Gone are the days of the Alberta Advantage.
(This column originally appeared in the Toronto Sun)
By: Candice Malcolm
No one would blame you if you hadn’t noticed that it’s late March, and yet, there’s hardly been any news coverage on government budgets. After all, March Madness basketball and the upcoming NHL playoffs are far more interesting. But when it comes to government spending, something odd is happening this year, and it may be worth your time.
Typically by early spring most provincial governments have already released their annual accounting document. This gives taxpayers a glimpse into the deep, dark and mysterious vaults of government accounting, and provides an update on the debt levels, taxes or any new government schemes in the works.
But this year is a bit different. The Canadian economy is suffering from the drastic drop in global oil prices, so most governments are holding off and trying to rework the numbers following lower than expected revenues.
Ottawa has already pushed back its budget, from February until April, and the provinces that rely on transfers from Ottawa have delayed their budgets accordingly. These so-called have-not provinces can’t calculate their revenues until they find out how much they’ll get from the federal equalization transfer.
The first few provincial budgets are now finally rolling out, starting with the three western provinces and Quebec. Remarkably, three of the four have come in on target and, perhaps even more remarkably, Alberta – long considered the epicentre of fiscal conservatism in the country, if not the continent – is the one government lagging behind.
Quebec, British Columbia and Saskatchewan all managed to balance their operating budgets, and at the same time, keep taxes low and spending under control.
The Alberta budget, on the other hand, featured a $5 billion operating deficit and another $5.7 billion in a capital infrastructure deficit. It was also stuffed full of surprise increases to taxes, premiums and fees.
Anyone earning more than $50,000 will pay a new health care premium, and many more will pay higher income taxes. The government is also fuelling its coffers with tax hikes on wine, beer, cigarettes, gasoline, traffic tickets, and just about any other licence or fee paid to the provincial government.
Gone are the days of the Alberta Advantage, and with it, gone is Alberta’s coveted single rate income tax, known as a flat tax.
Make no mistake, Alberta’s revenues have fallen by $7 billion from earlier projections, and Alberta Premier Jim Prentice certainly had his work cut out for him. But governments do not get themselves into a multi-billion-dollar mess overnight.
Alberta’s descent into fiscal ruin has been compounding for almost a decade.
While Quebec, B.C. and Saskatchewan have kept spending in check and worked hard not to introduce massive new programs, Alberta has been living high.
Government program spending in Alberta soared under the watch of premiers Ed Stelmach and Alison Redford. Alberta now spends more per capita than any other province in Canada.
Government employee compensation also grew at unsustainable rates during this time. The average employee now costs Alberta taxpayers over $100,000 per year, not to mention those incredibly generous pension packages.
Alberta went on a spending spree. It acted as though the oilsands were a never-ending money tree. Like an overnight lottery winner who then goes on to whittle away his fortune because he never learned how to balance a chequebook, the Alberta government got away with low taxes and low debt because they were spoiled with oil revenues. The harsh reality of low oil prices highlights just how much Alberta’s spending has spiralled out of control.
The Prentice government had to deliver this sour message to Albertans. They produced an historic Alberta budget featuring more taxes, more borrowing, more debt, and only trivial spending cuts. It read more like what you expect from an Ontario budget.
Prentice’s PCs in Alberta are really beginning to resemble the Wynne Liberals in Ontario. Both spend half of their budget on government employee compensation. Both rely heavily on borrowing, and use cheeky accounting tricks to hide the true debt figures. Both seem unable, or perhaps unwilling, to address the runaway costs of their governments, and both prefer tax hikes to spending cuts.
Under successive Liberal governments, Ontario slid from the economic engine of the country to an official have-not province. Ontario went from helping Canada grow to dragging Canada down.
Is this mere foreshadowing of things to come in Alberta?
Let’s hope not. And let’s hope that when the remaining 2015 budgets are finally released, they don’t follow the Alberta PCs’ tax-and-spend model.