* C$40.6 billion operating budget
* Province expects to outpace Canada in economic growth
* Awaits final Olympic cost tally
By Allan Dowd
VICTORIA, British Columbia, March 2 British Columbia unveiled a 2010-11 budget that includes a C$1.7 billion ($1.64 billion) deficit on Tuesday, and said it is keeping a close eye on whether it will have to cover any unexpected costs from the Vancouver Winter Olympics.
The Liberal provincial government said the budget for the fiscal year that begins in April 1 will be C$40.6 billion, and that it is confident that the 2009-10 budget, which had to be revised midway through the year, will end up with the C$2.8 billion deficit it forecast earlier.
The government said it expects a return to budget surpluses in three years.
British Columbia had agreed to spend C$765 million to help host the Olympics, which ended on Sunday, including setting aside C$79 million for any unexpected costs.
Finance Minister Colin Hansen acknowledged there are "pressures" on that fund. "We are not expecting them to be so great that it will be considerably above that," he said.
Games organizers had a largely privately funded C$1.7 billion operating budget, but the event was hit with weather problems that forced snow to be trucked to one venue and the cancellation of thousands of tickets.
Merchandise sales, however, were higher than expected during the Games, which received wide international acclaim after a rough start.
Organizers are still finalizing some contracts, including one to compensate the Whistler ski resort for any business it lost by holding alpine and sliding competitions there, so the full cost of the Games may not be known until early summer.
The province paid half of the C$585 million cost of building venues for the Games and a portion of the C$900 million security bill.
The new provincial budget projects revenues to increase to C$39.2 billion from C$37 billion in the revised 2009-10 budget. The C$40.6 billion in planned spending in 2010-11 is an increase from C$39.7 billion the year before.
Spending on health care will increase slightly, but cuts to ministries such as forestry will require job cuts, provincial officials said.
Total capital spending is expected to be C$8.1 billion, up from C$7.3 billion in the 2009-10 budget, due largely to economic stimulus projects with the federal government.
The province's total debt will climb to C$47.8 billion, giving it a debt to GDP ratio of 24.3 percent, up from C$41.3 billion and 22 percent in the last budget.
Provincial economists project British Columbia will have 2.2 percent real GDP growth in 2010, lower than the 2.9 percent to 3 percent that private economists have projected, but above the 2 percent growth the province expects for Canada nationally.
"Although it will take time, we are on the road to recovery," Hansen told the provincial legislature.
The province's GDP dropped 2.7 percent in 2009, dragged down by falling commodity prices and the collapse of the U.S. housing market, which hit British Columbia's forest industry.
The Vancouver Olympics, while having provided a psychological boost with Canada's strong medal count, is expected provide only a .01 percent boost to economic growth, officials said.
The head of the B.C. Federation of Labor, Jim Sinclair, complained that cutting provincial jobs at a time when the economy was already struggling was "like throwing gasoline on the fire".
($1=$1.035 Canadian) (Reporting Allan Dowd, editing by Peter Galloway)