Questions over austerity and path to balanced budget follow Alberta fiscal update​

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Questions over austerity and path to balance follow Alberta fiscal update
Questions over austerity and path to balance follow Alberta fiscal update – Aug 27, 2020

A dire fiscal picture presented by Alberta’s provincial government on Thursday has raised concerns over cuts and questions as to how the province will lift itself to budgetary balance.

The province’s finance minister, Travis Toews, announced that Alberta is on track to end the 2020-21 fiscal year with a historic deficit of $24.2 billion — triple what the United Conservative Party Government had projected in its February budget.

Government debt is also forecast to balloon to $99.6 billion, and total revenue has tumbled $11.5 billion.

The province is also expected to spend $5.3 billion more this year, to a total expense of $62.6 billion.

“We’re in a fiscal mess,” Canadian Taxpayers Federation Alberta Director Franco Terrazzano said Thursday.

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“It’s going to be challenging, it’s going to be hard, but we need our politicians to show leadership and to finally address the spending problem the Alberta government has.”

Terrazzano characterized the gloomy update as a loud wake-up call for provincial lawmakers and special interest groups.

He said the government needs to focus on growing the economy and cutting spending, all while not raising taxes — something Minister Toews ruled out in his speech to the legislature on Thursday.

“There are so many families, so many businesses struggling right now; so tax increases, that can’t happen right now,” Terrazzano said.

“So that really leaves the government with two options: focus on growing the economy, and cutting spending.”

Toews suggested further cuts to government services would be coming, following large cuts to public services in the UCP’s first two budgets in office.

“We will be looking for every opportunity to ensure we are delivering services most cost effectively,” Toews said. “Alberta can no longer afford to be an outlier in the cost of delivering services.”

Further austerity has raised concerns for the Alberta Union of Provincial Employees (AUPE).

The union is calling on the provincial government to increase funding to public services.

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“What I see is a government that’s determined to continue cuts to public services,” AUPE president Guy Smith said.

“For a premier and a government that got elected on job creation, creating jobs for Albertans, it’s very hypocritical to start throwing workers out of work.”

Trevor Tombe, associate professor of economics at the University of Calgary, said the government would be able to balance the books by 2026 at the earliest if it was to maintain its spending freeze, four years later than initially projected.

Appearing on 770 CHQR Global News Radio, Tombe said he was looking for how the government would plan to move forward under the new fiscal projections.

“A large-scale shock to the province was that there was no indication around what our next steps will be, not even what might be considered a hint at what our next steps will be,” Tombe said. “I thought that omission was fairly notable.”

Tombe said the government needs to start having difficult conversations around the province’s fiscal policy, whether that be about adjustments to spending or revenue.

Toews said Thursday that Albertans would need to have a collective discussion regarding tax and revenue structure over the long term; he added that a sales tax would be a sensible consideration for the government, but not its only option.

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Click to play video: '‘Further spending cuts are going to happen’: Political scientist on Alberta fiscal update'
‘Further spending cuts are going to happen’: Political scientist on Alberta fiscal update

Meanwhile, non-renewable resource revenue is projected to dissipate by 73 per cent.

“Most of the revenue decline will return as we recover and get back to normal in the coming years, but royalty revenues is kind of the exception there,” Tombe said. “The level of resource revenues we earn is tied less to employment in Alberta, or our GDP levels in Alberta.  They’re tied to oil prices, which depends on global developments.

“At least at the moment, it doesn’t look like we will be returning to that $60 per barrel range that the government was hoping for before.”

The Calgary Chamber of Commerce released a statement late Thursday afternoon, which called on the government to address diversification, adding that the government’s creation of the Ministry of Jobs, Economy and Innovation was a good first step.

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“Immediate action and intergovernmental collaboration were needed to support Albertan households and businesses, and above all protect the health of Albertans through an unprecedented crisis,” interim chamber CEO Murray Sigler said in a statement.

“These numbers call for the reimagining and diversification of our sources of revenue so that Alberta can have stable, predictable, and reliable sources of funding upon which we can build vibrant businesses and vibrant communities.”

As for the government’s path forward, Toews promised a three-year fiscal update in November, and told Albertans to “stay tuned” for the 2021 budget in February.

— With files from the Canadian Press

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