HILL / PALACIOS: British Columbians paying for Premier Eby’s booming government sector

Tegan Hill and Milagros Palacios are economists at the Fraser Institute.According to the Eby government’s budget released in February, the government will run a massive $13.3 billion deficit, fuelled in part by a growing government sector. In fact, employment in the BC government has skyrocketed.First, some context. Since taking office in 2017, the NDP government has recorded the highest levels of spending on record (on a per-person basis, after adjusting for inflation). Consequently, over the next three years, the government plans to run large budget deficits, and after accounting for longer-term spending on capital projects (e.g. highways and schools), total provincial debt will balloon to a projected $234.6 billion in 2028/29, more than tripling since the NDP government first took office under John Horgan.Just like individual or household debt, British Columbians must pay interest on government debt. By 2028/29, debt interest payments will reach a projected $8.7 billion — or $1,520 per British Columbian, up from $532 in 2016/17. That’s money no longer available for programs such as healthcare and education. To help finance this debt, the Eby government has increased the lowest personal income tax rate (which applies to the first $50,363 in income), expanded the provincial sales tax to a host of professional services (e.g. engineering, architecture, accounting services), and increased property taxes. Again, BC’s booming government sector is a big part of the problem, as government employee compensation typically accounts for half of all provincial spending. While Premier Eby plans to reduce the government’s full-time equivalents (FTEs) by 15,000 from 2025/26 to 2028/29, what’s 15,000 FTEs in the grand scheme of things?.According to our new study, from 2015/16 to 2025/26, the BC government’s FTEs (a measure of staff employment — two half-time employees equal one full-time equivalent) grew by 153,604 or 54%, dwarfing growth in the province’s population (19.6%) and private-sector job growth, including self-employed (16.8%). Put differently, government FTE growth was roughly three times larger than population growth or private-sector job growth over the 11 years. Eby’s plan to reduce FTEs by 15,000 does little to reduce the growth over roughly the last decade.Crucially, it’s not just essential workers (e.g. doctors) that comprise the surge in FTEs. The provincial government’s bureaucracy (i.e. ministries and special offices such as the auditor general) grew by 41.6% over the period. For perspective, if Premier Eby fulfills his promise to reduce the government sector by 15,000 FTE, the government could save $1.9 billion. But if he went further and reduced FTEs to what they would be had FTE growth matched population or private-sector job growth over the last 10 years (a reduction of roughly 100,000 FTE), potential savings are $12.2 billion to $13.2 billion, respectively — enough to effectively eliminate the province’s deficit.Fuelled by a booming government sector, the BC government is drenched in red ink, and it’s costing British Columbians dearly. To help solve the province’s fiscal disaster, Premier Eby must more meaningfully reduce the bloated government sector.Tegan Hill and Milagros Palacios are economists at the Fraser Institute.

HILL / PALACIOS: British Columbians paying for Premier Eby’s booming government sector

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