Provincial budget plunges Alberta into debt

Miriam Ostermann
Times Associate Editor

 

Amid unfaltering job losses and a fiscal roller-coaster of fluctuating oil prices, the provincial government went steadfastly into the red to combat Alberta’s economic downturn with the release of a budget that plunges the province into billions of dollars of debt, exceeds the government’s own legislated debt ceiling, and already prompted a credit rating downgrade.
The New Democratic Party’s (NDP) budget, released last week, shows plans to borrow billions of dollars for operations, and propels the government into a $57.6 billion debt by 2019. With steady spending over the next three years, Alberta will brace itself for a $10.4 billion deficit by the end of this year.
While the government kept their promises, refraining from introducing a provincial sales tax, continuing to funnel money into the $34 billion five-year infrastructure program, and providing funding for the previous government’s plan of school modernization and construction – which includes Strathmore’s new school in Edgefield – the NDP’s spending spree fell flat on impressing the official opposition.
Despite being promoted as the Alberta Jobs Plan, the budget only sets aside $250 million over a two-year span for job creation, introduces a carbon tax effective Jan. 1, 2017 that will cost the average family between $500 to $1,000 a year, and shelves the campaign promise to reduce mandatory school fees.
“This is entirely what we expected … the NDP were going to break promises either way,” said Wildrose Shadow Finance Minister and Strathmore-Brooks MLA Derek Fildebrandt.
“They were either going to break their promise to balance the budget by 2019 and not take on nearly as much debt, or they were going to break their promises around massive new spending programs. Obviously they decided, from their perspective, new spending programs were a more important promise to keep than pertinent financial management.”
Last fall, the provincial government set the debt-to-normal-GDP ratio at 15 per cent. Yet the budget foreshadows those numbers to hit 15.5 per cent by 2019. In light of the details released, the credit rating agency Dominion Bond Rating Service (DBRS) downgraded the province’s long-term debt rating from triple-A to a high double-A.
According to the Wildrose official Opposition, members had warned the NDP about a decline in credit rating and surpassing their own debt ceiling.
“We did not expect them to blow through it in just five months and have to repeal it that fast,” said Fildebrandt. “This is grossly irresponsible and it’s going to mean billions of dollars of debt placed on future generations. I think that taking on $56 billion of debt in just three years is not just bad financial management, it’s morally repugnant.”
However Joe Ceci, the president of the treasury board and minister of finance, defended the budget publicly, arguing it embodied the party’s priorities such as quality education and adequate and timely health care. He further stated that the plan will move Alberta forward and was inspired by its people.
“Today our province faces a choice,” Ceci said. “The first option is to slash and burn vital programs and services that Alberta families count on. This means laying off nurses and teachers. This is the wrong path; it moves us backwards. Instead we’ll carefully manage spending, ensuring we’re spending every tax dollar wisely. Budget 2016 is designed to support Albertans as we face a once-in-a-generation economic downturn.”
During his speech Ceci emphasized four areas of the Alberta Jobs Plan: supporting families and communities, investing in infrastructure, supporting Alberta businesses, and diversifying the energy industry.
The NDP is also introducing a carbon tax that Albertans will see implemented at gas pumps and on their heating bills starting next year. The government said rebates will be offered to singles earning a maximum of $51,250 and families with two children making no more than $101,000. While the money is expected to be invested into green infrastructure, clean energy research, and energy efficiency programs, Fildebrandt called the levy an extreme environmental program designed to seize more taxpayer’s dollars, while rebates wouldn’t come close to compensating the average household. Furthermore, he called the NDP’s $250 million job creation announcement a joke, referencing the government’s first job subsidy program, which he said was cancelled.
According to Ceci, the government aims to have the budget balanced by 2024. However, with an expected $10.1 billion deficit next year and an $8.4 billion drop the following year, the official opposition remains doubtful.
“We’re going to fight it tooth and nail as the official opposition and we’re going to have to clean up this financial disaster if we’re government in three years,” Fildebrandt said. “In the meantime the NDP are doing what they do everywhere else if they get into power. They’re going to smash and grab taxpayer money and run up debt right now and let someone else clean up the mess and do the hard work later.”