Province puts forth tough budget

By Stephen Dafoe

Edmonton – Doug Horner, Alberta’s Finance Minister, tabled the 2013-2014 provincial budget Thursday afternoon in the Legislative Assembly. That budget, which Horner described as a watershed moment, projects a $2-billion deficit and plans to borrow $4.3 billion for capital project spending during the fiscal year.

“This has been a highly anticipated budget, probably the most anticipated one in some time,” Horner said, adding the government had some tough choices to make. “We are facing a number of sizeable challenges. Our current fiscal situation means we are tasked with making some necessary decisions and some tough but thoughtful choices.”

Horner said government spending had increased by 7.3 per cent per year on average over the past 10 years. Those increases in spending stop with the current 2013-2014 budget. Horner said there would be zero spending increases in the upcoming fiscal year and that every dollar the province spends will be challenged to make sure it is the right thing to do.

As has been the case leading up to the budget announcement Thursday, Horner cited falling bitumen revenues and increasing population as the cause of the province’s money woes. “Right now, this resource is selling for 30 per cent less than the comparable world price,” Horner said. “That’s costing us $4 billion in lost revenues this year and it’s impacting our health care, education and services we all hold so dear.”

Holding the current year’s line at the same $36.4 billion in operational spending while increasing health care spending by $500 million in 2013-2014 means other programs and services will be cut. The province will suspend a number of programs, including the Student Temporary Employment Program (STEP), the Alberta Farm Fuel Allowance, and the Alberta Initiative for School Improvement (AISI). Additional trimmings were realized by cutting funding for training, income supports and health benefits by $98 million and trimming $147 million (6.8 per cent) from post secondary school funding. Municipal Sustainability Initiative, a fund that supports Alberta municipalities with operational and capital funding, has been reduced from $1.05 billion to approximately $900 million. Additionally, the province plans to close six courtrooms in the province.

Horner said the province would borrow $4.3 billion for Alberta’s capital project spending in 2013-2014. That number is anticipated to be $15 billion over the next three years, an average of $5 billion per year in infrastructure. The Finance Minister defended borrowing money in his speech. “Interest rates are at historic lows,” Horner said, adding the province’s Triple A credit rating gave it the lowest possible borrowing costs. “Budget 2013’s fully-funded capital plan will be supported by a responsible borrowing strategy to finance infrastructure projects.”

The opposition is not as optimistic about infrastructure borrowing. Wildrose Finance Critic Rob Anderson was critical of the plan, stating every dollar being spent on infrastructure projects for the foreseeable future would come from debt with no clear plan for how it will be paid back.

“This is the greatest squandering of wealth in our province’s history,” Anderson said in a release Thursday afternoon. “This government talks about living within its means, but it is spending so far beyond its ability that our children are going to forced to pay their bills. Premier Redford is taking Alberta down a dark path, one that we’ve been down before, and we know where it leads.”

The Wildrose critic also took issue with what he saw as the government’s new borrowing-to-save policy. Despite running a deficit budget and borrowing $15 billion over three years for infrastructure needs, the province is planning to pay itself first by socking away $24 billion in savings over the next three years.

“Saving money is a great idea as long as you’re not going into debt to do it,” Anderson said. “That’s like taking out a second mortgage to invest in an RRSP. It’s an absolutely foolish policy that makes no economic sense.”

Status quo for municipalities

Though budget cuts and increases affect all Albertans, municipal leaders were particularly attentive to what was happening with the Municipal Sustainability Initiative, a program established in 2007 to provide predictable, sustainable funding for the province’s municipal infrastructure projects.

Municipalities had understood that fund would top $1 billion in 2013-2014; however, Thursday’s budget announcement indicated it would remain at $896 million as it has for the past several years.

Morinville Mayor Paul Krauskopf said he was glad to learn the program would continue. “We are pleased that the premier recognizes the continued importance of investing in local infrastructure through maintaining MSI funding,” Krauskopf said. “Access to MSI funding enables municipalities like Morinville to meet the continuing demands of growth and completion of projects based on local priorities.”

But residents are affected municipally in other ways. Morinville will issue property tax bills later this spring. A considerable portion of that bill will include the education tax requisition municipalities collect on behalf of the province. The provincial budget indicates there will be a 1.8 per cent decrease in the education tax requisition.

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1 Comment

  1. Having been a comptroller of a large federal government budget in the recent past, I can tell you that they are tough to manage: everyone wants something, but no one wants to pay for it; everyone’s cause or pet project is a priority higher than everyone else’s.

    The best example I can use is a home with children. When kids are very young, many want everything they see because they don’t understand the value of money. But if the parents are caring, responsible and provide some tough love (i.e. say NO when required), most grow up learning that everything they have or do comes with a cost that someone (parents or society) will have to pay for. If you are really lucky, the children won’t take those things for granted and will be grateful. If you exceed expecations, the children will work and contribute meaningfully to their family and society.

    Our provincial budget is a large scale example of this. Ultimately, some things have to be cut because large deficits are not sustainable in the long term. However, every sector and the opposition parties condemned the decisions saying that the public won’t be properly served. To some degree, I think they are right. However, I have yet to see a single notional budget that would have “got it right.” I have heard accusations, whining, and outright condemnation, but not a single tangible example of what the government should have done.

    Show us your budget so we can judge with our votes who has it right. Are there opposition budget spreadsheets out there that aren’t a list of generalizations that I have missed? I doubt it. Finally, I seriously doubt that anyone can get it right in one year without simply blaming the past regime.

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