Nobody seems to be getting it
At the very end of June, as is the usual practice in the Government of Alberta, Finance Minister Joe Ceci released the year-end financial statements for the 2016/2017 fiscal year. The numbers themselves, including a $10.8 billion deficit and $33.3 billion in debt, should really not have been a surprise to anyone who has been paying attention. Overall, revenues at year-end came in about $1 billion higher than originally budgeted, thanks largely to higher than expected natural resource revenues, and expenses likewise came in around $2 billion higher than budgeted due largely to the costs of the Wood Buffalo fire and slightly higher than expected operating expenses. As government budgets go, however, the gap between budget and actuals on this one was far better than most.
As stark as the overall numbers in the annual report look, however, it is important to keep them in perspective. Alberta currently has the fastest growing economy in the country, job numbers are beginning to rebound, our population base continues to climb steadily, and despite the quickly rising debt total, we continue to have the lowest debt-to-GDP ratio in the country. These are all incredibly positive economic indicators, and bode well overall for the well-being of the provincial economy today and going forward.
Unfortunately, in Alberta, a strong economy does not necessarily always equal strong and sustainable government finances. In fact, for the better part of the past 45 years the exact opposite has been true: our over-dependence on fossil fuel revenues has meant that even in times of significant economic growth, government ledgers and balance sheets have not looked particularly healthy or sustainable.
The reason for that is it has been a very long time in Alberta since the government has actually brought in enough revenue through corporate and personal taxes to actually cover even half the cost of the infrastructure and services Albertans want to have at their disposal. Even in 2006, at the height of the most recent boom, corporate and personal taxes were only covering about one third of total government expense. So when the price of oil collapses, as it has over the last couple of years, the only other way the government has to pay for that infrastructure and those services is through deficits and debt.
Although the problem, and by extension the solution, seems fairly obvious and straightforward to any casual observer, that does not seem to be the case for any of the political parties currently representing Albertans in the provincial legislature. Minister Ceci, for example, highlighted the government’s protection of key services and the positive impacts of infrastructure investment during his press conference, but largely provided no concrete plan for addressing the imbalance in the ledgers over the long-term.
His approach, and that of the government, clearly seems to be to wait for the price of oil to recover creating more resource revenue while employing more Albertans to create more tax revenue. Should the price of oil recover to a point where Alberta’s books balance once again, which is certainly far from a guarantee given the changing context, Ceci’s approach won’t have actually solved the province’s chronic fiscal problem, but rather just kicked it forward for some future government to deal with. The bottom line is, if you are brave enough to protect public services during an economic downturn, then you need to be brave enough to actively generate the revenue to pay for those services. Doing one without the other just exacerbates the problem.
This kind of looking away from the real problem and the obvious solutions could do damage to a government, except for the fact that not one of the four opposition parties currently occupying space in the legislature has presented a credible, workable, and specific road map for fixing the problem going forward.
Wildrose Leader Brian Jean, PC Leader Jason Kenney, and even Alberta Party Leader Gregg Clark all responded to the annual report by waving their arms around and yelling some combination of “the deficit!”, “the debt!”, and “we’re all doomed!” while only putting forth vague promises (at least in the case of Jean and Clark) that they will successfully cut taxes, eliminate or change the carbon tax, and cut spending to fix the problem, not identifying where they would cut, how student and patient growth would be funded, or even how cutting taxes will result in more government revenue. Kenney, for his part, simply relied on his ‘NDP bad, deficits bad, taxes bad, Alberta doomed’ message box.
Ultimately, Albertans deserve better. All parties talk vaguely about getting Alberta off the fiscal roller coaster, but not one of them is actually putting forth a plan for how to do that. Albertans expect world-class public services and infrastructure. The first party leader that can show me a plan for adequately, consistently, and sustainably funding those services and infrastructure at their current quality or better over the long term will get my vote in 2019. I hope others demand the same.