Predicted Vic budget surplus drops $200m November 11, 2014 - 2:18PM Victoria's predicted 2014/15 budget surplus has been cut by $200 million in a pre-election budget update. The operating surplus was expected to be $1.3 billion but the latest Treasury figures predict a $1.1 billion surplus. Treasury reported the pre-payment of federal money for stage one of the East West Link in 2013/14 caused the majority of the 2014/15 drop. Other key fluctuations since the 2014/15 budget include lower estimates for land tax, partially offset by higher GST grants. The update also makes it clear Victoria would be legally liable for compensation to the consortium building the East West Link stage one if Labor scraps the road project. The state government signed a side letter along with the deal to commit Victoria to paying the termination compensation. "Any compensation payable by the state under the letter and in the contract is linked to a formula in the contract, the quantum of which would change depending on timing," the update, said. The update said the risk to the budget from a court action Labor is relying on to scrap the East West Link is not able to be quantified. Predicted budget surpluses in the forward estimates have also been revised down, dropping by $736 million in 2015/16, $504 million in 2016/17 and $365 million in 2017/18. The surplus estimates are now $2.3 billion in 2015/16, $2.7 billion in 2016/17 and $3.0 billion in 2017/18. The drops were in part due to the federal government deferring $500 million from its East West Link contribution to 2018/19.