B.C. ended the fiscal year with a smaller-than-forecast deficit of $1.84 billion, according to the provincial government.
The deficit would have been $241 million had it not been for the one province's one-time repayment of $1.6 billion in HST transition funding to Ottawa.
Finance Minister Kevin Falcon predicted the province is on track to return to a balanced budget in 2013-14.
But he cautioned while the 2011-12 results are better than expected, B.C. still faces great economic uncertainty from fluctuating commodity prices and potential economic impacts from the European debt crisis.
"British Columbia stands out globally as a safe harbour for investment because our government continues to keep spending and debt under control," Falcon said, adding Europe's plight reflects "the perils of the tax-borrow-and-spend mentality."
But B.C. Auditor General John Doyle pegged the deficit at $2.36 billion, finding the province understated it by $530 million due to its continued practice of deviating from accepted accounting methods.
Because the government posted a deficit, cabinet ministers lose 10 per cent of their salary. They're all receiving the other 10 per cent of the legislated 20 per cent pay holdback because their ministries met their targets.
A deficit of nearly $2.5 billion had been budgeted.
B.C.'s economy grew by 2.9 per cent in 2011, third among the provinces and better than the national average of 2.6 per cent.
Retail sales, an indicator of consumer confidence, increased by 3.1 per cent in 2011.
Excluding the one-time HST repayment, government spending was held to an increase of 2.6 per cent, down from the 4.3 per cent budgeted.
The provincial government spent $42.8 billion last year, with an additional $934 million going to health, $67 million to education and $51 million to social services. There were cuts in most other areas to offset the HST repayment.
Nearly $3.6 billion went to capital spending on schools, universities, hospitals, roads, bridges and other infrastructure.
B.C. took in an extra $1 billion in tax revenue last year, half of it from more personal income tax.
The provincial debt climbed $2.8 billion to $50.2 billion.
B.C.'s taxpayer-supported debt-to-GDP ratio – a measure of ability to pay – fell to 16.4 per cent, one of the lowest ratios in North America.