As the B.C. government phases out Medical Services Plan premiums and imposes a new 1.95 per cent employer health tax, local governments are looking at property tax hikes to cover the resulting increase in their labour costs.
The Maple Ridge-Pitt Meadows School Board is looking at budget cuts.
The City of Maple Ridge’s current estimate is that the changes will cost it approximately $1 million.
“This is a million-dollar download on taxpayers – on our houses and properties,” said Coun. Gordy Robson. “I’ve never seen this kind of a download – not without notice and consultation.
“I think it’s outrageous – tax and spend governments living up to their name.”
The government is phasing out MSP premiums and imposing payroll taxes on larger businesses to recover some of the revenue. The employer health tax will come into effect on Jan. 1, 2019 for business with annual payrolls over $500,000.
The government’s intent is to cut MSP premiums for individuals, which will save families up to $1,800 per year, and eliminate a fee that is unique to British Columbians in Canada.
Maple Ridge chief administrative officer Paul Gill said the $1 million impact quoted by Robson is a “ballpark figure,” based on 1.95 per cent of the city payroll of $35-36 million, combined with the approximately $16 million in RCMP payroll.
“It’s going to be a big number,” said Gill, but added that the finance and audit committee has yet to report on the impact of the changes.
He said the city has been paying $300,000 per year for MSP premiums.
For one year, the city will also have to pay MSP premiums on top of the payroll tax, as the new system is phased in. MSP premiums will be phased out by 2020, but there will be one year when employers pay both MSP and the employer health tax.
A $1 million expenditure would represent a 1.25 per cent tax increase, said Gill.
Gill agreed with Robson’s assessment that the new tax and elimination of MSP premiums is a shift of the tax burden from employee to employer, but in the case of public employers it will increase taxes.
But Coun. Craig Speirs said the NDP government is righting a wrong that saw the Liberal government put MSP premiums on individuals and families, where it was a large cost. He said large employers should rightly pay this fee.
“We will make room and absorb it,” added Speirs.
The Maple Ridge-Pitt Meadows school board has called on government to fund the changes, which are expected to cost approximately $1 million in 2019.
The district’s cost for MSP before the rates were reduced by 50 per cent in January 2018 was $1.5 million.
“We are estimating that the new tax will cost $2.2 million, which will be a net cost increase of $700,000,” said district spokesperson Irena Pochop.
“In addition, for 2019 both MSP and the new tax will be in effect, creating an additional cost pressure of $350,000.”
School board chairman Mike Murray said if government doesn’t fund the payroll tax, or make school boards exempt, then budget cuts are the only solution.
“My concern with this one is we are a government agency with no ability to generate addition revenue to offset additional costs,” said Murray.
He said the board has been asking governments – first Liberals and now NDP – for a predictable budget process.
“We want consistent, predictable and stable funding every year, not surprises.”
He said the Liberals imposed two years of administrative savings on boards, with little warning, and the result was budget cuts.
“We expected this government wouldn’t do that, but here we are.”
The board passed a motion that the B.C. School Trustees Association request that the Ministry of Education and the Ministry of Finance increase funding for school districts to fully cover the cost of the newly created Employer Health Tax of 1.95 per cent on total payroll.
In Pitt Meadows, the 2019 net cost increase is estimated at $82,000. This considers the 1.95 per cent new employer health tax less the 50 per cent reduction in MSP premiums in 2018, with the remaining 50 per cent premiums expected to continue in 2019.
If the MSP premiums discontinue in 2020, the net cost increase to the city decreases from $82,000 to $50,000.
The city currently pays 75 per cent of the MSP premiums for staff.
Business groups have also complained government is reducing the tax burden on individuals by shifting it onto businesses.
Finance Minister Carole James has been criticized about the new tax during question period in the B.C. legislature, and said she plans to consult with cities and other affected agencies.
“That’s why we give it a year for implementation, so we can have discussions with not-for-profits, with school districts, with municipalities, to determine how those resources are going to be allocated,” James said.