Some highlights from the Alberta budget

Yolanda Curtis
February 26, 2021

The province is pushing off deep cuts to its bottom line in order to help protect the economy and lives during the pandemic as it anticipates high deficits, even higher debt and modest recovery to its revenues.

This is what the Conservative government, united in the last budget, had already been criticized for when it had forecast an oil price of 58 U.S. dollars a barrel.

Kenney says the budget will concentrate on getting Alberta past the pandemic and on rebuilding the economy that has seen businesses close and jobs lost during the health crisis.

Guy Smith, president of the Alberta Union of Provincial Employees (AUPE), the largest union in the province, said Thursday's budget decisions will take money out of pockets of people who've helped Alberta through the pandemic.

However, this plan is no longer adequate due to the COVID-19 pandemic, says University of Calgary economist Trevor Tombe.

- $3.1 billion to diversify economy and expand aviation, tech, pharmaceutical and tourism sectors.

"It's a little bit of a deer in the headlights budget".

Alberta's revenue fell to a forecasted $42.3 billion in 2020, $7.7 billion less than the government had budgeted for last February.

The decrease falls on Alberta Health Services, Alberta Public Service departments and impacts all levels of education.

- Personal income tax to generate an estimated $11.6 billion.

The debt is now expected to reach $116 billion by the end of the fiscal year.

Annual spending on debt interest is closing in on $3 billion.

That will bring debt servicing costs soaring up to the highest rates the province has ever seen.

"There will come a time when it will be important to take a hard look at the efficiency and appropriateness of Alberta's revenue and tax structure", he said.

The 2021-22 budget includes $2.2 billion in the capital plan for new and ongoing health facility infrastructure projects. This climb comes after a drop in GDP by 7.8 per cent in 2020 and a near-flat GDP in 2019.

"Right now we are well on track with respect to the Alberta public service, and our plans on right-sizing the public sector".

Right now, about half the province's operating expenses are related to compensation. "We're on a path of delivering government services most efficiently", said Toews of the government goal to reduce the public service by almost eight per cent. The entire public sector will see an overall three per cent reduction - or $822 million - in compensation to $26.7 billion.

Toews said the United Conservative government remains committed to reducing public-sector, per-capita spending to match that in comparable provinces such as British Columbia and Ontario.

But even once Alberta gets spending in line with other provinces, which is expected in 2023-24, the province will still face an $8-billion deficit.

The budget delivered on promises to avoid tax increases in a province that has the lowest per-capita tax regime in Canada - and is the only one with no retail sales tax.

Toews said that the UCP is still set to meet the four-year target. Alberta is now the only province without a PST.

"I don't think too many Albertans are laying away at night wishing the Premier's office would increase its budget by $2 million", said Terrazzano.

- Spending of $57.3 billion before expenditures on COVID-19 and cancelled crude-by-rail contracts. So how they can build into the budget a preconceived outcome?

Alberta's economy is now pegged to recover to pre-COVID-19 levels by 2022, one year earlier than had been expected in the mid-year quarterly fiscal update.

Indicators suggest the overall fiscal future, while not rosy, is brighter.

Oil prices have rebounded in recent weeks to above US$60 a barrel for the benchmark West Texas Intermediate, but Toews said the province can't count on or budget for renewed boom times. For this coming year, Alberta is estimating oil prices to average out to $46, and climb to $56.50 by 2023-24.

The Business Council of Alberta argues that now is precisely the time to at least start talking about taxes after the pandemic laid bare just how exposed the province's economy is to resource prices.

The government had planned to reduce the deficit by two-thirds between 2020 and 2021.

"The minister publicly-released the results of that review, but its implementation has been on hold while we have been focused on managing COVID-19", said Toews while presenting the budget to the legislature. The pot also includes a contingency of $500 million in 2021-22 to fund emerging sector strategies and any further economic recovery needs that arise during the year.

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