Alberta Budget 2021: Looking for signals

While the public sector plays a key role in delivering public services, it does not create jobs or generate wealth. 
Travis Toews, articulating the UCP mindset

In February 2020, the Government of Alberta’s strategic plan had 3 main priorities.  The plan said it would:

  • Create jobs and prosperity through low taxes and reducing regulation.
  • Make life better for Albertans by transforming education and health services
  • Get a fair deal in Confederation

At the beginning of the year, it estimated:

  • Forecasted revenue of $50 billion and expenditures of $56 billion on operations and $7 billion on capital projects
  • A balanced budget in 3 years.

Then the Pandemic struck!

In a mid-year update, the news was bleak:

  • Forecasted revenue dropped to $41 billion 
  • Operating costs were expected to be $63 billion with $8.5 billion in capital spending.

The Alberta Legislature will resume sitting and a three-year budget will be presented on February 25th.  The news will be bad.  Here are some items to watch for:

Revenue:
  1. Personal Income Taxes: The big drop in employment caused by the pandemic means lower personal income tax.  How steep will the decline be?
  2. Oil Forecast Price: Will the government estimate the benchmark price of oil higher than $40?
  3. Corporate taxes: How big will the revenue decline be from COVID-19 and the decision to quickly reduce the tax rate?
  4. Federal Transfers: What proportion of the budget will be from federal transfers? (25% or higher)
  5. New Revenue: Although very unlikely, will the government introduce any new revenue streams?  (Health care fees, selling off crown agencies, sales taxes, or maybe acquire the carbon tax from the federal government.)
Expenses:
Calgary doctor photographed telling a family they lost their loved one to COVID-19.
  1. Health Care: Government is trying to curtail health care spending through wage and fee negotiations and staffing reductions. How successful will they be, after alienating health care workers with constant attacks?
  2. Government Boondoggles: The government continues to leak red ink over the Redwater refinery, the sale of rail tank cars and the equity and debt it put into Keystone XL pipeline. What is the cost of these three risky bets?  
  3. Post-secondary Education: Government has signaled a wish to ‘transform’ the system through steep cuts to institution grants and increases to tuition and student loan costs. How steep will the cuts be?  
  4. Staff cuts: Will there be wage reductions and further cuts to staffing in other departments?  There have been ongoing staffing cuts and a wage freeze within the government service.  Will there be deeper cuts?
  5. Accumulating Debt: What will be the level of net debt and the cost of debt servicing? 

The UCP government has struggled to rationally respond to the pandemic.  They stuck to a budget reduction strategy even though the pandemic might have caused them to postpone their austerity program.  Now, as the pandemic stretches into it second year, will the upcoming budget signal that the UCP has made adjustments to its playbook?