The NDP dares not speak of accumulated deficit
Here is the Alberta government’s new budget boiled down to one four-letter word: Ouch.
Or expressed as a number: $96 billion.
You won’t actually find that number in the budget documents released Thursday, but that’s the number everybody was talking about.
It is the amount of debt the province will have accumulated by 2023, the year the government expects to finally balance the budget.
Think of it this way — the good news is the NDP government has finally unveiled its plan to gradually decrease annual budget deficits to the point where there is no deficit in the 2023-24 fiscal year.
The bad news is by then the accumulated deficits will have added up to $96 billion worth of debt.
That number is the Lord Voldemort of Alberta’s new budget. Nobody in government dare speak its name ( just like the infamous Harry Potter villain).
It’s not in the government’s 170-page fiscal plan, not even in the chapter devoted to “Path to Balance” that outlines how the province will shrink the deficit year by year until it turns into a small surplus in 2023.
It’s a chapter that includes optimistic subheadings such as “Things are looking up” and rosy predictions of a “growing and more diversified economy.”
Indeed, Alberta’s economy is growing — by 4.5 per cent in the old fiscal year and by 2.7 per cent in the new fiscal year.
Finance Minister Joe Ceci’s budget speech was laden with references to growth: exports “increased” 30 per cent; housing starts “grew” 20 per cent; retail sales “expanded” 7.5 per cent; rig activity “jumped” 66 per cent.”
Revenue will increase, as well, allowing the government to start reducing the annual deficit to $8.8 billion this year, $7.9 billion next year and $7 billion the year after.
But future growth is contingent upon, among other things, the construction of the Kinder Morgan pipeline expansion. What happens if the pipeline doesn’t get built or is delayed by years?
Ceci’s curt response: It will get built.
Even if it does and Ceci meets every target, we’re still looking at that monstrous $96 billion debt in five years.
Ceci says it’s a price we have to pay.
“That’s what it will take to make sure that we don’t do without the important programs and services Albertans have come to rely on,” he said.
The size of the debt really shouldn’t come as a shock, I suppose.
We have seen the record deficits accumulate in recent years and we knew the total debt was already in the neighbourhood of $45 billion. You could have drawn up a chart and projected your own Armageddon number.
But we have never seen an official debt projection to the year 2023.
Technically, we still haven’t seen it.
The $96-billion number was conspicuous by its absence from the budget documents. It was only disclosed reluctantly by government officials after prodding by the usual collection of perplexed journalists trying to figure out the size of Alberta’s debt.
It’s a number we have gravitated to ever since the revenuerich days of Ralph Klein when he happily laid out the government’s bottom-line budget figure for everyone to see. Governments are happy to showcase surplus numbers.
However, when the surplus turned into a deficit under subsequent premiers, politicians began playing shell games to hide or minimize the size of the budget hole.
By the time the NDP formed government in 2015, the province’s debt was already on track to hit $11 billion. The reality is we’d be in a massive debt now no matter who won the 2015 provincial election. A calamitous drop in the price of oil will do that to an Alberta budget.
The NDP government points out the current debt might be a record for Alberta, but we still enjoy the smallest debt-to- GDP ratio of any province.
That’s a great argument to make to an economist, but not so much to the average Alberta voter who is accustomed to having no provincial debt.
And it probably doesn’t help pointing out that Alberta could wipe out its deficit immediately by raising taxes. The provincial budget has a helpful chart illustrating that if Alberta had the same tax structure as British Columbia, we would reap an extra $11 billion a year.
That would mean introducing a provincial sales tax. A PST might help eliminate the deficit but it would also eliminate the government’s chances of being re-elected in 2019.
This government’s best chance of being re-elected is to have the price of oil increase and get the Kinder Morgan pipeline under construction this year.
And bring in a much rosier pre-election budget next year.