NDP BREAKS ANOTHER TABOO
Taken together, the two fiscal blueprints of this extraordinary year in Alberta politics are a lesson for the ages in the proper conduct of public business. In March, the last budgetary gasp of a dying Tory dynasty finally confronted the gap between Albertans’ expectations of government and their willingness to pay for it.
Rather than lead the province through another round of slash-and-burn on services like health and education, former premier Jim Prentice’s government faced up to plunging fossil-fuel revenues by violating the taboo against raising taxes.
And now, seven months and one historic election later, Rachel Notley’s fledgling New Democratic administration is thumbing its nose at the second great anathema of the Ralph Klein era — borrowing money.
Under the impeccable cover of a report by David Dodge — both a former federal deputy finance minister and a former governor of the Bank of Canada — Alberta’s Finance Minister Joe Ceci unveiled a budget based on the principle that an economic downturn is the right time to increase, not cut, spending on infrastructure such as roads, schools and hospitals.
Yes, Notley’s government proposes to borrow and spend more than Prentice had planned during the depression in oil and gas prices.
Over five years, the March capital plan has been boosted 15 per cent to $34 billion. And on the operating side, once the province’s contingency fund of previous surpluses is exhausted, Ceci actually envisions borrowing for operating expenses in 2017 and 2018 (a total of $3.85 billion) for the first time since 1993-94.
But our new premier joins Prentice in believing what conservative Albertans really want conserved is quality services and a fertile environment for future investment and economic growth. If they are right, and we think they are, this budget will be a political as well as a policy success.
Critics who believe otherwise might be wise to remember that what got the Prentice Conservatives into trouble — and brought New Democrats to power — was not so much his tax increases as the decision to spread the pain unevenly, letting corporations off the hook. That was addressed last spring as one of the new government’s first acts in power; the corporate rate was raised from 10 to 12 per cent. But Ceci’s budget does have holes of its own. For one thing, it does nothing to tackle the underlying problem of a regime that relies on resource revenue to compensate for tax rates far lower than in other parts of the country.
For another, Ceci offers no plan for sustaining services and paying back infrastructure borrowing if royalties never again ride to the rescue. That would involve tax increases a lot higher than the Prentice and Notley governments have combined to introduce this year.
But in a province of enterprise and entrepreneurship, for Ceci to operate on the assumption things will never improve seems almost un-Albertan.
The real challenge Albertans face is not a government (either Tory or New Democrat) with a spending problem, but rather a government crippled by a line in its $50-billion annual fiscal plan. It’s called Non-Renewable Resource Revenue, and it has fallen more than $6 billion — from $8.9 billion to $2.7 billion — in a single year.
In the short run, this challenge will have to wait for the report of its royalty review panel. In the long run, it will take a government with the discipline to save in the boom years rather than spend immediately when construction costs are high.