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Nothing "conservative" about this budget

Appeared in the Calgary Herald
Authors:
Release Date: February 11, 2012
As Albertans ponder Premier Alison Redford’s first budget, they would be wise to ignore Finance Minister Ron Liepert’s assurance that Albertans can “[take] comfort in our fiscal situation.” A closer look at the budget reveals a dearth of prudence and no credible plan to return Alberta to a balanced budget position.

Redford’s Progressive Conservative government claims it will balance the budget by 2013-14. However, the budget numbers actually tell a different story. In 2013-14, the government plans to have enough revenue to pay for operating expenses but not capital expenditures. As a result, they will extract a further $1.3 billion from the Sustainability Fund (after extracting some $3.7 billion this year). Claiming the budget is balanced while depleting the province’s reserve account misleads Albertans.

The reality is that the budget won’t be balanced until 2014-15. And that balance will not be achieved through a prudent spending plan and realistic revenue projections.

On the revenue side of the ledger, the government is hoping for revenues to grow at a robust average rate of 8.4 per cent over the next three years. This is based in part on optimistic forecasts of future revenue and economic growth. For example, the budget assumes average oil prices of $105 per barrel over the next three years. While that price might be realized, a slight decrease in price of say $4 per barrel would result in nearly a billion dollar drop in revenues for 2012 alone.

Additionally, the government’s forecast for personal income growth is 37 per cent higher than that of private sector forecasting agencies (including the major banks), and the government’s economic growth forecasts are 14 per cent higher.

The government is also including as revenue the additional billion dollars of federal transfer money it will receive in the third year of the fiscal plan as a result of the new transfer formula. However, the billion dollars is money that has annually been taken from the pockets of Albertans to pay for spending in other provinces. The transfer shouldn’t be part of the government’s spendthrift plan. Rather, it should rightly be returned to Alberta’s taxpayers.

On the spending side, the government proposes to hold program spending growth to an average rate of 3.3 per cent for the next three years. The government assures us that they “will be disciplined enough to spend no more.”  Forgive us for being sceptical about this promise. In last year’s budget the government said it would hold spending growth to 1.9 per cent in 2011/12 but then nearly doubled the growth in spending to 3.6 per cent.

If revenues don’t increase markedly as expected, or the government is not able to deliver on its spending plan, the province will be left with larger deficits for a much longer time period therefore threatening to undo what Liepert called “the advantages Albertans have worked so hard to achieve.”

The government’s claim that their budget provides “comfort” is shocking.

Of course, to actually comfort Albertans, Liepert emphasized  in his speech that there were no tax increases in this budget – five times to be exact. That claim, however, came with a huge asterisk that the government wants to have a “discussion on taxes” in the future (likely after the election).

Liepert also mentioned the need for Alberta to move away from relying on volatile resource revenues towards a more stable footing for the future. While the province is right to want decrease its reliance on natural resource revenues, increasing other taxes or adding new ones is not the way forward. To reduce reliance on resource revenues, the real discussion Alberta needs to have is about how to reduce and control spending.

For proof one need look no further than this: by the end of the budget plan (2014/15), revenues will have increased by 38 per cent over a decade while spending will have increased by 63 per cent.

Premier Redford’s plan to balance the budget is optimistic by most measures and the odds (and history) are stacked against it. There’s simply nothing “conservative” about this budget.


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