The B.C. government has reversed a decision to chop millions of dollars in funding from community and arts groups, just one day after announcing the cuts in its updated budget.

Finance Minister Colin Hansen said the more than 500 groups that had three-year funding commitments in writing will get the money they were promised.

"What we realized in that process is that there's many organizations for whom we had actually made written commitments and we recognize that in living up to what our initial intent was, we have to honour those commitments."

Hansen said the extra $20 million in promised grants would come from the government's contingency fund.

The news comes shortly after the B.C. Association of Charitable Gaming threatened to launch a class-action lawsuit on behalf of those charities that had signed agreements with the government guaranteeing annual funding.

However, Housing Minister Rich Coleman said the threat of a lawsuit had nothing to do with with the government's decision.

"I took a look at it from a standpoint of, if a reasonable person was reading this, what would they think? And I felt that we should make the commitment, so I took it back to government and they said yes."

Cheryl Ziola of the B.C. Association of Charitable Gaming said her members aren't "jumping up and down with glee."

"Because we felt that this funding belonged to the charities to begin with. It was almost outright theft," she said.

The cuts were part of the government's three-year plan to slash $1.5 billion in discretionary spending.

With files from the Canadian Press