Four years ago, BC Tech sounded a warning bell with the second of our New Economic Narrative for BC reports, BC’s Fiscal Future. At the time we published the report BC enjoyed a triple A credit rating. Yesterday, Moody’s downgraded BC’s credit rating for the second time to Aa2.
In our report we called for government to recognize the critical importance of building a robust fiscal framework to preserve the capacity to deliver health, education and other key services and to position our economy for long-term success. Our call to action was that government must do far more to invest in sectors with growth potential that provide high levels of employment and well-paying jobs – in particular BC’s tech sector.
Our report was read widely in government, most commonly with the remark ‘but if this is true it changes everything’. Yes, it does.
Over the last 4 years, the tech sector grew two to three times faster than the rest of BC’s economy each year and now represents 9% of BC’s workforce. Our members have done a tremendous job creating jobs and GDP and driving economic growth to keep BC relevant. And tech leaders are just as interested today in supporting BC’s government to make better choices about our economy and our future. That’s why we’re calling on the province to establish a permanent standing Premier’s Technology Council to provide them with better guidance on economic growth drivers and opportunities. Because you can’t seize an opportunity if you don’t understand it.
At BC Tech we’re obsessed with how AI is changing our world and how we can best support our members and others in the ecosystem – including government – to grasp the opportunities and act even while the environment is changing and the uncertainty is real. AI can do so much but what it can’t do is ask the right questions or decide to act based on the results – for that, we need humans.
(For those interested in the longer-form argument, I worked with my intern Claude on an analysis of BC’s recent Provincial Budget – see below.)
The Fiscal Picture
BC projects deficits of $13.3 billion in 2026-27, declining to $11.4 billion by 2028-29, with total provincial debt expected to rise sharply [BC Budget 2026]. Total provincial debt is expected to climb from $154 billion to $235 billion over the three-year plan [CBC News]. Expenses are accelerating at 4.4% year-over-year, with healthcare, education, and social services absorbing the bulk of new outlays [TD]. The government has included $5 billion annual contingencies, which provides a buffer but also signals awareness of downside risk.
Short-term Debt Cycle Dynamics
BC is in the late stage of a short-term debt cycle contraction. The economy is growing at just 1.3% real in 2026, consumer demand is weakening, the housing market has cooled significantly after years of overheating, and federal immigration policy changes are slowing population growth — the engine that has driven much of BC’s demand-side economics for the past decade.
In this context, the budget is mildly contractionary at exactly the wrong moment. Raising taxes on the lowest income bracket, expanding PST to professional services, freezing bracket indexation, cutting 15,000 public sector jobs, and re-pacing capital spending — these are all measures that pull demand out of the economy when it’s already soft. Food bank use is up 79% since 2019, including a significant rise among employed people [BC Policy Solutions]. That’s a leading indicator of household distress, not a backdrop that calls for austerity-adjacent measures.
The counterargument is that BC has no choice — it was already running $10 billion+ deficits before these measures, and credit rating agencies had already downgraded the province. The budget attempts to thread a needle: enough tightening to demonstrate fiscal discipline, not enough to trigger a severe demand contraction. Whether it succeeds depends heavily on external factors (U.S. tariffs, commodity prices, immigration) that the province doesn’t control.
Long-term Debt Cycle Considerations
This is where the picture gets more concerning. BC is exhibiting classic late-long-term-debt-cycle characteristics:
The province went from a mid-teens debt-to-GDP ratio pre-pandemic to a projected 37.4% by 2028-29 — approaching levels comparable to Ontario and Quebec, which historically had much weaker balance sheets [RBC]. The speed of this deterioration matters as much as the absolute level. Debt servicing is projected to rise from 4.9 cents per dollar of revenue to 8.2 cents by 2028-29 [Crestview Strategy], meaning an increasing share of every tax dollar goes to bondholders rather than services or investment. This is the classic crowding-out dynamic of the long-term debt cycle’s later stages.
Meanwhile, spending growth is being driven by structurally rising healthcare costs (aging population, wage demands), education costs, and debt service — all categories that are extremely difficult to reverse. The spending-to-GDP ratio has risen well above its pre-pandemic norm of under 19% [TD]. Revenue is growing more slowly than expenses, and the new tax measures are projected to add only about $757 million this year — a fraction of the deficit.
The Real Estate Dimension
This is the critical link that connects fiscal policy to household economics in BC. Real estate has functioned as BC’s dominant asset class and primary wealth engine for two decades. But that dynamic has now inverted for a large share of the population: instead of generating wealth, housing costs are extracting it.
The average household in Metro Vancouver is allocating an extraordinary share of income to shelter — whether through mortgage payments, rent, or property taxes. This compression of disposable income has several consequences relevant to the budget analysis.
First, it limits the tax base’s elasticity. When households are stretched on shelter costs, their consumption of taxable goods and services is already constrained. Raising PST coverage and income tax rates on a population that’s spending 40-60% of gross income on housing produces diminishing marginal revenue and increasing marginal pain. The bracket indexation freeze from 2027 to 2030 compounds this — the impact will be more pronounced over time as inflation pushes more income into higher brackets [MNP] without the brackets moving upward to compensate.
Second, it creates a structural need to drive income higher just to maintain household solvency. This is where the tech sector connection becomes direct: tech jobs are among the few sectors that pay enough to sustain a household in Vancouver without dual income or family wealth. The 271,000 tech jobs in BC aren’t just an economic asset — they’re a fiscal survival mechanism for the province. Any policy that makes BC less competitive for these workers undermines the revenue base the government is trying to protect.
Third, the housing correction itself is reducing government revenue. Property transfer taxes, which had been a windfall during the boom, are declining as transaction volumes drop. The budget’s increases to the speculation and vacancy tax (from 3% to 4% for foreign owners) and the additional school tax on properties over $3 million are attempts to extract more revenue from the remaining real estate wealth, but they’re inherently procyclical — they raise the most during boom times and the least when the government needs revenue most.
The Core Tension
The budget reflects a government caught between the short-term political imperative to maintain services and the long-term fiscal reality that spending growth is outpacing revenue growth by a structural margin. The measures taken — modest tax increases, PST base broadening, public sector cuts, capital re-pacing — are insufficient to close the gap but significant enough to weigh on economic activity. The province is adding roughly $25 billion per year in new debt, with no projected timeline for balance.
The province is trying to combine spending cuts, tax increases, and continued borrowing, but without the productivity growth or income growth needed to make the debt burden sustainable. Real GDP growth of 1.3-1.8% simply cannot support debt growing at this pace indefinitely.
The path forward requires one of two things: either a significant acceleration in private-sector productivity and income growth (which would broaden the tax base organically), or a much more aggressive fiscal consolidation that the current government has explicitly chosen not to pursue. The tech sector is BC’s best candidate for the former — but the budget’s mixed signals on competitiveness suggest the government hasn’t fully internalized that its fiscal future and its tech sector’s health are essentially the same bet.
Jill Tipping is the President and CEO of the BC Tech Association.
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