Tag: Alberta Revenue Problem

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Alberta Politics

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

Travis Toews Jason Kenney Alberta Budget 2020
Finance Minister Travis Toews and Premier Jason Kenney holding a copy of Alberta's 2020 budget document (photo: Government of Alberta Flickr Account)

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.

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Alberta Politics

MacKinnon Report endorses Jason Kenney’s political agenda, doesn’t fix Alberta’s big revenue problems

Janice MacKinnon
Janice MacKinnon

The report and recommendations of the Blue Ribbon Panel on Alberta’s Finances, known widely as the MacKinnon Report, after the panel’s chairperson – former Saskatchewan cabinet minister and history professor Janice MacKinnon – was released yesterday.

Jason Kenney Alberta Politics
Jason Kenney

The report is an endorsement of the United Conservative Party government plan to implement deep cuts to public sector funding, a wide-range of drastic changes to how Alberta’s public services are delivered (or delivered at all), and the use of legislative tools to interfere with the collective bargaining process.

When reading the panel’s report and recommendations, it is important to remember this is not a neutral or academic document. The MacKinnon Report is very much a political document written by political people who were appointed because they share the government’s vision.

Despite her past political affiliation as an NDP cabinet minister in Saskatchewan, MacKinnon’s fiscal conservative views make her more likely to feel welcome in the UCP or the Fraser Institute than in a party led by Rachel Notley or Jagmeet Singh. For decades MacKinnon has been a champion of fiscal conservatism and more recently provided an enthusiastic endorsement that was prominently displayed in the UCP’s election platform.

The MacKinnon Report calls for funding freezes or cuts to public services across the board, including increased privatization of health services, changing the funding formula for Alberta schools (and likely introducing more private and charter schools), increasing government control of post-secondary institutions and lifting the current freeze on tuition fees, and downloading more infrastructure costs on municipalities.

Premier Ralph Klein
Ralph Klein

In yesterday’s press conference announcing the report, MacKinnon suggested that “fewer hospitals” could be a solution to cutting the health care budget, which should raise giant red flags in rural communities across Alberta. During her time as Saskatchewan’s finance minister, 52 rural hospitals were closed as a result of budget cuts.

The report’s suggestion that the government scale back capital investments could also spell trouble for the much-needed new hospital in southwest Edmonton, which was announced by the previous New Democratic Party government in 2017.

The recommended cuts and creation of legislative mechanisms to interfere with the collective bargaining processes are likely designed to create strife with public sector unions whose members would be directly impacted by these cuts – a group that the UCP is eager to pick fights with.

For anyone who grew up or lived in Alberta in the 1990s, it may feel like deja-vu.

When premier Ralph Klein and treasurer Jim Dinning imposed drastic cuts on public services, Albertans were told that balancing the budget and paying down the provincial debt was necessary to get Alberta’s fiscal house in order. At the time, a young anti-tax crusader named Jason Kenney cheered on those cuts, going so far as to tell the Western Report that “Education will be the toughest area to cut, but it will also be the most important. If the government backs down on this one, then the entire Klein revolution will fail.”

Successive governments, both Progressive Conservative and NDP, spent decades trying to fix the damage those short-sighted cuts had on Alberta’s communities, public infrastructure and public services.

The “blue ribbon” panel was created to provide an endorsement of Premier Kenney’s political program, and, if its recommendations are adopted, could be the most radically ideologically conservative agenda Albertans have seen in decades. It is a far cry from the technocratic conservative agenda meticulously implemented by former prime minister Stephen Harper, who Kenney served dutifully in Ottawa.

Unlike Harper, there is no indication that Kenney is interested in half-measures or incrementalism.

Alberta still has a big revenue problem

The narrow mandate of this panel was a missed opportunity to actually address the fiscal challenges facing Alberta, which includes issues with revenue ranging from low taxation and over-dependence on oil and gas royalty revenues.

Rachel Notley Alberta Premier NDP
Rachel Notley

The report briefly mentions that over-dependence on unreliable natural resource revenue is an issue, but the panel was specifically told not to provide recommendations to fix the revenue problem – only spending. Both MacKinnon and Finance Minister Travis Toews repeated the government’s well-used talking points during yesteday’s press conference – that Alberta has a spending problem and not a revenue problem.

The report frequently compares public sector spending in Alberta with British Columbia, Ontario and Quebec, but only when it comes to government spending. The big problem with comparing Alberta with our provincial counterparts on the spending side is that our revenue – generated through taxes – is significantly lower than every other province.

If Alberta had the same level of taxation as BC, which is the second lowest in Canada, then Alberta could have no deficit and could be collecting billions of dollars in additional revenue each year. 

By not addressing the revenue challenges faced by the Alberta government, the MacKinnon Report shows it was created to justify the spending cuts and privatization of public services that the UCP was likely already planning to implement. Remember, this is a political document.

It’s hard to criticize the MacKinnon Report without also laying some criticism at the feet of the past PC and NDP governments who did not fix Alberta’s revenue problems when they had the chance. Had the NDP been as aggressive in fixing Alberta’s long-standing revenue problems as the UCP will be in attacking government spending, we might not be reading the MacKinnon Report today.

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Alberta Politics

Only in Alberta are huge deficits and low taxes completely irreconcilable

(photography by Chris Schwarz/Government of Alberta)

“When the global price of oil collapsed and the recession hit, we had a choice: Cut or build. We chose to build. In making that choice, we focused on the priorities of regular people and families – creating badly needed jobs, building our province for the future, making life more affordable for people and protecting the schools, hospitals and public services all Albertans rely on.”

It was with this familiar refrain that Finance Minister Joe Ceci began his speech on the floor of the Legislatve Assembly as he introduced the Alberta Government’s 2018/2019 budget. This was Ceci’s fourth budget since the NDP were swept into office in the 2015 provincial election and this is likely the last governing budget from this government before next year’s provincial election is called.

This year’s budget appears to have avoided the “compassionate belt tightening” that Premier Rachel Notley warned about in her 2017 year-end interviews. The NDP has avoided making significant cuts to public services over the past three years, instead opting for stable increases to operations funding and major investment in capital spending.

Titled “A Recovery Built to Last,” the themes of this budget – a path to a balance budget, jobs and diversification, protecting public services – are key to the narrative the NDP hopes to shape between now and next spring’s election.

This budget’s narrative also provides a contrast between the NDP and what many expect would be a much different budget implemented under a government led by United Conservative Party leader Jason Kenney, which might be expected to impose deep cuts to funding for public services, education and health care.

Welcome to pre-election season.

Overall, it was a generally acceptable budget, but it is difficult to get too excited about it.

With government prone to make major changes to budgets over the course of a year, it is hard not to see the Budget Day pomp and ceremony as just an overrated exercise in expectations management.

Ceci said in his speech that the NDP are projected to balance the provincial budget by the 2023/2024 fiscal year, which would coincide with the end of a second NDP term in government.

The current deficit is forecast to be $8.8 billion, which is $1.5 billion less than was initially forecast. The government will be lambasted for taking on more debt, even though significant debt accumulation was already forecast in the media coverage of last year’s budget. Economists will be quick to point out that the Alberta government is still in a fairly strong position when it comes to the net debt to GDP ratio, but that message might be hard to sell to newspaper opinion writers and voters at the doorsteps.

But what is not clear in this budget is how the government plans to deal with its revenue problem.

Only in Alberta could a finance minister calmly deliver a speech about an $8.8 billion budget deficit while also bragging about the lowest taxes in the country. “…Albertans and Alberta businesses pay at least $11.2 billion less in taxes than they would in any other province,” Ceci stated. Maybe if we paid a little bit more taxes, we could have a balanced budget, or at least a lower deficit?

Economists and political staffers might tell me it’s not that easy, and maybe it’s not, but only in Alberta could huge deficits and low taxes be totally reconcilable in reality but completely irreconcilable in politics.

What’s in a budget name?

The titles of Alberta’s budget documents typically present a general theme. Budget names can sometimes be quite silly, but they do provide a snapshot of the political and economic agenda of the government of the day. Here is a look back at titles of Alberta budgets from 1997 to 2018:

  • A Recovery Built to Last (March 22, 2018)
  • Working to Make Life Better (March 16, 2017)
  • Alberta Jobs Plan (April 14, 2016)
  • Supporting Jobs, Supporting Families (October 27, 2015)
  • Budget 2015 (March 26, 2015)
  • The Building Alberta Plan (March 6, 2014)
  • Responsible Change (March 7, 2013)
  • Investing in People (February 9, 2012)
  • Building a Better Alberta (February 24, 2011)
  • Striking the Right Balance (February 9, 2010)
  • Building On Our Strength (April 7, 2009)
  • The Right Plan for Today and Tomorrow (April 22, 2008)
  • Managing Our Growth (April 19, 2007)
  • Strengthening Today, Securing Tomorrow (March 22, 2006)
  • Investing in the Next Alberta (April 13, 2005)
  • On Route, On Course – Heading Toward Alberta’s Second Century (March 24, 2004)
  • Making Alberta Even Better (April 8, 2003)
  • The Right Decisions for Challenging Times (March 19, 2002)
  • The Future … Meeting Priorities, Sharing Benefits (April 24, 2001)
  • New Century. Bold Plans. (February 24, 2000)
  • The Right Balance (March 11, 1999)
  • Agenda for Opportunity (February 12, 1998)
  • Building Alberta Together (February 11, 1997)
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Alberta Politics

Who is really to blame for Alberta’s financial situation? #PrenticeBlamesAlbertans

PrenticeBlamesAlbertans
The best of the #PrenticeBlamesAlbertans meme (by @SallyPoulsen)

Are Albertans to blame for the province’s current financial situation, as Premier Jim Prentice would have you believe? Mr. Prentice faced a public backlash this week when he commented on a CBC Radio call in show that “in terms of who is responsible, we need only look in the mirror.”

With an election call expected only weeks away, it is an odd strategy for a political leader to blame the voters for his own party’s record of poor long-term planning.

Robin Campbell Alberta Finance Yellowhead
Robin Campbell

Of course, while Mr. Prentice’s comments are supremely arrogant, there is a small kernel of truth in them. Albertans have voted Mr. Prentice’s Progressive Conservative Party into government in each election since 1971 and it is that party’s leaders who have made the decisions that have led us into the current situation.

And while hundreds of thousands of Albertans have cast ballots for the PCs over the past four decades, there are hundreds of thousands of Albertans who consistently vote for opposition parties. There have also been dozens of opposition MLAs in the Legislature over the same period who have demanded that the PCs take a more disciplined and mature approach to long-term planning.

Stephen Mandel Edmonton
Stephen Mandel

The response to the bad press received in the media and online through the #PrenticeBlamesAlbertans meme was truly strange. On short notice, Mr. Prentice sent out senior cabinet ministers – Finance Minister Robin Campbell and Health Minister Stephen Mandel – to defend his comments and explain to the media why what people say on the internet does not matter.

The truth is that Alberta’s current financial situation is a crisis by design.

The PC Government made an intentional decision to have the lowest corporate and personal tax rate in Canada, by $11 billion. A consequence of the decision to forgo an estimated $11 billion in potential revenue is that the government has relied heavily on revenue from unstable natural resource royalties to fund a significant portion of its operational budget.

Now, facing a shortfall in resource revenues, our politicians are taking advantage of the perceived crisis to make short-sighted 9% funding cuts to public services instead of focusing on diversifying the revenue sources that are causing our problem.

If our political leaders had kept corporate taxes at reasonable levels, not replaced our progressive income tax with the flat tax, and implemented a moderate provincial sales tax while saving the funds collected from royalties, Alberta could be in a situation today where we could rely on a large reserve fund for these “rainy days.”

Mr. Prentice blames Albertans. Who will Albertans blame when the next election is called?

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