The Parkland Institute

Op-eds | February 25, 2011

Tories’ gross fiscal mismanagement sells Albertans short

Government focuses on spending without beefing up available revenues

by Diana Gibson, Ricardo Acuña

On the same day that Alberta's provincial budget was released to the public, oil briefly hit over $103 per barrel. Third-quarter results from the oil patch revealed a doubling or tripling of profits in that sector. And despite the economic downturn in 2009, that year was the second most profitable Alberta's oilsands operators had ever seen.

All of this in a province that is already one of the wealthiest jurisdictions in North America, with the highest average weekly earnings in the country, and whose economy is clearly on its way to another boom period.

Yet somehow, in the midst of all this wealth and good fortune, the Alberta Tory government has just a released a budget with a $3.4-billion deficit, and the government's failure to keep pace with inflation and population growth will result in cuts to the programs and services Albertans depend on.

Provincial resource revenues have collapsed, and the province is very quickly working its way through the meagre savings it managed to put together during the last boom. This can only be called gross financial mismanagement, a scandal worthy of Lehman Brothers.

Nowhere is this mismanagement more evident than in the Tories' failure to adequately use our tremendous energy resources to benefit Albertans. Despite the rapidly increasing price of crude oil internationally, Alberta Budget 2011 is actually projecting higher revenues from gambling and liquor than from conventional oil royalties. This is almost entirely the result of the government's decision to make permanent the royalty breaks put in place last year, regardless of the rapidly growing profits in the industry. Despite projecting significantly higher oil prices for the coming year, resource revenues are projected to increase only slightly.

The total cost of those so-called drilling incentives for the current fiscal year is now projected to reach $1.66 billion (up from the $732 million originally budgeted). Although the government will no longer report the costs of those royalty breaks separately, we can assume that they will amount to at least as much in the coming fiscal year. In other words, they will account for almost half of the entire projected deficit.

At the same time, the provincial government continues to boast that Alberta collects over $11 billion less in taxes than the next lowest province. This means that Alberta could adjust our tax system to raise an additional $11 billion in taxes and still be the lowest tax jurisdiction in the nation. Why is this budget about spending cuts and deficits rather than fixing our revenue problems?

The budget does acknowledge some need to deal with revenues, but does so only by increasing service fees for vehicle registrations, drivers licenses, corporate registries and campsite reservations. These fee increases do little to capture any of Alberta's growing wealth and will have little to no impact on the province's overall finances.

There is incredible wealth being generated in Alberta today, but Albertans are being shorted. This is a stingy budget. There is no red ink being spilled; it is full of cuts and inadequate funding for programs that serve all Albertans and protect the vulnerable.

The budget spending falls short of population growth and inflation, meaning cuts in real dollars across most program areas. The government projected the same level of funding cuts for the coming two years as well.

It is important to point out that the programs and services that received cuts in Budget 2011 were not goldplated to start with. Compared to other provinces, Alberta's spending has been in the middle of the pack for years, and the results being generated by those programs were already barely better than adequate. Social spending in Alberta has yet to fully recover from the cuts of the 1990s, and this budget will actually make it worse.

The 2011 budget will ultimately mean ongoing crowding in classrooms, no relief for Albertans in poverty, continued growth in student debt loads and tuition costs, fewer doctors and nurses and other health professionals being trained, insufficient numbers of long-termcare beds for seniors, less funding for culture and the arts, and inadequate supports for children in care and people with disabilities.

Even the six-per-cent increase and "stable" funding for health care is not at all generous.

Inflation, population growth and aging alone add up to at least five per cent. The remaining one per cent will not nearly cover increases in costs for pharmaceuticals and new technologies. Hard choices will still have to be made within a health-care system, still struggling to provide service at adequate levels.

In the end, and despite the spin being put on this budget by the Tories, some opposition parties and the media, Alberta does not have a spending problem. Responsible fiscal management means being aware that there are two sides to a financial statement: revenues and expenses. Until the government figures that out, and starts budgeting accordingly, Alberta will continue to suffer from budget deficits and programs and services that are second best.

Diana Gibson is research director and Ricardo Acuña is executive director of the Parkland Institute, a non-partisan public policy research institute in the Faculty of Arts at the University of Alberta.

Links to Media:

• Edmonton Journal, February 25, 2011 (A16)

---

Comments

Comment on this entry

Please log in to comment. If you don't have Parkland Institute site login yet, register here (it's free and we don't share your email address with anyone).

Username

Password

Auto-login on future visits

Forgot your password?