Hole-y Budget update Batman

Don’t wait up for good news folks!  In late November, the Alberta Finance Minister released the results for the first half of the budget 2017-18 (April thru September). He brought out a virtual air pump to the news conference.  His glad tidings included a reference to the slow, steady climb out of recession.images-3

Alberta Government Revenue

There is still not much air in our saggy budget revenue balloon; estimated income is down $250 million from the budget of April.

  • Overall, energy revenue will exceed estimates (+$100 million). But revenue from bitumen is terrible (-$670 million). Hurray for conventional oil and sale of drilling rights! They boosted revenue enough to make a positive number for energy sales.
  • Personal income tax (-$340 million) and corporate taxes (-$83 million) dipped below expectations… a leak in our bicycle tire!
  • Even ‘sin’ taxes (smokes and booze -$121 million) are down. These revenue shortfalls are indications of the continued hangover from the recession.
  • But thanks to a US bull market, our investment income was higher (+$287 million).

Alberta Government Expenditures – A ballooning problem

Despite attempts to control costs; overall operating expenses were up $124 million.

  • Budget surprises included caseload and cost increases for children, the disabled and welfare recipients. RCMP compensation and legal aid costs were up, and so were investment management fees and film production grants.
  • Savings were found by grinding costs in other departments.
  • Some savings were accounting magic, since some of the Climate Leadership Rebates costs were moved to the previous year.
  • We took a $120 million beating by subsidizing electricity costs.
  • For those of you obsessing over debt servicing costs; interest payments on debt will be $1.4 billion. About half to cover infrastructure costs, the other to cover our operating deficits. $1.4 billion is what it costs to run the Department of Children Services.

Cost Management

A major element of the NDP budget strategy is to ‘bend the curve’ on health care spending. This means increases are limited to less than a factor of inflation plus population growth.

  • Health spending is now within rock throwing distance of $20 billion and is $60 million higher for the year.  Drug costs were among the culprits, so the bending the curve strategy isn’t working as planned.
  • The Alberta government extended the tuition freeze for another year, through the 2018-19 fiscal year. That might be good news for students and, expect the NDP to remind students of that come election time.
  • But the ones being frozen are the taxpayers. The institutions get compensated for the tuition they would have received from government. The NDP will announce new plans for the post secondary system next year. Don’t get your hopes up that it will focus on saving the public purse any money.
  • But there is restrained capital spending. Overall it is expected to be lower by $884 million as schools, roads, housing and health projects and municipal grants have seen delays in permitting and construction.

But the bottom-line is bleak; a deficit of $10.3 billion is only $100 million lower than the budget.