What I expect were strategic leaks over the past week revealed some popular highlights included in the budget, giving the government some positive media in the days before the budget was released. The construction, revitalization and renovation of schools and funding for a new hospital in south Edmonton were two of the most notable tidbits to be released in advance of yesterday’s budget speech.
If the leaks were indeed intentional, it was not a bad communications strategy considering the government’s current financial situation. It created a positive distraction from two big numbers that the conservative opposition parties want to focus on – total budget spending and the budget deficit.
But when the budget was tabled yesterday, neither of these numbers were really a surprise. We knew the NDP was not planning to make deep cuts to provincial program spending in this budget. And we knew from Ceci’s third-quarter update from the last fiscal year that the deficit would likely remain over $10 billion – it is projected to be $10.3 billion, down around $500 million from $10.8 billion last year.
The conservative opposition attacked the budget, which was also something we knew would happen. A Wildrose opposition press released called the budget a “a debt-fueled disaster” and the Progressive Conservatives claimed it took Alberta over a “fiscal cliff.” A press release from Alberta Party leader Greg Clark claimed the budget was “uninspired, irresponsible and focused only on the short term.”
Also not surprising was the response from Liberal leader David Swann, who took a more reasoned approach by applauding the government on investing in public services and infrastructure, and then pointing out where the budget failed.
As AlbertaPolitics.ca author David Climenhaga writes in detail, Rachel Notley‘s NDP government rejected the kinds of conservative fiscal policies that created the infrastructure deficit Alberta has today.
The government continues to make significant investment in public infrastructure, which is long overdue in Alberta. Along with a new hospital in Edmonton, the budget includes funding for renovations at the Misericordia Hospital and new construction at the Royal Alexandra and Glenrose hospitals (which was not previously announced, so that was a surprise).
One question that remains unanswered is how, in the long-term, the government plans to deal with the revenue shortfall created by the drop in the international price of oil. For many years, the Alberta government became over-dependent on oil and natural gas royalties to pay for a large portion of the daily operations of government.
The old PC government used those high royalty revenues to subsidize corporate and personal tax cuts, which proved politically popular in the short-term but financial irresponsible in the long-term. When the international price of oil dropped in 2014, so did about $10 billion worth of expected government revenue.
The NDP took some steps to diversify revenue with moderate increases to corporate and personal taxes after they were first elected 2015 but it was nowhere enough to fill the revenue shortfall (Albertans still pay some of the lowest taxes in Canada). The positive news is that Alberta still has the advantage of having a low debt-to-GDP ratio, which means at least in the short-term our province should be able to deal with being in a deficit situation.
Overall, I am not surprised about what is and is not included in the 2017 provincial budget. I am encouraged that the NDP is not heeding the calls of the conservative opposition parties to make deep funding cuts to public services and infrastructure investments, which would be detrimental to Albertans’ quality of life during this economic downturn.