Alberta’s Economy Still On Track to Get Better and Better

“Budgets are political documents.” ~ Trevor Tombe

It’s probably one of the most fluffed-up accounting documents we ever get to see. In between the spattering of charts and graphs there are affirmations of priorities, justifications for spending or cuts, and reiterations of promises past or commitments to come. It tells a story.

Alberta’s budget is on a path to balance, Tombe wrote yesterday.

He’s an economist. I am not. Still, I had my doubts about the projections so I did what I do, went back and looked for evidence, and I found it – in spades. 

Alberta’s economy has been humming along, despite the Chicken Little narrative over the past four years. The budget expects that in four year’s time, Albertans will be sending $3 billion more to the province in personal taxes and corporations will be contributing $500 million more than this year (with a further 3% reduction in their responsibility, no less). 

Even with “180,000 Albertans out of work”, the province registered more personal income tax revenue during the previous three years, 2015, 16 and 17, than it had in 2013-14, the lead up to the last oil price peak in 2014-15. Last year, 2018-19, the government recorded a ten-year high of $11.8 billion received in personal income tax.

Corporate taxes were at a low but not the lowest over the last decade; 2010-11 and 2011-12 were lower than the lowest two of the past four years. 

Looking to verify the credibility of the government’s revenue estimates, based on the past decade, I saw an economy that was not really all that bad; yet we were bombarded with news to the contrary. The government couldn’t get ahead of the media or the opposition, who were, to put it mildly, singing the same tune. 

Alberta is still a very wealthy province with very wealthy people and the 2019 budget reflects that. 

In what can only be called a slight stroke of genius on the government’s part, this budget cut funding for things progressives found important; post-secondary, municipal funding, hospital expansions, and green infrastructure spending for municipalities. In fact, it wouldn’t surprise me to learn that there were two budget documents at the ready; one that would complement a Conservative Party of Canada government and this one. 

Why do I call it a stroke of genius? Because these are things that a non-regressive federal government might be motivated to fund. After the federal election results, Kenney was reassured that no amount of assistance from the feds (I mean, they bought the damned pipeline) will be rewarded with a plurality of votes. 

Kenney’s left flank is secure. 

While his government made cuts to what can be considered ‘progressive’ interests, he did not go nearly far enough to appease the ‘small government’ types. Certainly, the ‘surgical’ cuts of almost 8% of the public service will help, but there are a lot of Albertans who want to see it bleed out, now. 

There are also sly tax increases within the budget, such as not indexing the personal exemption with inflation. It will provide the government with around $200 million in additional revenue. Further, auto registration rates went up $5 a year and a host of other small items will be increasing. 

Incredibly, the UCP is planning to borrow as much as the NDP did during their first year in government as a recession was taking hold; $8.7 billion. They’re also currently planning to borrow the same amount next year. 

There is no definite plan for a targeted debt-reduction solution over the next four years; Alberta’s provincial debt is scheduled to increase at about the same rate as the previous government.

Does this budget leave Alberta better prepared to meet its fiscal challenges? I don’t see how. Obviously more cuts will have to come to enable the government to focus on paying down the debt. At this point, even a modest sales tax wouldn’t allow the government to stop borrowing.

Kenney’s right flank is vulnerable.

Alberta’s economy, however, may not be nearly as vulnerable as we were led to believe. 

This post is an opinion.

Deirdre Mitchell-MacLean

contact: [email protected], [email protected]

Twitter: @Mitchell_AB for all the commentary; @thisweekinAB for posts; @politicalRnD to guess “who tweeted that”?