New fiscal blueprint rolls dice on quick return to prosperity
As the Alberta government reins in spending in its latest budget, it foresees a brighter economic outlook in the not-so-distant future. But if its lofty forecasts of higher employment and provincial revenues don’t come to pass, deeper cuts will be on the way.
Rarely has a provincial budget been dropped at such a nervous moment.
With rail blockades, the spreading coronavirus and the Teck Frontier cancellation, many assumptions in the new UCP plan seem shaky on Day 1.
But budgets, by their nature, are a clash between reality and a government’s dreams of re-election. Dreams always win.
This budget, like every single one in Alberta’s era of debt and deficits, sees a tomorrow that will be far brighter than today.
Total revenue, for instance, is forecast to fall in 2020-21 by about $1 billion, to $50 billion.
But in the following year comes a gusher. Revenue is said to climb to $54 billion in 2021-22, and then to $58 billion the following year.
Because the government will constrain or reduce spending at the same time, Alberta happily arrives at a surplus of $706 million in 2022-23. It would be the first in 15 years.
But still, debt payments will rise nearly $1 billion a year, to $2.9 billion.
Alberta’s total debt (and this is a shocker) will climb from $95.6 billion in 2020-21 to $107.4 billion in 2022-23.
This year, the fiscally ardent UCP will borrow a further $10.4 billion, and refinance $5.2 billion more.
And all that applies only if things work out as the UCP expects. If the economy slips into recession because of our many national and international challenges, heaven knows what comes next.
One consequence would certainly be deeper cuts. Premier Jason Kenney has warned about this — if trouble deepens, the government won’t borrow more money, it will accelerate austerity.
Kenney hasn’t yet imposed reductions anything like the brutal measures of the Ralph Klein years, when some areas of government saw spending drop more than 20 per cent.
But tougher measures are always a possibility, which is one reason Albertans in general, and certainly the public service unions, should hope the positive predictions come true.
The budget says GDP will rise by 2.5 per cent this year, and then average 2.8 per cent growth “amid a continued pickup in business investment and gradually strengthening labour market.”
Even before Finance Minister Travis Toews gave his speech, Opposition leader Rachel Notley was calling UCP claims about growth “just false, just wrong.”
The government forecast does have independent support, however.
The Conference Board of Canada expects growth of 2.4 per cent this year, and 3.1 per cent in 2021.
Toews counts on higher tax revenue to help increase annual revenues by nearly $10 billion in three years.
That can happen only if tax rates are raised — which the UCP will not do — or the economy heats up to a level not seen since 2014.
Any way you look at this budget, solid growth over several years is the only way to stabilize finances, reduce debt, restore full employment and protect public services.
Kenney continues to insist that through restructuring and careful spending, service levels can be maintained.
But some groups, including the doctors, say it can’t be done. They’re smarting after the government abruptly cancelled their master contract last week.
The Canadian Medical Association is helping the Alberta Medical Association with funding for a legal challenge, says Dr. Christine Molnar, president of the AMA.
There will be even more uproar from the nurses, teachers and other public-sector unions.
But they may not even be Kenney’s biggest problem. That could come from the fiscal right wing of his own party.
This week, Kenney started talking about the possibility of direct government investment in energy projects.
Drew Barnes, the Cypress-medicine Hat MLA who once ran for the Wildrose Party leadership, quickly put up a pointed Facebook post citing big losses the former PC government incurred from direct stimulation of business.
A great deal in this budget will frighten politicians who worry more about debt than public-sector jobs.
A lot of them are in Kenney’s own caucus.
There may be only one way out of this, folks.
Pray for prosperity.