TOEWS TARGETS 2027 FOR BALANCING ALBERTA'S BOOKS

Alberta won't balance its books by 2023.

How about by 2027?

Finance Minister Travis Toews, who delivered a new budget on Thursday with $18.2 billion of red ink, predicts an end to the string of deficits will happen by then.

“I can't identify a specific year

... I do expect we're going to be able to balance in our next term, I am quite confident,” Toews said during an interview on Friday, after delivering an online address to the Calgary Chamber of Commerce.

“We have to put this province on a sustainable fiscal trajectory. And so we're going to have to do what it takes to balance the budget.”

So minister, is that a commitment to deliver a balanced budget before the end of 2027? “Absolutely,” he said.

“Short of a COVID-LIKE event that obviously one can't anticipate, I would commit to getting this province to balance by the end of our second term.”

Let's all mark that one down for future reference.

So how can that happen?

The new 2021-22 budget paints a daunting picture of the road ahead, with COVID-19 and an economic recovery still in front of Albertans.

In the following year, the deficit is projected to shrink to $11 billion.

That's the same 2022-23 fiscal year the UCP government had previously expected to record a small surplus — before the pandemic struck, revenues plummeted, costs soared, and the target was dropped.

One of the government's recently adopted fiscal anchors is a commitment that, after the pandemic is over, it will adopt a clear timeline to balancing the budget.

For a province facing a total taxpayer-supported debt load of nearly $116 billion by the end of March 2022, talk of balancing the books might seem like a moon shot at first glance.

Documents show the government is expected to borrow $24 billion this year.

Yet, some economists believe Alberta has the ability to record a budget surplus by 2027 or sooner, although it will require some policy choices.

It should necessitate a debate about not just slowing down spending increases — something the Kenney government has committed to — but the possibility of raising revenues.

“We are still far away from any balanced budget. We haven't talked about how we want to reach that, but it's a discussion we need to have,” said Alberta Central chief economist Charles St-arnaud.

Higher resource revenues would obviously help.

The budget conservatively projects benchmark oil prices will average US$46 a barrel in the new financial year.

A report by RBC Economics on Friday said using its own oil projections of $62 a barrel in 2021, that would imply almost $2.8 billion in additional revenue for Alberta.

“For me, higher oil prices will definitely help the adjustment, but in some ways, we should probably use those better oil prices to actually make reforms on the revenue side less painful,” St-arnaud said.

“The size of the deficit can be tackled . ... We need to think hard about how we want to do it.”

The budget includes an interesting scenario based on higher-than-projected oil prices.

Under that picture, if West Texas Intermediate (WTI) crude averaged $64.50 per barrel by 2023-24 and the economy improves, the deficit would shrink to just $3.4 billion.

Given WTI prices closed Friday at $61.50 a barrel, it's not an offthe-wall notion.

University of Calgary economist Trevor Tombe noted in a thoughtful column for CBC that the deficit gap could be closed and the government could balance its budget by 2024 or 2025 without cranking up taxes.

The $20.2-billion deficit for the budget year ending in March is big, but roughly half of it is due to the impact of COVID-19 on revenues and spending.

The longer-term challenge is how to deal with the remaining structural shortfall, he said during an interview.

As for the promise of balancing the books by 2027, Tombe calls it “an easy commitment for (Toews) to make,” given an expected rise in resource revenues over time, as production increases and more oilsands projects move into a higher payout category for royalties.

“There is no question in my mind that, of course barring some unforeseen shock, balancing in the next term, regardless of who wins the election, will be a walk in the park,” Tombe said.

“There are pros and cons to balance in the next mandate, and one could reject that as a goal. But the government of Alberta could absolutely do it in the next mandate without large-scale changes in its current fiscal policy.”

That begs the question of whether Albertans want to continue to lean heavily on volatile resource revenues in the future.

Economists and some business groups have been pressing the province to have a conversation about the need for more certain revenues, including the possibility of adopting a provincial sales tax.

“Going forward, the province should seek more stable sources, like a consumption tax, to ensure fiscal stability and predictability,” RBC economist Carrie Freestone said in the report.

“Addressing the revenue volatility should be as much of a priority as rightsizing expenditures.”

Government critics aren't impressed with Toews' promise.

NDP finance critic Shannon Phillips called it presumptuous for the UCP finance minister to be talking about commitments to balance the budget after the next provincial election, which will be held in 2023.

“When someone states something with such unequivocal absolutism, that implies that person has a plan,” she said.

“We don't see that plan in the budget.”

It's not there yet. And the province also has more work to do to get past the pandemic.

A provincial review of its revenue structure is also coming. At some point, let's hope a detailed plan for a balanced budget will arrive, too.