British Columbia's credit rating was lowered to AAA-negative by Moody's Investor Service, down from an AAA-stable level.
BC Conservatives Leader John Cummins says the downgrade was attributed to B.C.'s growing debt load, and places the blame squarely on the shoulders of the B.C. Liberal government.
“B.C.’s total debt will double in just over a decade under the B.C. Liberals from $33.8 billion, to $66.4 billion.
“Now, as a result of the credit downgrade, our borrowing costs will rise ever higher. Even though the B.C. Liberals claim to be superb economic and fiscal managers, the evidence clearly proves otherwise.”
He adds the result of the credit downgrade will be ever-rising borrowing costs.
However, in Cummins' recent campaign briefing notes, he says an objective look shows it appears provincial government policies do not have much of an impact on the assessments by credit-rating agencies.
“The provinces seem to have less of an impact on their own credit ratings than do global economic forces.”
He notes this doesn’t stop provincial politicians from using credit rating changes to their advantage, and points to former Finance Minister Kevin Falcon touting the triple-A credit rating in Legislature last February.
Now, Cummins explains, the downgrade prompted a warning by the B.C. Liberals that a defeat at the polls next May would have “dire consequences.”
He says Attorney General Shirley Bond told the Globe and Mail, that in light of the cautionary note from Moody’s, she thinks there is “an enhanced risk” if people are considering a change in government.
Cariboo-Chilcotin MLA Donna Barnett says it's true the recent drop in B.C.'s credit rating is partly due to a growing debt load, but disputes Cummins' claim it will double in the next decade to reach $66.4 billion.
“It has a lot to do with the uncertainty of the global economy and the resource industries that actually [provide] most of the wealth of British Columbia to pay the bills.”
The recent decrease in natural gas volume and prices has reduced revenues, she explains, and just like anyone dealing with bank loans, Moody's also looks at the income levels when assessing financial risk.
“When [natural gas prices] come down, naturally your revenues come down, and then you have to take a look at your budget and you have to tighten your belt. That's what has to happen; you have to take a look at your spending.”
Barnett notes there are localized examples in the Cariboo of reduced income for B.C.
“Take a look at the forest industry. Because of the pine beetle, the revenue on stumpage is down from many years ago because of the quality of the timber.”
Tourism revenue decreases from the United States economy also affect B.C.'s bottom line, she says.
Generating more resource industries, such as new mines, brings additional revenue to government through new jobs and taxation, the MLA explains.
“Then, your triple-A credit rating will come back. It's a warning.”
Barnett reiterates Cummins' forecast on the debt-doubling next decade has no basis in hard numbers.
“The only way the debt could double is if the interest rates soared. The credit rating and the interest rates are different [things].”
She adds the Canadian dollar is another important factor beyond the control of the province, as was the case when it hit 60 cents for U.S. exchange.
“If you balance your budget, you curtail your spending, you increase revenues; therefore, you will decrease your debt load. That's what I foresee.”
She adds government's adjusted credit rating is “not all bad.”
Barnett notes there are only two provinces that hold an AAA-negative or better credit rating with Moody's – B.C and Alberta.