When Finance Minister Joe Ceci stood in the Legislature on Oct. 27 to deliver the Alberta NDP’s first budget, it marked the first time since 1972 that the budget was not tabled by a Progressive Conservative finance minister.
The first budget of Premier Rachel Notley‘s NDP government includes a 15 percent increase in capital spending over the next five years, with a goal to create jobs and tackle the province’s aging and neglected hospitals, schools, roads and other public infrastructure.
The NDP budget includes modest increases and projected stable funding for health care, education, advanced education and human services – core services that Albertans depend on. This was a key component of the election platform that helped propel the NDP into government on May 5. The job creation and economic stimulus elements of the budget followed last week’s creation of an Economic Development and Trade portfolio, led by Edmonton MLA Deron Bilous.
A projected $6.1 billion deficit in the NDP budget is larger than the $5 billion deficit presented in the Tory spring budget, which was tabled but never passed. But the Alberta government’s eighth consecutive deficit budget is “…hardly sky is falling territory,” wrote University of Calgary economist Trevor Tombe in Maclean’s Magazine this week.
“While not trivial, obviously, it is completely manageable. Alberta is fully able to handle it and no one need panic. It represents 1.8 per cent of the province’s GDP, which is fairly small, as far as some deficits go,” Dr. Tombe wrote.
The NDP government will borrow to pay for parts of its operations budget starting next year, which will hopefully be a short-term move. Decades of bad financial management and poor long-term planning by the previous conservative government has exacerbated the provincial government’s current fiscal situation. The PCs simply became too comfortable and dependent on unreliable revenue from natural resource royalties to fund the province’s operations budget.
Mr. Ceci also announced that the government would legislate a debt ceiling of 15 percent debt-to-GDP in order to hold off a risk of credit downgrades and higher debt service costs.
Former premier Jim Prentice was correct last year when he warned about getting “off the royalty roller coaster.” The Alberta government faces serious revenue problems and moving Alberta away from its over dependence on resource revenue will be a significant test of Ms. Notley’s first term in government.
Any plan to deal with the revenue problem will likely come after the government receives a much anticipated report from the royalty review panel chaired by ATB President and CEO Dave Mowat. The panel is expected to finalize its recommendations by the end of the year. But it will not be enough to simply wait for the international price of oil to rise again. Albertans need to have a serious conversation about revenue and taxation, including the potential introduction of a provincial sales tax.
To no ones surprise, Wildrose Party leader Brian Jean and finance critic Derek Fildebrandt responded to the NDP budget with outrage and a message filled with apocalyptic rhetoric.
Mr. Jean’s post-budget press conference was somewhat overshadowed by Mr. Fildebrandt’s bizarre decision to refuse to answer a question from Globe & Mail reporter Carrie Tait (see the ~8:50 mark in this video). Mr. Fildebrandt is sour from a recent interview Ms. Tait published in which she quotes him as claiming the NDP duped Alberta voters by actually implementing promises made during the election (and he later referred to Ms. Tait as a b-list reporter and accused her of auditioning for a job in the Premier’s Office – a comment he later retracted).
A joint opinion-editorial written by Wildrose MLAs Rick Strankman (Drumheller-Stettler), Grant Hunter (Cardston-Taber-Warner), and Don MacIntyre (Innisfail-Sylvan Lake) and Dave Schneider (Little Bow) and circulated to rural weekly newspapers in September 2015 provides some sense of how that party would approach provincial budgeting if elected to government:
“When governments borrow and spend, there’s no marketable asset. There’s only debt. It’s like using a credit card to buy pizza. Even when governments borrow to spend on bridges and highways rather than programs, the debt is still not connected to a marketable asset. It’s a liability. Mortgages can be liquidated. Houses can be sold. Who buys used government bridges and worn-out highways?”
This is a crude ideological approach to public governance. Using capital financing to pay for the construction and maintenance of public infrastructure like hospitals, schools, bridges and roads is nothing like using a credit card to buy a pizza.
The Alberta NDP’s first provincial budget is sensible and reflects the thoughtful approach that has defined the first six months of Ms. Notley’s tenure as Alberta’s Premier. Rather than follow a disastrous road taken by some of her predecessors, and slash funding to government services while the price of oil is low, the NDP government is taking an opportunity to invest in much needed public infrastructure when the economy is slow and the price is right. It’s not a brand new approach in Alberta politics, but it is refreshing to see a government focus on building rather than tearing down.
