficits. We have inherited an incredible deficit in services and infrastructure. We have been working on it for the Colombians of England.
Milobal made the minister better in exchange as he did all week in Parliament on carbon taxes and other matters.
“This premier inherited a $6 billion surplus,” he rebutted, explaining exactly what the financial situation was presented to Horgan in 2022 by David Eby.
The Prime Minister seemed more willing to acknowledge the reality of the situation on his part.
“I’ve noticed concerns from these credit rating agencies that I share,” Ebby said Thursday.
“We have a significant deficit. We have committed to protecting the frontline services of British Columbians, building hospitals, building schools. We are doing that. We need to be strong in British Columbia, and we need a path to balance.
“That’s why the Minister of Finance has been working.”
Bailey has promised a cost-cutting and efficiency review along with employment freezes to save money. The review does not have a defined range or timeline, and the adoption freeze is already exempt Swiss cheese.
Bailey estimates the initiative will save $300 million this year. This is 0.3% of the overall spending. This is irrelevant and basically corresponds to no planning at all for rating agencies.
In other news
•US President Donald Trump mistakes tariffs for economic relief, columnist Kirk Lapointe wrote.
• BC’s response to the Trump administration’s new global tariffs has been kept and confused so far, columnist Lane writes. Meanwhile, BC car buyers could soon face higher prices.
•BC’s Business Council has its own view of the state’s difficult financial situation.
Rob Shaw has spent more than 17 years covering BC Politics and is currently reporting on writing for Chek News and Glacier Media. He is a co-author of the National Best Selling book A Confeition, host of Weekly Podcast Political Capital, and a regular guest on CBC Radio.
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