Alberta plays it safe with 'cautious' 2014 budget

Despite growing oil revenues that will help the Alberta government spend more on health care, education and social programs this year, the province will continue to borrow billions to finance projects.

Finance Minister delivers surplus, defends borrowing billions for roads, schools, hospitals

Alberta Finance Minister Doug Horner announces a surplus budget, the first in seven years. (Scott Lilwall/CBC News)

Despite growing oil revenues that will help the Alberta government spend more on health care, education and social programs this year, the province will continue to borrow billions to finance projects.

Alberta is turning the corner, said Finance Minister Doug Horner, announcing a $1-billion increase in spending after holding the line last year.

"That means more teachers, doctors, nurses and other essential front-line supports for Albertans."

The province says it has been able to overcome the pressures of a growing population, the so-called bitumen bubble (the price difference between Alberta bitumen and West Texas crude) and the costly flooding in southern Alberta.

"In light of these issues … we’re going to continue to play it safe," Horner said at a pre-budget news conference. "There is no question things are looking good in Alberta today, but even so I'm delivering this good news with some cautious optimism."  

However, even as the province forecasts an overall budget surplus of $1.1 billion, the first in seven years, it intends to borrow $5.1 billion this year for schools, health facilities and roads, pushing the government’s total debt to $14.5 billion and growing to $21.6 billion over the next three years.

Debt service costs to reach $820M

Servicing the debt will cost the province $421 million this year, climbing to $820 million in 2017.

"This is the right thing to do at this time,” Horner said. “If you don’t do this, you stymie the growth … in that tax base."

The government is taking advantage of historically low interest rates to finance needed infrastructure, Horner said.

"If interest rates start to rise, we stop borrowing," he said.

Liberal Leader Raj Sherman warns the budget relies too heavily on debt.

"Now is not the time to borrow," he told reporters following the budget presentation.

 Wildrose Leader Danielle Smith said paying off the debt will be onerous.

"This government has now locked us into spending at least $820 million in finance charges for the next 30 years," she said. "That is money that's just wasted, flushed down the drain."

The Canadian Taxpayers Federation agreed. "You can only borrow for so many years before you have to pay the piper," said spokesperson Derek Fildebrandt.

The province will spend $19.2 billion over three years on:

  • 155 school projects.
  • 24 new health facilities.
  • 258 kilometres of new or twinned highways.
  • 2,500 kilometres of rehabilitated highways.

All those projects are necessary in the face of a surging population, the fastest growing in the country, Horner said.

Last year the population grew by 3.5 per cent, the fastest rate in more than 30 years.

That growth is expected to ease over the next two years to 2.9 per cent this year and just over two per cent in 2015, when the province's population is expected to surpass 4.3 million.

Alberta leading country in economic growth

That population growth has helped Alberta lead all provinces in economic growth for the last two years,  which it's expected to do again in 2014.

The province expects its revenues to top $44 billion this year, the highest in history, a 5.4 per cent rise due to higher oil revenues in face of a lower Canadian dollar, higher income tax intake, and more money transferred from Ottawa.

The province expects to spend $40.4 billion this year, 3.7 per cent over last year, on health, education and social programs.

Alberta will also spend $1.1 billion over the next three years towards continuing flood recovery.  

After years of drawing down on the province’s savings funds, the government is adopting a new interest in replenishing the Heritage Savings Trust Fund and the Contingency Account.

The Heritage Fund will now contain two new endowment funds aimed at encouraging social and agricultural innovation. Horner expects total savings to be $23.9 billion by the end of the fiscal year.  

But the budget, which contains no tax hikes or new taxes, won't please everyone.

The mayors of Edmonton and Calgary will not see any increase to the GreenTRIP program to speed up or expand LRT plans.

Speaking to the media, Edmonton Mayor Don Iveson took a deep sigh and said, "that's how I feel about it."

Iveson said he was disappointed by the province's lack of commitment on the LRT, saying the budget was "nothing to celebrate."

"Our municipalities, our cities and towns are not getting the funding that they need to build this great province," Sherman said. "How is it possible in such a wealthy place, we’re going into debt and we’re cutting public services?"

While Alberta universities recovered much of the funding cut last year, they did not recover all of it.

Also, government workers currently in a contract deadlock with the province will find there’s no more money set aside for employee salaries.   

NDP leader Brian Mason called the budget another stretch on the path of two Albertas. 

The rich will get richer, the middle class will get squeezed and the poor will become poorer, he said.

"The premier's office has a million-dollar increase. And given the spending habits of our premier, I think that is an indication that if you're at the top of the food chain in Alberta, you're going to be doing well, but if you're poor or in the middle class, you're going to get squeezed out."


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