Alberta needs to rethink how to approach resource revenues: Trevor Tombe
Alberta is predicting a $2.4-billion budget surplus for its petro-powered economy this year, with plans to take a big bite out of its debt and put up guardrails to prevent eye-popping deficits when oil booms go bust.
“This plan achieves the priorities of Albertans, which include ensuring the government lives within its means,” Finance Minister Travis Toews told reporters Tuesday before introducing the 2023-24 budget in the legislature.
"Our relentless focus on investment attraction, job creation and diversification has secured our position as the economic engine of Canada."
It's the first budget under United Conservative Party Premier Danielle Smith and the last before a scheduled provincial election in May.
The document hikes spending almost across the board, particularly in the key areas of health, education and justice.
There are billions of dollars for new schools, new roads and bridges, a new business school in Edmonton, more ambulances and Crown prosecutors and training in schools for in-demand fields like health, energy, business and innovation.
Many major spending initiatives were revealed in recent weeks, including $158 million to recruit and retain health workers and $243 million over three years to augment primary care to reduce emergency room bottlenecks.
The budget promises a cap on post-secondary tuition increases starting in 2024.
Toews said there would be $1.8 billion over three years to fund kindergarten to Grade 12 enrolment, reduce class sizes and improve bus transportation.
There is a 12 per cent combined hike to the Justice and Public Safety budgets to pay for more sheriffs and prosecutors and more staff to clear courtroom backlogs.
The province is also putting in almost $2 billion to top up the Heritage Savings Trust Fund nest egg to $20 billion. There are also to be legislative changes to let the fund keep all of its net income rather than allowing the government to withdraw a portion in certain circumstances.
Opposition NDP Leader Rachel Notley called it a sham budget of false promises, cynical policy reversals, hidden agendas and unrealistic growth projections.
She said previously announced inflation-fighting measures end shortly after the election and funding givebacks, particularly in health, don’t catch up to the debilitating cuts of recent years under the UCP.
Notley added the budget is also silent on controversial and pricey promises by Smith to explore an Alberta police force, a provincial pension plan and to reward oil firms with potentially billions of dollars in royalty relief for cleaning up unused wells.
“This is a fraudulent budget designed to buy votes ahead of the election and then spring the costs on Albertans after the polls have closed,” said Notley.
“It hides Danielle Smith’s worst ideas while flatlining the real priorities of Alberta families.”
The Alberta Union of Provincial Employees, the province's largest public sector employer, said reinvestment in public services doesn’t make up for the 2019 cuts, noting the funding for Children’s Services has been reduced by seven per cent from four years ago.
“Premier Smith had the chance to break from three years of neglect and privatization. Instead, she wants Albertans to believe she has righted the ship while sailing us into more of the same,” said union president Guy Smith.
The Canadian Federation of Independent Business said while it was hoping for a cut in the small business tax rate, the budget on the whole keeps the province on a growth-oriented, fiscally prudent track.
Alberta, with a population of 4.4 million, is on track to take in $70.7 billion in revenue and spend almost $67 billion. Another $1.5 billion is being set aside for unforeseen spending emergencies.
Oilsands money remains the key driver, with bitumen royalties alone expected to bring in $12.6 billion.
Oil prices plunged into negative territory early in the COVID-19 pandemic only to rebound over the last 24 months as the global economy picked up and Russia’s invasion of Ukraine drove up prices.
West Texas Intermediate, the benchmark price for North American oil, is expected to remain strong at around US$70 and US$80 barrel in the coming years.
Alberta’s oil booms have allowed it to pay the bills while keeping the lowest tax regime in Canada along with no provincial sales tax.
However, as successive governments tied operational spending to the ups and downs of oil prices, oil booms have seen sky-high surpluses accompanied by equally head-spinning deficits during bad times.
Toews also introduced a plan for legislated balanced budgets that can only go into the red when there are emergencies, such as COVID-19 or last-minute steep drops in revenue.
Even if such events occur, the government would have to get back into balance within two years. Spending increases would also be limited to inflation plus population growth.
Toews said it would be "far more than embarrassing" if the government were to break its own balanced budget law.
"It would be a public spectacle and there would be a huge political cost to bear,” he said.
“Simply passing legislation around these fiscal rules provides real teeth in terms of the impetus for governments to follow them.”
The surplus for the fiscal year that's about to end had been on track to be $12.3 billion but will now come in at $10.4 billion.
The change is to help pay for $3.5 billion in inflation-aid programs along with a new deal for physicians and wages in bargaining with public-sector unions.
The inflation aid programs have seen the province pause its portion of the gasoline tax and once again index personal income tax brackets to inflation. There are also rebates on electricity bills and direct payments for young families, seniors and those in need.
This report by The Canadian Press was first published Feb. 28, 2023.