Gasp! Alberta plans to borrow
NDP will need oil price boost to meet targets
In a monumental NDP budget, the most shocking Alberta paradigm punch in a generation, it’s the string of details that can make you gulp.
By 2017-18, for instance, health-care spending will total 46.7 per cent of all government revenue — $20.4 billion for health, $43.7 billion in revenue.
Next year, there will be no cash left in the Contingency Account, so the government will borrow $712 million to cover its day-to-day operations, and a further $3.1 billion the year after that.
That second revelation drew gasps from dilapidated veterans of Alberta budget days. It’s the biggest symbolic shift of all. Not since the early 1990s has the government borrowed to keep the storefront open.
The Progressive Conservatives always insisted they would never do that, no matter how bleak the fiscal picture. Wildrose makes the same vow, to the point of apoplexy after the budget details were unveiled to leader Brian Jean’s caucus on Tuesday.
The New Democrats project modest growth in civil service employment for the next three years. They also pledge a balanced budget by 2019-20. There’s nothing in the budget to show both can happen without a big rebound in oil prices, and higher taxes, too.
The budget forecasts oil at US$50 a barrel this year (nearly $8 above today’s price, always a bad budget day sign); $61 in 2016-17, and $68 in 2017-18.
That’s no route back to a balanced budget when spending is set to top $50 billion for the first time ever, and this year’s spending will be $6.1-billion more than revenue.
The NDP will have two familiar dreams — a renewed oil bonanza and rising tax revenue from the accompanying new boom.
But even if dreams come true, the aggressive spending program for both operations and capital works (wow, $38 billion over five years) will demand extra cash, both from borrowing and higher taxes.
The budget contains some modest revenue measures that pummel the usual victims — smokers and drinkers — as well as anybody who buys insurance. But the total gain from all that is a paltry quarter-million dollars.
You get the feeling this government is just clearing its throat on the tax front. Finance Minister Joe Ceci has said for months that all revenue sources are in his sights.
He rules out a provincial sales tax, but give it time. The numbers point inexorably toward an Alberta harmonized sales tax.
The government will also bring in a bill to allow borrowing to reach 15 per cent of nominal GDP. This is fairly low by national standards, but it still means that within three years, Alberta could owe up to $55 billion.
By 2017-18, interest on projected debt will cost $1.2 billion a year.
In the 1990s, public worry over $23 billion in debt swept Ralph Klein to office with a program of deep cuts to spending on infrastructure and the public service.
It truly would be an irony if the NDP, in trying to solve the shortages that began in that era, ends up provoking the same political reaction.
Despite all this, the NDP can still credibly claim that Alberta is in good shape by national standards.
Ontario, with just over three times our population, has 10 times more debt — more than $300 billion. That province’s credit rating has been downgraded, which hasn’t happened here. But Wildrose warnings that it might are not entirely partisan or imaginary.
Like Alberta, Ontario has embarked on a massive public works program with borrowed money. Stimulus is the national buzzword these days. Prime minister-designate Justin Trudeau promises infrastructure spending to overlay the lavish plans in both Ontario and Alberta.
This spending won’t bring many complaints from Alberta’s gasping construction industry, or laidoff workers, or parents, teachers, health employees and patients. The job-creation schemes may or may not be effective, but they do try to address sudden and massive unemployment.
Premier Rachel Notley is likely right when she says big public sector layoffs would make things worse, and building should be done when construction prices are low.
It’s not the goal or the goodwill of this budget that’s in question. It’s the scale.
This is a vast structure than hangs largely on the hope of better luck over the horizon. And we’ve had precious little of that of late.
THE NUMBERS POINT INEXORABLY TOWARD AN ALBERTA HARMONIZED SALES TAX. — DON BRAID ON THE PROBABLE PATH TO A BALANCED BUDGET FOR ALBERTA