Standard & Poor’s Ratings Services has revised its outlook on British Columbia to positive from stable, based on the likelihood of a provincial budgetary surplus in 2005.

At the same time, Standard & Poor’s affirmed its existing ratings on the province. S&P says that the ratings on B.C. reflect the Liberal Party government’s track record since coming to power in 2001 in consistently exceeding budgetary targets and thereby continuing to reduce the large budgetary deficit.

“In the past three years, the government has made progress in controlling expenditures and in increasing transparency in the province’s budgetary practices,” said Standard & Poor’s credit analyst Mario Angastiniotis. Better transparency in reporting has resulted from the inclusion of the results of the SUCH sector (schools, universities, colleges, and health authorities) in British Columbia’s budgetary revenues and expenditures, in accordance with recommendations made by the Public Sector Accounting Board.

The ratings also reflect another successive decline in the province’s deficit in fiscal 2004 (year ended March 31), with the overall shortfall amounting to about 9% of revenues (as adjusted by Standard & Poor’s), down from about 13% in fiscal 2003. The deficit was smaller than budgeted in the fiscal 2003 budget; and, the province is expected to report a balanced budget in fiscal 2005, as required by legislation.

S&P says that the government has achieved this mostly through expenditure control through measures such as program reviews and restructuring. With restructuring essentially completed, it expects that the province would be increasingly relying on stronger revenue growth to achieve larger budgetary surpluses.

The ratings are constrained by the performance of BC’s economy in 2003, which turned in modest growth as a result of a number of negative events in 2003. Risks remain with respect to the timing and breadth of the U.S. recovery, it says. “The positive outlook reflects Standard & Poor’s expectation of the achievement of a budgetary surplus beginning in fiscal 2005 and extending through to fiscal 2007 as set out in the province’s medium-term fiscal plan. The outlook also reflects the proximity of a provincial election (May 2005) and the [inherent risks] for the achievement of the current fiscal targets.”