It’s time to renew efforts to get off the budget roller-coaster

Gambling on uncertain energy revenue not a solid plan, writes Ron Kneebone.

Uncertainty in the form of the whims of U.S. President Donald Trump, the future of NAFTA, interest rate changes, and pipeline approvals and construction schedules, should all be weighing heavily on Alberta Finance Minister Joe Ceci. Maybe more so than appears given the recently released first-quarter update.

Citizens have a contract with government. They provide governments with a substantial share of their income in exchange for the government providing education to our children, social assistance to those in need, and health care to those who are ill. Citizens reasonably expect that their governments not take gambles that threaten the amount they need to pay in taxes or threaten the viability of the education, health, and social assistance programs provided for their benefit.

Too often in Alberta’s past, governments have budgeted to spend amounts on important programs and gambled that the cost of those programs could be financed with uncertain energy revenues. On a number of occasions, those gambles have been losing ones. Losing those gambles forced the governments of the day to allow for a rapid accumulation of debt or a dramatic cut to spending. Even when the gambles have been won and energy revenues have come in higher than expected, the response has too often been to justify still more spending or still more tax cuts, choices that have increased the potential losses of future gambles.

Minimizing threats to tax bills and spending programs from the uncertainties arising from potential losses of export markets, delayed pipeline construction, or other threats to the economy requires that the government minimize the size of its deficit and the amount of its accumulated debt. In this way, it avoids the possibility of being forced by recession and the consequent loss of revenue to impose badly timed austerity measures.

While the economy continues to build momentum toward recovery it’s time for government to do the same; to take steps toward re-establishing its fiscal capacity to support the economy in a future downturn.

To date, progress on deficit reduction has been the result of higher oil prices and a robust private sector recovering sufficiently to create employment and new revenues. But a sizable deficit, $7.8 billion, remains. Uncertainty surrounding the private sector’s ability to generate still more

The government continues to rely heavily on higher energy prices to satisfy its plan to balance the budget some years into the future.

revenue sufficient to close the deficit is simply too high for the government to leave all the heavy lifting to others. What remains of the deficit needs to be addressed by the government. Doing so requires that it question if it has properly balanced its responsibility for providing public services with its responsibility to raise tax revenues as efficiently as possible and in a sufficient amount. The reward for taking real steps to reduce the deficit is the ability to support the private sector when, as inevitably happens, another shock strikes the economy.

The government would also do well to remember its promise to get Alberta “off the royalty rollercoaster.” I cannot honestly say that I have seen much progress in that regard. The government continues to rely heavily on higher energy prices to satisfy its plan to balance the budget some years into the future. That policy keeps Albertans firmly buckled into the energy price roller-coaster, and leaves their after-tax incomes and the public services on which they rely subject to a great deal of uncertainty. These are not things to be gambled with.