Alberta budget 2013 marked by billions in deficit spending, service cuts

Alberta will soon join the ranks of the heavily indebted, its government announced Thursday as it tabled what has been billed as a “watershed” budget.

Although its economy is still strong, growth is high and unemployment is low, a decline in bitumen prices brought on by decreased pipeline capacity has thrown the province’s finances off the rails.

Alison Redford’s government announced it would cut spending and borrow billions to cope with a multi-billion-dollar shortfall.

Within the next three years, Canada’s wealthiest province will borrow $12.7-billion for capital projects — a major reversal from Alberta’s financial position under former premier Ralph Klein, who paid off the province’s $23-billion debt in full in 2004, after several years of severe spending cuts.

“This is a complete repudiation of Ralph Klein’s legacy,” said Derek Fildebrandt, Alberta director of the Canadian Taxypayers Federation. He said the budget was unclear; he predicted debt over the next three years to soar to $20-billion.

“The government seems to think being debt-free is a weird, quirky Albertan thing and that it’s somehow embarrassing to some of their friends … I think being debt-free is a point of pride for Alberta, and rightfully so. Do we really want to join the same fiscal class as Ontario? As Quebec? As the federal government?”

Unlike previous years, the province has split its total fiscal plan between operating and capital budgets and savings. The changes made teasing out deficits and comparing them to previous years’ nearly impossible.

Mr. Fildebrandt said the changes were an attempt to sow confusion and “cook the books.”

“If there’s one message to take away from this budget, it’s: Don’t trust them. Don’t trust the government. They have cooked the books to an unprecedented level. I’ve never seen anything like this on the federal or provincial scene anywhere in the country.”

Ms. Redford’s government has said it would run a $451-million operating deficit in the coming year. However, after cash adjustments, that amount will swell to just under $2-billion. In addition, the government has announced more than $4-billion in spending for capital infrastructure, for a total 2013-14 shortfall of $6.3-billion.

However, Finance Minister Doug Horner said that amount was not, strictly speaking, a deficit.

“It’s irresponsible to call it a deficit because there are things in there that are not deficit-related,” he said, referring to adjustments such as savings, student loans and money left in provincially owned treasury branches.

“The old way of doing things where we included some capital expenses in [the deficit] is $1.9-something, but we’re moving into a different format.”

Wildrose’s opposition leader, Danielle Smith, predicted the actual shortfall to be closer to $5.5-billion.

“[Previous premiers] brought through a clear set of consolidated books so you could clearly see what the revenues were and what the expenses were,” she said.

The only thing clear about this budget, Ms. Smith said, is that Ms. Redford is “addicted to spending. She’s addicted to borrowing. She’s so addicted to borrowing that she’s going to borrow to start saving.”

Thursday’s budget was announced on the heels of a 2012-13 deficit that is expected to reach $4-billion — a four-fold increase over what was forecast last year.

The Government’s Sustainability Fund — a savings account intended to offset declines in volatile resource royalties — will stand at $2.7-billion by the end of the month. By this time next year, it will hover at $691-million.

Only five years ago that fund — which will soon be renamed the Contingency Account — was flush with $17-billion.

The province expects it will have $15-billion in the Heritage Savings Trust Fund this year, an account it hopes to bolster by $24-billion with the new legislation that will mandate that certain amount of resource royalties be put away.

The Alberta government has come under heavy fire from critics for its overly optimistic non-renewable royalty forecasts, and high spending on public sector salaries.

Mr. Horner said there was no room in this year’s budget for any salary increases. He also said spending increases after population growth and inflation had been reduced to zero. Cuts have been made to higher education and seniors’ programs.

In the last budget, about a third of the province’s revenues came from non-renewable resource revenues. This year, that drops to just over a fifth.

Original Article
Source: nationalpost.com
Author: Jen Gerson