Putting the Alberta Budget on a New Trajectory

Alberta’s current NDP government has multiple money problems. Some of those problems arose as a result of the drop in oil prices; others arose because of spending choices the government made. Either way, a course correction is necessary. Otherwise, the burden from this government’s building up of debt will be unfairly shifted to the shoulders of future Albertans. This paper examines various measures the government can, and should, employ in both the short and long term to better align spending and revenue. The NDP’s spending choices appear to be based on the precarious assumption that a rebound in oil prices will heal what ails the Alberta economy, as well as on the refusal to significantly reduce spending with almost zero attempt to contain costs. The NDP bases its choices on a black-and-white scenario of either spending or imposing austerity and drastic cutbacks. However, there is a middle ground that would allow the government to maintain services without the quality of those services suffering. These include moderating public sector wages, engaging in better procurement practices, lowering administrative costs, and delivering services and programs more effectively. Alberta is a big spender on health care, but the government could learn much from what other provinces are doing that enables them to spend less while still delivering quality health care. Alberta’s 2017 budget projects deficits of $10.3 billion this fiscal year, dropping to $7.2 billion by 2019-2020, and offers no concrete budget-balancing plan. Credit-rating agencies such as Moody’s see danger in the NDP budget of a speedily increasing debt burden, long-term deficits and growth in spending that is above inflation levels. The government’s projected rise in oil prices, on which it is depending to stabilize the economy, is also considered to be far too rosy. There are ways out of the gloom. For example, by reducing raises for all public sector workers, unionized or not, the province could save $1.5 billion over three years. Emulating Ontario, Quebec and British Columbia by applying the brakes to runaway infrastructure spending would save $4.6 billion over the next three years. Public programs and services can be restructured, as has been done in other provinces, to make them more efficient and effective and administrative and procurement costs can be reduced. Reducing Alberta’s per capita spending levels to those akin to levels in other large provinces would eventually yield annual savings of $6.6 billion. Economic growth won’t come from poorly thought-out spending; rather, it will evolve from the creation of a more positive climate for investment. The NDP’s carbon tax and its emphasis on more heavily taxing higher income earners do nothing to promote economic growth that could shore up government revenue. Tax reform is key: less economically damaging taxes would improve growth prospects and help close the deficit. Use of the carbon tax should address competitiveness issues through deregulation and cutting business taxes. And for the long term, the government needs a solid plan to balance the budget with specific annual deficit targets. Common sense, moderation in many things and a firm hand on the fiscal reins will go far towards righting this dangerously listing ship, but the NDP government has to be bold enough to take the initiative. Unrestrained spending is not the answer to any economic predicament.