Federal report projects $1-trillion debt in Alberta, but debate swirls on how to rein it in

A federal report estimates public debt in Alberta will exceed $100 billion by 2021 and $1 trillion by 2051. Opposing sides of the debate, unsurprisingly, look at the numbers — and possible solutions — differently.

Some argue for cuts, some for more taxes, but economist says there are no easy answers

The Parliamentary Budget Office projects Alberta's debt could reach $1 trillion by 2051. (Adrienne Lamb/CBC)

A federal parliamentary budget report out this week estimates public debt in Alberta will exceed $100 billion by 2021 and $1 trillion by 2051.

Opposing sides of the debate, unsurprisingly, look at the numbers — and possible solutions — differently.

"Don't be fooled, this is really, at the heart of it, a spending problem," said Franco Terrazzano, the Alberta director of the Canadian Taxpayer's Federation. "And this is not just this current government. It's a bipartisan issue. It's been years of overspending."

Gil McGowan, the president of the Alberta Federation of Labour, says it's not about spending, it's about revenue. 

"We're going to have to start paying something closer to Canadian mainstream taxes if we want Canadian mainstream services," he said. 

'Myth' of the Alberta advantage

McGowan says the provincial government has relied on oil and gas royalties for too long, something he says stems from the Alberta advantage "myth" laid out by the late Ralph Klein that promised low taxes and good services. 

"In our case, the only way that the conservatives could make good on the promise of the Alberta advantage and balance the budgets after [premier] Ralph Klein slashed taxes, was to use the windfall revenues from oil and gas royalties to pay for day-to-day operations, and that's what they did," he said. 

McGowan says the mistake the NDP government has made is not to fix that problem by raising more tax revenue. 

Spending 

For Terrazzano, this is the end result of decades of government spending increases. 

"If you look at Alberta's past and you look at Alberta compared to other provinces, it's clear that Alberta does have a spending problem," he said, noting Alberta spends $3,000 more per person than B.C., Ontario and Quebec. 

"We do have to get spending in line before we discuss any other measures."

Terrazzano says there has to be better oversight of government construction projects and a prioritization on where the money is spent. 

"The current government is talking about, you know, it's time to tighten the belt," he said.

"And yet the Alberta government is considering spending money to host the Olympics? The Olympics should not be a priority, especially in light of these recent  numbers."

Joe Ceci responds

Alberta's finance minister says the Parliamentary Budget Office report is a "snapshot in time."

"It does not take into account important factors such as finding savings, our cuts to conservative waste and growth in government revenues," he said in a statement provided by his office.  

"Those factors matter. Our government has taken action, and thanks to that our deficit was cut by $1 billion in the first three months of this fiscal year. Our plan is working and Alberta led the country in growth last year and is poised to do so again in 2018 and 2019. We will not put that recovery and growth at risk through deep and draconian cuts."

8 per cent sales tax or 15 per cent cut

Economist Trevor Tombe, writing for CBC News on Thursday, said there are no easy options to deal with the fiscal threat. An immediate solution would involve cutting or raising the equivalent of 2.3 per cent of the province's economy. 

"For perspective, the required action is equivalent to an immediate and permanent eight-per-cent sales tax or shrinking government operations by roughly 15 per cent," he wrote. 

Compounding the concern is that an aging population will cost more in health-care costs but won't contribute to government coffers after they retire because Alberta doesn't have a sales tax, said Tombe. 

About the Author

Drew Anderson

Drew Anderson is a web journalist at CBC Calgary. Like almost every journalist working today, he's won a few awards. He's also a third-generation Calgarian. You can follow him on Twitter @drewpanderson. Contact him in confidence at drew.anderson@cbc.ca.