‘Tough decisions’ ahead for Albertans
Redford blames oil prices as province faces fiscal crunch
Premier Alison Redford said Wednesday she’s prepared to make hard choices to deal with a fiscal crisis, but suggested health, education and municipal funding may be spared from the government’s cleaver.
Redford struck a more upbeat note than her finance minister, Doug Horner, who warned in a legislature news conference that every aspect of the government’s $40-billion in annual spending is on the table as the plunging price for the province’s heavy oil batters Alberta coffers.
But in a year-end interview with the Herald, Redford said the government can keep its promises on health and education. Those include commitments in the spring budget to stable three-year funding for school boards, advanced education and municipalities, she said.
“We’re going to have to do some tough stuff, we’re going to have to make some tough decisions,” Redford said.
“I think we can still continue to provide the services that Albertans have told us are their priorities, which are education and health care, and of course we’ll continue to invest in infrastructure.”
However, the commitment to education and health doesn’t include a hefty raise for teachers and doctors.
Negotiations with both the Alberta Medical Association and Alberta Teachers Association on new contracts have stalled in recent weeks and there is “no bottomless pit of money,” Redford cautioned.
In Edmonton, Horner said he told his cabinet colleagues they will face financial constraints.
“It’s not the greatest Christmas news for the cabinet ministers to hear, but the reality is the reality and we have to adjust,” he said.
The province has previously reported it’s facing a deficit in the current fiscal year that could be as high as $3 billion, money that would be covered by Alberta’s sustainability fund. Horner said bigger problems loom and the government may not even be able to balance its operating budget in 2013-14, potentially breaking a promise made by the PCs during the spring election.
The government has warned recently that volatile commodity prices are causing financial turbulence, particularly the deep discount for Alberta’s heavy oil and bitumen.
The price of Alberta’s Western Canadian Select — reflecting a blend of heavy conventional crude and oilsands production — has fallen to more than $30 below the price for benchmark West Texas Intermediate oil.
“We have a situation here that is growing faster than anyone predicted,” Horner said. “It’s different than in the past because now the majority of our revenue stream on the non-renewable resource side is driven by oilsands .… The biggest problem we have with oilsands right now is market access. When you put those two things together, this is a very difficult situation.”
But there was little sympathy from the opposition parties Wednesday.
The Wildrose party had characterized the current budget — with its original deficit projection of $886 million — as being built on overly optimistic revenue projections, while Liberal Leader Raj Sherman has described it as a “fudge-it budget.”
“We’ve always said we shouldn’t tie our children’s education and our health care to the price of a barrel of oil,” Sherman said Wednesday.
The Liberal leader said Redford is in a fix because she won’t rein in spending and refuses to institute a progressive income tax or a moderate tax increase on corporations.
Wildrose MLA Rob Anderson said the government is moving back to the Getty years, as it spends billions of dollars on “corporate welfare” and allows wasteful expenses.
The premier had originally pledged to balance the province’s overall budget by next year, but Horner said recently the government would begin taking on debt to pay for roads, schools and hospitals. However, the PCs have insisted the operating budget would be balanced in 2013-14.
But Redford said it was “ridiculous” for the opposition to suggest the government cooked the books in this year’s budget.
“We were very confident in those projections. Those were middle-ofthe-road forecasts from investment houses around the world. They were the same numbers provincial governments used,” she said. “Something happened this year that was entirely different than we’ve ever seen before.”
Mount Royal University political analyst David Taras said there may be an element of posturing in the government’s stance, as it seeks to lower expectations among the public and government-sector unions seeking new contracts. But he said there is little doubt the numbers add up to an an enormous financial challenge for the government and a political headache for Redford.
“It throws all the plans off, it throws all the optimism off, and all of a sudden you’re in a spiral of cuts and people losing hope,” Taras said.
Bill Dechant, executive secretary treasurer of the Alberta Union of Provincial Employees, said Horner was warning the union a month ago that there was little money to be found as it heads into contract bargaining. The current deal for 21,000 government employees expires March 31, 2013.
“The scary part is that you always have to be concerned about them looking at cutting more of the working people because our front line right now is fully loaded and I don’t know where they’re going to cut,” he said.
The United Nurses of Alberta contract with Alberta Health Services also expires at the end of March. Union president Heather Smith said Horner’s comments are no surprise, reflecting a long-term “boom and bust” pattern of the government being over-reliant on resource revenues.
“We should be looking at long-term stability in revenue, rather than spasms that negatively impact service delivery,” she said.
Joseph Doucet, interim dean at the University of Alberta’s business school, said there is no doubt the oil price differential facing the treasury is a real and significant problem for the government. Horner is correct to look at all aspects of spending to find savings, but it’s a mistake to preclude any talk of taxes and other revenue initiatives, because the government’s finances are dangerously skewed toward energy revenues, he said.
“If times are getting desperate, maybe we need to think about desperate measures,” Doucet said.
Both Horner and Redford were categorical there would be no tax hike this term.
“We have the ability within the fiscal framework that we have to accomplish what we need to for Albertans,” Redford said.