Finance minister talks of reducing debt, deficit
Province’s ‘tough medicine’ includes 7.7-per-cent reduction in public service
Alberta cities, post-secondary institutions and public-sector jobs will bear the brunt of the largest cut to provincial program spending in a quarter-century.
The United Conservative Party government’s inaugural budget, introduced Thursday, will reduce the size of Alberta’s public service by 7.7 per cent in four years, but fail to stave off the province’s rising debt, which is projected to hit $93.3 billion by 2022-23.
Finance Minister Travis Toews said Thursday it’s all part of his government’s plan to eliminate deficits within three years — a plan Albertans overwhelmingly endorsed in the provincial election.
“It’s certainly an exciting day for myself and this ministry. I believe it’s a good day for Alberta,” he told reporters before tabling the $58.7-billion 2019-20 budget in the legislature.
The 2.8 per cent cut in operating expenses over four years could grow, Toews cautioned, should government’s conservative economic projections be too rosy or new oil pipelines fail to materialize.
By the end of March 2020, the budget projects 824 fewer fulltime government jobs and 764 fewer jobs at post-secondary institutions and government agencies like the Alberta Energy Regulator. Reductions will happen mainly by leaving empty jobs unfilled, but there could be some layoffs.
“It’s tough medicine, but it’s much-needed medicine,” Richard Truscott, vice-president of the Canadian Federation of Independent Business in Alberta and B.C., said Thursday. “It’s not going to be easy for Albertans to make some of these adjustments, but it’s absolutely necessary to get us back on a more fiscally sane path.”
MACKINNON PANEL IDEAS
Many of the budget moves stem from recommendations made last month by a panel tasked with scrutinizing Alberta’s spending. The panel, led by former Saskatchewan finance minister Janice Mackinnon, said Alberta spends much more per capita on public services compared to B.C., Quebec or Ontario and recommended bringing costs in line.
As the panel suggested, Alberta’s four-year post-secondary tuition freeze will be history next fall. Colleges and universities can raise tuition up to seven per cent per year for the next three years. They’ll need the money to offset the 12.5-per-cent reduction in government funding over the next four years.
Eliminating tuition and education tax credits are among the most shocking moves in the budget, said Adam Brown, vice-president external of the University of Alberta Students’ Union. The move could cost a full-time student $1,000 a year.
“Students are not going to be happy,” he said. “To receive such a dramatic shift in a system that we have been working really hard to build to be a lot more supportive for students than it has been, it’s quite disappointing, for sure.”
While the government projects K-12 school enrolment to grow by about 60,000 students in the next four years, they’ll freeze education funding at $8.2 billion until 2022. Funding is also coming for 25 more school construction and modernization projects, the details of which will be announced another day.
Health-care spending, which gobbles up 43 per cent of the budget, will grow by about one per cent after it had been rising by three per cent in recent years. It includes new money for tackling mental health and addictions, responding to a rash of opioid deaths and new continuing care beds.
NDP Leader Rachel Notley said Thursday she expected cuts, but not so many that affected Albertans’ livelihoods.
“If you’re low income, there’s a lot of different ways that Jason Kenney is coming after you,” she said.
Changes to rental assistance, less money for nursing, “flatlined” spending in health and education and new limits on families qualifying for child tax benefits were among changes that trouble her.
FROZEN TAX BRACKETS
Albertans will pay $5 more tax on a carton of cigarettes starting Friday. Vaping products and online rentals like Airbnb will be subject to new levies in 2020. Citizens will pay more to visit provincial museums, get a driver’s licence and register a land title.
The government will axe a city charters deal with Edmonton and Calgary and delay funding for LRT projects in those cities. A new hospital for south Edmonton will also be pushed back four years with a revised opening date of 2030.
Edmonton Mayor Don Iveson called it a significant step backward, a disappointment and a broken campaign promise.
As the Alberta government dispenses with the former government’s Climate Leadership Plan and carbon tax, the Environment Ministry’s climate change office will no longer exist. The budget projects a nearly 10-per-cent reduction in Environment Ministry spending over four years, including less money for parks, emissions management and fish and wildlife.
Raising the ire of many critics is a temporary pause on indexing income tax brackets, tax credits and benefits like Assured Income for the Severely Handicapped (AISH). It’s a broken election promise as the UCP campaigned on keeping AISH and seniors benefits tied to inflation.
“I think a big part of what this budget does is focus on the most vulnerable and ask them to pay more in order to balance the budget,” Joel French, executive director of Public Interest Alberta, said Thursday. “At the same time, the largest corporations, the wealthiest corporations are getting a big tax cut.”
CAREFUL ASSUMPTIONS
Although the former NDP government had been on track for a $97-billion debt by 2023, Toews said that calculation should have been $104 billion. He also said his government’s plan to eliminate a yearly deficit is tenable, where the NDP’S was not.
Despite the service cuts, spending in 2019-20 will go up 4.2 per cent to $58.7 billion, largely resulting from the estimated $1.5-billion cost of getting out of oil-by-rail contracts signed by the previous NDP government, Toews said.
It leaves Alberta with a projected $8.7-billion deficit this year. The province will continue to borrow $15 billion a year for the next two years to pay the bills.
Provincial bean counters expect $50 billion in revenue both this year and next, eventually rising to nearly $58 billion by 2022-23.
The government’s cut to the corporate tax rate is expected to give up around $700 million this fiscal year, rebounding to bring in more money by 2021-22.
By then, in theory, the cut will have stimulated increased investment in the province and private-sector job creation, officials said at a budget technical briefing.
The predictions also rely on Enbridge’s Line 3 pipeline moving more oil to the U.S. by 2021 and either Keystone XL or the Trans Mountain pipeline expansion pushing out more bitumen by 2023. A lack of new pipelines could shave $3 billion off revenue projections by 2023.