It would seem as if the shine has come off the Alberta advantage in light of the Alberta government’s budget last week. This year the Alberta government is projecting a $4.7 billion deficit. Apparently this is the first deficit in 16 years.
Isn’t it the law in Alberta that you can’t run a deficit? Not that there’s anything wrong with that (if you really have to). I guess they’re pulling a page from the Stephen Harper playbook and ignoring their own laws. Easy come, easy go, I guess.
Alberta increases taxes
Really, the Alberta Conservatives increased taxes? That one caught me off guard. It’s reminiscent of NDP governments all over Canada isn’t it? I can’t wait to hear the spin on this one.
I haven’t got all the details, but I’d heard on CBC (damn taxpayer supported informative radio) that apparently the education portion of property taxes will be going up, as well as liquor and cigarette taxes.
I can live with increases in taxes on cigarettes and alcohol, particularly cigarettes because I don’t suffer from that addiction. What’s 10 cents a bottle extra for beer in the lowest tax jurisdiction in Canada? Hmm. I guess we’ll have to recalculate that one before we can crow about it anymore.
If I heard correctly, the property tax increase will increase your Edmonton property tax bill by 8.6 per cent, on average. I hope I didn’t hear that correctly. The education portion, maybe, but the whole bill? I guess Edmonton Mayor Stephen Mandel could be indignant on one hand and laughing to himself on the other.
There are a variety of other spending cuts, but nothing too serious yet. The language in the newspaper and web stories about it indicate that major cuts may be coming.
Criticism of Alberta government
I think it’s more than fair to criticize the Alberta government for this budget. Stepping back a couple years we find Ralph ‘The man without a plan’ Klein and our current premier, Ed Stelmach, saying he wasn’t going to touch the brake on the economy. It’s like an episode of Dukes of Hazzard where we’re barreling towards the ‘bridge out’ sign.
The criticism I’ve heard, and I think it’s warranted, is that the government is too reliant on resource revenues as a proportion of its budget; 20 per cent I heard. So, when the oil hits the fan, so to speak, the government has a big problem.
Another criticism that is warranted is that because of the lack of a plan and any willingness to rein in the formerly overheated Alberta economy, we’re now in the position where there is a major structural deficit. In other words, there’s no optional spending that is easily cut.
I’m not sure our current government really understands inflation, because that’s the undercurrent here. The overheated economy put serious upward pressure on real estate prices, rent and prices on nearly everything. People moved to the province in droves because of all the high paying jobs, exacerbating those price pressures.
The result was that the government needed to pay more for nurses, doctors, teachers and virtually every other civil servant. They needed more of them too. Apparently now we have the best paid civil servants in Canada, which is great, but now what?
Remember this for next time: keeping a rein on the economy isn’t always a bad thing. Boom and bust cycles can be moderated. We don’t have to go from people lighting cigars with $100 bills to people jumping out of windows (not that it happened much, but you get the point). Maybe they can light cigars with $5 bills and just yell out the window? That’s more Canadian anyway.
Seriously though, it makes sense to have steady economic growth rather than an outrageous boom and all the economic and social problems that go along with it. It also makes sense to manage your resource extraction for the longer term. Alberta’s conventional oil and gas is disappearing, and more rapidly than I think most people realize. I don’t think that people know that conventional oil production consistently declined in Alberta for the last 10 years, even through the boom.
Diversifying Alberta’s economy
I think this budget really points out the need to diversify Alberta’s economy. It is too reliant on the energy sector and when the energy sector goes bust, so goes the rest of the economy in Alberta. The Alberta government has made some attempts to support the tech sector but more needs to be done. Hey, if Ireland can do it, surely we can!
The government here could start by investing more in post-secondary education, but that is another blog post.
Diversification will be one of the keys to Alberta’s economic success in the future. Moderating growth so we don’t see ridiculous boom-bust cycles will be another. Can the entire province’s economy rely on the oilsands? I’m thinking it can’t. Time will tell.
Alberta health transfers
And, in a story that is tremendously ironic, Alberta Premier Ed Stelmach is going to be “pressing the federal government very hard” for more health funding for Alberta. Apparently Alberta’s being short-changed under the new health funding formula, so we should be getting $733 million more.
Of course the irony is that only a year ago the whole country apparently was eyeing Alberta’s surpluses and wondering how to siphon them off, or so the thinking goes in Alberta. Stelmach bristled at the thought that Ottawa would try to get its hands on Alberta money. National energy program again and all that. Blah blah blah. It’s a broken record. So now Stelmach wants to go to Ottawa with his po’boy cap in hand? That really is funny.