Editorial.
So far, Alberta’s New Democrats have been true to form and their support base, growing the province’s expected deficit in part by spending to support the social agenda that helped put them in power.
What they do next, once they actually drop a budget on the table and manage the province’s business through turbulent times, will surely test their abilities as financial stewards.
Finance Minister Joe Ceci opened the books Monday, almost four months after the May 5 election, and his first-quarter financial update allowed Albertans to look past oil prices at other origins of a deficit that could hit $5.9 billion by the fall.
Total expenses are now expected to reach $50.2 billion, an increase of $1.8 billion on the budget tabled in the legislature in March by the former Progressive Conservative government of Jim Prentice. Total revenues are forecast for $44.3 billion, an increase of $1 billion over the PC projection.
The nature of those additional expenses and revenues is about what you would expect, given the priorities of Premier Rachel Notley and her cabinet. The $624-million expenditure on health, education, human services and advanced education, for instance, is a significant pressure on the bottom line, but in keeping with the NDs’ commitments and core values. So, too, the elimination of a proposed health care levy and the reinstatement of the charitable donation tax credit, line items that amount to $483 million in lost revenue.
On the plus side of the ledger, and in keeping with election campaign promises, modifications to the personal and corporate tax regimes will raise an additional $679 million over the PC projections. The corporate tax hike that took effect July 1 — pushing the rate from 10 per cent to 12 per cent — is expected to raise an additional $249 million, while the progressive personal income tax hikes targeting higher earners will raise an additional $450 million after they take effect Oct. 1.
Other factors — low oil prices, costly drought and wildfires — have also done their part to push the expected deficit higher.
We won’t see the financial fallout from $39 oil until the second-quarter financials come out in late fall. Before that happens, Ceci will deliver the first NDP budget in Alberta history in late October.
How does the government construct a realistic financial blueprint when the world price of oil vacillates wildly between $60 US and $40 US? How do they cope with the realities of rising unemployment in what most see as the land of plenty? How will they pilot the province through what some analysts expect will be a mild recession?
These macro fiscal challenges are produced by forces that are generally out of the government’s control, but the NDs must be seen to address each one with proactive strategies. They have already increased taxes on corporations and high earners, so it seems likely that the expense side will surely have to take a hit. But where?
Even as he poured out the red ink, Ceci tried to calm the waters, saying there is actually better news on the horizon.
“Forecasts indicate our economy will recover in 2016,” he said Monday. “In the meantime, Albertans can trust that we will continue to be fiscally responsible while investing in their priorities: health care that’s there when we need it, good schools and a quality education for our children, and support for our most vulnerable families.”
Some will question the prudence of spending more and driving up the deficit through a downturn, just as some questioned the former PC government’s commitment to social programming. You just can’t please all those people all the time, and the key words in that sentence would be “former PC government.”