Rough and Tumble – Alberta’s Budget

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This past week saw the credit rating agency DBRS give the Alberta government another kick in pants because there is no credible plan to address deficit the province is rapidly building.  DBRS issued a caution which follows on the heels of a downgrade by both DBRS and Standard and Poors in April.  In May, Moody produced an analysis that crystallizes its assessment of the Alberta government’s creditworthiness.  

The Government’s perspective is pretty clear.  They think:

  • Government should not reduce people services in an economic downturn, and counter cyclical spending on infrastructure has the double benefit of creating jobs and lower construction costs.
  • The debt is affordable because Alberta is strong financially and our debt ratio is lower than other provinces.
  • Government can slowly bend the curve and balance a budget by 2024 by reducing annual increases to less than inflation and population growth.

Severely normal Albertans hold a different view:

  • Service efficiencies can always be found in public bureaucracies. Service expansions in a revenue crunch is wrongheaded.  Per capita spending on the big ticket items of health and education are out of whack with what other provinces spend so there is lots of room for efficiencies.
  • While Alberta has lower debt to GDP ratio other provinces, the amount and speed with which is has been accumulating is very troubling!  Because we are borrowing for operating costs we will be passing this debt to our children with no real payoff for them.
  • The government did “bend” the curve in health – it is now 3.0% which is lower than the nearly 5% annual growth previously. But then they bent the curve the other way – the budget for 2015-16 came in $2.0 billion higher originally budgeted.

As the NDs enters the second half of its mandate – it shows no sign of listening to the warning signals.  The mantra is about “green shoots of economic recovery” and “We have turned a corner from where we were before.”

Meanwhile oil slipped to $45 per barrel while government’s budget is based on $50.  And the Premier’s approval rating continue to deteriorate. According to a Mainstreet survey if the election were held today Notley’s NDP could count on only 21% of voters.

Summer is Barbecue Season for Politicians. Severely normal Albertans need to eat a hotdog with their MLAs’ and focus their minds on dealing with the deficit.  We should encourage government to abandon the “bend the curve” talking points and begin to focus a more coherent approach to budget reductions.  

For this year, setting a target of 2% would be a good start.  Is it possible to save $1.0 billion in the current budget year?  Perhaps discretionary grants can be reduced.  Perhaps plans for shiney new programs can be stopped before they are launched.  Perhaps Ministries should be instructed there will not be a year end spending spree referred to a March Madness!