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Alberta Politics

Alberta Budget 2020: This is no way to run a household.

It will probably be no surprise to readers that I am not a fan of the United Conservative Party’s budget tabled this week in the Legislature by Finance Minister Travis Toews. It includes short-sighted cuts to public health care, public education and public services that will have a detrimental impact on Albertans and lead to thousands of job losses across the province.

But my key criticism of this budget is close to the same I have given to budgets presented by former finance ministers Joe Ceci, Robin Campbell, Doug Horner, Ted Morton and Iris Evans: Alberta needs to stop over-relying on revenues from oil and gas royalties to pay for the daily operations of government.

The budget does not deal with the big financial problems facing Alberta.

Premier Jason Kenney frequently claims that Alberta is “broke,” but the budget documents plainly explain that our provincial government collects the lowest levels of taxes in Canada. We are also the only province without a sales tax, a solution that could relieve some of our government’s over-dependence on oil and gas, a revenue source determined by international prices.

The UCP budget actually increases its projected dependence on oil and gas royalties, growing from 10 percent of revenues to 15 percent by the 2022-2023 budget. When the international price of oil plummeted in 2014, it left an estimated $7 billion hole in the Alberta government’s revenue stream.

Kenney, like premiers Rachel Notley, Jim Prentice, Alison Redford, and Ed Stelmach before him, is praying for the international price of oil to rise and return an economic boom to Alberta.

The international price of oil, and our government’s chronic over-reliance on the oil revenues generated by it, is the source of much of the economic and political malaise we now find ourselves in.

The UCP also cut corporate taxes for the province’s wealthiest corporations, to the tune of $4.7 billion, according to the opposition.

With a single-minded focus on reducing spending, regardless of the jobs lost and the cost to Albertans’ quality of life, it appears highly unlikely that Alberta’s revenue stream will be looked at as long as Kenney, a founding spokesperson for the Canadian Taxpayers Federation, occupies the Premier’s Office.

While responsible investment of public funds is a goal that should transcend party-lines, the UCP government’s hand-picked panel to study Alberta’s finances was expressly limited to recommend changes to spending, not revenue.

Supporters of conservative parties frequently compare government finances to a household budget as justification for cuts to public services. Comparing a government budget to a household budget is a flawed analogy for many reasons, but it is has become a familiar narrative in Canadian politics.

If the Government of Alberta was a household, it’s overdraft and line of credit would partially be the result of someone purposely taking a lower paid job (stable taxation revenue) and instead relying on lottery tickets or inheritance from dead relatives (unpredictable oil and gas revenues) to pay the bills and keep the family fed.

This is no way to run a household.

10 replies on “Alberta Budget 2020: This is no way to run a household.”

Absolutely true, not a way to run a household when you spend more money than all of your neighbours. Clearly we need to be cutting deeper and bringing down out of control spending on our bloated public service and inefficient health and education systems.

I think of the public service as a sort of flywheel for the economy. When times are bad, these people and the services they provide add financial and social stability. Almost half of the wages they get go right back to the government at tax time, so the net cost is not that great.

As our host notes, the UCP plan seems to based on improved oil prices, not to mention a cargo-cult around pipelines. Long-term and perhaps permanently low oil prices coupled with transportation economics makes this seem a pretty faint hope.

We spend more money than our neighbours because we HAVE more money than our neighbours. Per capita income and median family income are the highest in the country in Alberta. Government spending as a % of GDP is low. And taxes are the lowest in the country.

There is nothing wrong with running a household that spends more than the neighbours if the money is actually there. In Alberta, it still is, though the future does not look particularly rosy.

Recent anaylsis of our healthcare system showed the management ratio to front line staff was the lowest in Canada. Class sizes are growing and not keeping pace with increase population. Alberta Transportation has been understaffed for decades (despite privatizing most of the maintenance). Most public-sector unions have had almost no wage increases over several years. Where are we bloated? And as others correctly point out, we have higher average salaries than adjacent provinces.
If you just have a hate on for unionized employees, then just say that. Then we can debate the merits of perks of civil service work against the drawbacks (there are many).

A point that doesn’t seem to ever be made is that a jurisdiction with a growing population has more expenses than one with a stable population. For example, imagine a city with no population growth. If the city has 10 fire trucks, and a fire truck has a life expectancy of 10 years, they can plan on replacing one truck every year.

If, however, that city were to suddenly double in size, it would need to buy another 10 fire trucks to provide the same level of service to the new population, in addition to the one they had planned on buying. Spending has suddenly skyrocketed!

Alberta’s population has increased by about one million people since the 2001 census. If all of those people had moved to say Rocky Mountain House, RMH would be the same size as Edmonton or Calgary. Now imagine all the hospitals, fire halls, schools etc in either city. That is the amount of infrastructure that has been needed to be built. Yes Alberta’s spending has increased, but it has been a necessary increase.

Just like the Alberta PCs have done, after Peter Lougheed left office, were utter and abysmal failures at managing Alberta’s finances, so it goes with the UCP. So pathetic!

The decicit for the first year of UCP is higher than the last full year of the NDP and the unemployment rate is now higher too. I am not sure how much more “progress” from the UCP Albertans will be able to stand.

I suppose the Conservative financial model is still as broken as it was under Prentice and Redford. Sure you can cut a lot, but when the price of oil falls a lot, revenue falls by even more. Therefore, the deficit either doesn’t go down or goes up despite the cuts. Of course, the cuts also have a negative feedback loop in consumer confidence and the economy. It is no coincidence Edmonton now has one of the highest unemployment rates in Canada and unfortunately it is not going down anymore in Calgary either.

Conservatives may have a case to make that some spending restraint is needed, if they didn’t totally ignore the revenue side. Half a solutuon is not a real solution at all.

Thank you, Dave, for pointing out that all our governments (PC, NDP, and UPC) in this province have lacked the courage to have a grown up conversation about how we pay for the services Albertans want, without being so dependent on highly volatile natural resources revenues.
And it is not as though they are not aware of this to some extent. Prentice did, in his ill-fated budget, bring back progressive tax brackets for personal income tax, as well as adding a “health levy”. Notley raised corporate tax on large corporations from 10 % to 12 %, and brought in her version of a scheme for progressive tax brackets (which did not kick in at a low enough taxable income, in my view – did not even affect the relatively well off like me). And even the current UCP government has not made any move to go back to a flat rate of income tax, and has not adjusted brackets for inflation, in addition to eliminating some substantial tax credits (like tuition and education deduction). So in spite of their protestations, they do realize that something has to be done on the revenue side as well.

The NDP chickened out in 2015 when it didn’t completely overhaul the oil & gas royalty system. What should have been done back then: (1) increase royalties to one-third of the wellhead value (or equivalent) of the resource extracted, staged over three years — i.e. 11% in year 1, 22% in year 2, & 33% in year 3; (2) remove oil & gas royalties from the revenue side of the government’s annual budget, & instead invest them into the Heritage Fund; (3) channel investment earnings from the Heritage Fund into the budget, instead of the principal; (4) brought in a truly progressive taxation system with rates set at levels needed to fund the public services Alberta residents rely on, targeting a rolling 7-year balanced budget but allowing either deficits or surpluses year-by-year with the fluctuations of the business cycle.

They also should probably have purged the top levels of the public service of the leftovers of 44 uninterrupted years of PC rule, which might, for one thing, have allowed them to avoid the fiasco of the long-overdue introduction of farm worker safety and labour laws. By this I mean that they should have demanded the immediate resignations of each & every Deputy Minister, & many of the Assistant Deputy Ministers, as well as every ABC Board member & CEO, right off the bat at their first or second Cabinet meeting. That would inevitably have posed governance challenges, but those would have been short-lived and would have been offset by the inability of an entrenched conservative bureaucracy to sabotage their agenda.

They still might have to ended up a one-term Government — the hate engendered by their election was palpable as early as E-Day+1 — but it would have demonstrated far more political courage than the minor tinkering around the edges that was their actual legacy. And Alberta’s finances might have been in far better shape, & harder for the UCP to screw up.

Please tell me, is Kenney going ahead with his plan to make mastectomy an outpatient procedure, at one of those private rural clinics he is funding? Because, you know, what better than doing major surgery at an outpatient clinic in the boonies, far removed from an actual hospital, if any of those patients get into trouble? And if they run into trouble, some actual emergency rooms at actual small town hospitals won’t have any doctors. And aren’t paramedic services in rural Alberta also being subjected to funding cuts? And good luck with that crossbody seatbelt on the long drive home, and how about the road conditions on Highway 2 in the winter?

BTW, I think there could be tremendous savings by having healthcare aides do all surgeries in the future. Surely they dissected something in middle school science classes, if they attended classes at all. I mean, the health care aide occupation is unregulated here, and any training is entirely optional, and admission at some places is based on a passing mark in English 20-2, or other English test, so what could possibly go wrong? They could be hired for next to nothing, and cheaper if they’re under 18. No cost for education of any kind. Beauty!

Well, one thing about women’s health in Alberta, it will be very inexpensive. Promise made, promise kept. The overwhelming majority of Albertans wanted this. Let the chips, or bodies, fall where they may. How about walk-in day surgery at the mini-mall for faster service, like those 10-minute oil change places? Cheep and fast iz gud, right?

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