Victoria is estimating a further decline in tax revenue for the year, which will be offset by further cost reductions and cutting in half the province's forecast allowance, according to the Ministry of Finance's second quarterly report.
The province is now projecting annual tax revenue for the 2009-2010 fiscal year at $37.4 billion, a $232 million net decline from the forecast in September's budget update. The bulk of the decline is expected to come from a $205 million decline in personal income tax revenue based on weaker 2008 tax assessment reports. Corporate tax revenue is also expected to be $41 million lower than previously forecast.
Revenue from social service taxes are down $80 million and hotel room taxes are $11 million lower than expected. Forest revenue is down $73 million due to continued weakness in the sector leading to lower Crown harvest volumes, stumpage rates, U.S. exports and a higher than forecast Canadian dollar vis--vis the U.S. greenback.
Natural gas royalties are expected to fall $113 million this year, reflecting a 12.3% decline in the average price of natural gas.
However, not all sectors have seen revenue declines. The province has received $95 million more in the property transfer tax reflecting a stronger than expected domestic housing market. Higher coal, metal and electricity prices are projected to increase revenue from energy, metals and minerals by $171 million this year.
Victoria also expects about $25 million more in federal tax transfers including $10 million more from the BC Housing Management Commission relating to federal stimulus spending and $15 more in health and social transfers.
To deal with the net revenue declines, the province plans to save $107 million from spending cuts and other cost savings. It is budgeting savings of $79 million from reduced spending to service delivery agencies, health authorities and post-secondary institutions. It also plans to cuts to Crown grants, and lower interest and insurance-related costs.
It has also cut in half the budget's forecast allowance to $125 million in order to keep the province's record deficit at $2.77 billion.
Hansen is expected to meet with members of the province's independent Economic Forecast Council in December in preparation for a revised five-year economic forecast that will be developed for the province's 2010-2011 budget.