British Columbia

Reality Check | What does Moody's really say about B.C.'s budget

B.C. Liberal leader Christy Clark repeated claims today that international bond rating agencies verified her last budget as balanced and are concerned about an NDP government.
B.C. Liberal Leader Christy Clark took to the airwaves on Monday morning. (Jonathan Hayward/CP Images)

B.C. Liberal leader Christy Clark repeated claims today that international bond rating agencies verified her last budget as balanced and are concerned about an NDP government.

"Go ask Moody's," Clark told a Vancouver radio show on Monday morning.

"Moody's is a debt rating agency that works all over the world and looks at everybody's budgets and decides whether or not those budgets are balanced," said Clark.

"They said it was balanced. They are the world's experts. Dominion Bond Rating agency said the budget was balanced."

"They said they are concerned if the government changes, that we are going to have a financial mess again in this province, based on what they saw in the 1990's," said Clark.

So CBC's Reality Check team decided to check the reports ourselves and ask some experts if that's what the bond rating agencies said.

Agencies don't verify balanced budgets

Helmut Pastrick, the chief economist of Central One Credit Union says Moody's and other credit rating agencies examine budget projections, but do not verify them as balanced or not balanced.

And according to Queen University economist Donald Drummond Moody's actually raised concerns about the government hitting its balanced target.

"Moody's acknowledges B.C.'s budget plan to balance the operating balance, but has some concerns about the plan being realized. Hence they are casting some doubt about achieving balance in the budget's timeline," said Drummond.

Moody's does give Clark's government credit for "a track record of prudent fiscal planning," but notes for the B.C. Liberals latest budget to be balanced, the government must sell nearly half a billion dollars in assets like parking lots and old schools.

"Disposing of surplus properties, often with associated operating costs, would appear to make sense, however, these one-time sales cannot be relied on to resolve structural budget imbalances," said Moody's April report.

Similarly the Dominion Bond Rating agency, DBRS, also notes the government plan to balance the budget, but raises concerns about if the targets will be met.

"Despite a weak economic growth outlook, the budget introduced on February 19, 2013, marks the culmination of the Province’s plan to return to fiscal balance in 2013-14."

"DBRS acknowledges that all budget measures may not be implemented before the upcoming provincial election scheduled for May 14, 2013."

Credit downgrade claims challenged

As for Clark's second claim that the bond rating agencies have raised concerns that a change in government could lead to a downgrade in B.C.'s credit rating, Moody's never said that, according to Pastrick.

"No, not to my knowledge. I take their statement at face value and they are mainly concerned about the state of the global economy in the next three years."

In fact, Moody's gives B.C. a "negative" credit outlook, and blames the province's recent accumulation of debt under the B.C. Liberals.

"The negative outlook reflects the risks to the province's ability to reverse the recent accumulation in debt given a softened economic outlook, weaker commodity prices and continued expense pressures," said the most recent Moody's report.

"A return to a stable outlook on the Aaa rating would require an achievement of the province's fiscal targets that stabilizes and ultimately reverses the recent accumulation in debt over the medium term."

But the Dominion Bond rating service does warn an NDP government could result in "a change in fiscal direction," in their Mar. 26 report.

"While DBRS is encouraged by the responsive measures taken in the February budget to restore fiscal balance, the upcoming provincial election scheduled for May 14, 2013, has the potential to delay or cancel the implementation of some of the aforementioned budgetary measures."

"Recent opinion polls suggest the New Democratic Party, led by Adrian Dix, have the best chance of forming the next government. DBRS believes this could result in a change in fiscal direction."