The province's new Finance Minister, Mike de Jong, announced Thursday morning that B.C.'s budget deficit is expected to hit $1.14 billion this year — an increase of $173 million over earlier estimates.
De Jong blames falling natural gas revenues that are projected to cost the province $1.1 billion over the next three years. He said other natural resource revenues projections are also down, meaning the province is facing a total drop of $1.4 billion in projected revenue over the next three years.
A gigajoule of natural gas is now priced at $2.20, down from $7.58 in 2005, de Jong said, adding that the only good news is that it probably can't get much worse.
"We're almost at a point where it is difficult to imagine gas prices dropping any further," he said.
As a result, the government will have to find more than $1 billion in cost savings and cuts over the next three years, de Jong announced at his first quarterly update in Victoria on Thursday.
"We are committed to delivering a balanced budget. That's why we are taking additional steps to exercise greater fiscal restraint," he said in a statement.
De Jong said he is still committed to balancing the budget by the 2013/14 fiscal year, as required by B.C. law, but said dropping revenues will make that very tough.
"This government respects taxpayers and we will not spend more of their money than we receive. We are looking for savings inside government, while protecting the programs and services B.C. families rely on."
Wage and hiring freeze
In order to do that the government will have to cut spending by $241 million this year, $398 million next year, and by $483 million the year after, he said.
To do that B.C. will be rolling out spending cuts, freezing salaries for all public sector managers and putting in a hiring freeze for civil servants.
He said the government is also reviewing its bargaining mandate with public sector unions and indicated even small wage increases are likely now off the table.
That news is likely to anger government unions, which have been holding one-day strikes in order to push for better wage increases in ongoing contract negotiations.
The cuts will also be bad news for Premier Christy Clark, whose Liberal government is trailing the NDP in the polls by roughly 20 per cent heading into the May 2013 election.
The B.C. NDP says the provincial government should have seen a big drop in revenues coming.
Finance Critic Bruce Ralston says he had warned that natural gas prices were too volatile to be relied on.
Ralston also questions how genuine the Liberals are being with their expenditure-cutting approach.
"On the one hand, the minister is saying he's introducing some austerity. On the other hand, there seems to be money for projects the premier thinks are important for her electoral opportunities."
De Jong was appointed finance minister in a cabinet shuffle earlier this month, but his predecessor Kevin Falcon had already warned the province's books were being squeezed by plunging natural gas prices.