Jason Kenney’s conservatives deliver the tougher budget they warned Albertans was necessary
|National Post 24 Oct 2019 at 19:32|
EDMONTON — Jason Kenney’s conservative government introduced its first Alberta budget Thursday, fulfilling his promise of slight austerity, promising cuts to spending programs and the elimination of hundreds of bureaucracy jobs. Those, along with a corporate tax cut aimed at spurring business investment, were the key planks of a four-year plan to bring the budget into balance.
In plain numbers, the United Conservative government says it plans to bring expenditures $1.3-billion below spending levels in 2018–19; cumulatively, the budget says, this amounts to a $4-billion reduction in government spending over four years. Alberta Finance Minister Travis Toews maintained this was the best way forward for the province, a plan predicated on cautious estimates on revenues and oil prices.
“This is not a boom-time scenario,” Toews said.
Nevertheless, the 2019-20 budget will still run a deficit of $8.7 billion, roughly $2-billion higher than in 2018-19.
Toews also acknowledged the possibility of a global recession or pipelines not coming online and said the government was prepared to further restrain spending, citing a commitment to bringing the budget into balance, come what may.
“The theme of our platform was overwhelmingly supported by Albertans,” said Toews. “I believe the most extensive and important consultation was that consultation that we did with Albertans back in April.”
On Wednesday night, Kenney took to television for a pre-budget suppertime address to Albertans. He warned this was going to be a tough budget on Albertans. That was borne out on budget day.
Repeatedly on Thursday, government officials harkened back to the MacKinnon report, an analysis of Alberta’s spending growth over the last several decades commissioned by the government and released last month, which concluded that Alberta spent more per capita on public services than other provinces, in some cases considerably more, with no better outcomes. The report argued that the provincial government was going to need to reduce spending to levels more in-line with other provinces to head off what it said had become a “fiscal crisis” for Alberta.
The budget plans for major government line items, such as K-12 education and health-care spending, to remain roughly stable over the next four years. Savings are expected to be found instead in a slew of spending cuts sprinkled across ministries and programs. There are, as well, some new spending commitments on the Technology Innovation and Emissions Reduction program, and spending on veterans’ scholarships.
Significant changes are coming in some areas, in particular, to post-secondary education: a 12-per-cent funding cut — found via unspecified “departmental efficiencies” and reducing government grants to post-secondary institutions — will save an expected $1.9 billion; tuition rates, meanwhile, will be allowed to increase by seven per cent per year as the freeze is thawed.
Many of the other changes tinker around the margins: the budget plans for a 7.7-per-cent reduction in the size of the civil service, amounting to nearly 800 people, by 2022–23, which is expected to save $552 million; various “red-tape reduction” measures should save another $140 million.
Several targeted tax credits are being eliminated in favour of a more broad-based corporate tax cut; for instance, the Alberta Small Brewers Development program aimed at subsidizing craft breweries is being shut down, saving $123 million over four years.
Reductions in road-maintenance services will save nearly $200 million. Smaller reductions are scheduled for other areas ($88 million to the ministry of agriculture and forestry, $60 million to the ministry of multiculturalism and status of women) and there are plans to pause inflationary indexes on various payments, such as disability and seniors’ benefits.
The United Conservatives were elected in the spring as Albertans turfed the one-term New Democratic government under Rachel Notley. At the time, Kenney’s party was pitching Albertans on a program of cleaning up Alberta’s ballooning deficits and debt; given a prolonged economic slump, rising unemployment and difficulties getting petroleum products to market, they were elected with a strong mandate for spending restraint.
“And this is a budget that puts Alberta and Albertans first,” Toews said in his budget address.
This is not a boom-time scenario
Toews emphasized the focus on restraint when discussing plans for a $2.9-billion reduction in capital spending and the deferment of LRT funding to Edmonton and Calgary until after the budget is balanced. This, he said, would “reflect the province’s ability to pay and minimize the need to borrow when funds are not available.” Toews called the whole document a “thoughtful, surgical approach” to the province’s finances.
Additionally, some measures were announced that are designed to increase government revenues over the next four years.
The government, starting Friday, will jack up cigarette prices by $5 per carton and institute a 90-per-cent hike in taxes on rolling tobacco. The budget anticipates a $5-million per year in tourism levies and expected increases in revenues from everything from fuel taxes and cannabis use, both due to increases in consumption, not changing tax rates. And, income tax exemptions will hold steady instead of increasing annually at the rate of inflation, until “economic and fiscal conditions can support it,” the government said, keeping an escalating amount of money in government coffers per year, adding up to $600 million by 2022–23.
Notley, now leader of the opposition, slammed the budget as she spoke to reporters in the Alberta legislature, saying it would harm vulnerable Albertans. She took particular aim at the end of indexing on benefit payments to the disabled and on income tax. “None of what Mr. Kenney ran on in is in this budget. He’s not creating jobs; he’s cutting front-line services and he raised taxes and fees on Albertans,” Notley accused Kenney of lying about his motives for cutbacks. “It’s never been about the debt, it’s never been about the deficit … it is simply about making sure that the wealthy get more and the rest of us pay for it.”
But University of Calgary economist Trevor Tombe said the budget’s cutbacks are reasonably measured. “It’s certainly restraint, but it is not austerity,” Tombe said Thursday. He said the estimates upon which the budget is based — projected oil prices, the assumptions about economic growth, for example — are conservative and safe estimates, and the budget projects a gradual return to balance over a reasonable time frame to accomplish it. The projected royalty revenues that are banked upon to get back to balance are are “also very reasonable,” Tombe said. “It’s a credible plan, the debate should be around the merits around individual decisions, not whether or not this is an austere budget.”
Richard Truscott, vice-president of the Canadian Federation of Independent Business in Alberta and B.C. said the budget puts Alberta back on a “sane” path. “It’s tough medicine, but it’s much-needed medicine,” Truscott said. “For far too long politicians have been spending beyond their means to buy votes … the party’s over.
The end of the NDP’s carbon tax means cancelling around $1 billion in tax revenues, but the government argued that it will leave $5.7 billion in the economy.
The corporate-tax-rate reduction from 12 per cent to eight per cent over four years is projected to spell a $2.4-billion reduction in direct revenue in the near term. The government, though, predicts this will make Alberta one of the most tax-competitive jurisdictions in North America and will bring in $4 billion in private-sector investment, spurring a GDP boost of 0.3 to 0.4 per cent per year.
While the plan is to eliminate the deficit by 2022–23, the documents suggest only a modest decrease in the overall size of the debt. By the time the budget is supposed to be balanced, the overall debt the government holds will be around $93 billion — about $4-billion less than was projected under the former NDP government’s fiscal plan — and the government is promising a surplus of some $600 million that year.
“It’s a lot of debt,” Toews told reporters. “We have to get to a balanced budget, which this plan does.”
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