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Pandemic spending derails Alberta government's plan for balanced budget

Fixated on bolstering the health-care system during the COVID-19 pandemic, Alberta’s United Conservative Party government has postponed its promise of a fiscal reckoning to a later, undetermined time.

Province on track for $116-billion debt by March 2022

Alberta Finance Minister Travis Toews speaks at a news conference at the legislature Thursday. (CBC)

Fixated on bolstering the health-care system during the COVID-19 pandemic, Alberta's United Conservative Party government has postponed its promise of a fiscal reckoning to a later, undetermined time.

A government that one year ago insisted the province had a spending problem will now raise Alberta's planned expenses by eight per cent compared to last year, proposing nearly $62 billion in spending for 2021-22.

Finance Minister Travis Toews said Alberta's situation has changed dramatically, and so should the government's plans.

"I'm not happy with COVID-19 and the pandemic, and having to deal with the resulting economic challenges of the province," Toews said at a Thursday news conference before tabling the budget.

"This is where we find ourselves, and we have to adjust to make sure that we're delivering the most competent, responsible governance possible."

Among the planned spending this year is a $1.25-billion contingency fund to respond to COVID-19, which includes vaccination rollout. 

With an estimated $43.7 billion in revenue, Toews predicted an $18.2-billion deficit in the coming year — one of the largest in the province's history.

Toews also predicted finishing the current fiscal year about $20 billion in the red. That's almost three times the deficit the province projected before the pandemic took hold.

Sixteen years after Alberta paid off its debt, the province will be $98 billion in the hole by the end of this year. At the end of next year, the debt could climb to $116 billion.

The health-care budget will rise by four per cent, and $120 million will flow into a surgical wait-times initiative that aims to boost the number of procedures annually by about 20 per cent.

A human resources headcount table reveals plans to increase the number of full-time Alberta Health Services employees by nearly 3,000.

The government will boost its three-year construction plan by $1.7 billion, which it hopes will create thousands of jobs.

There is also a $500-million contingency fund to stimulate the economy.

Although school enrolment is expected to rise, spending on K-12 education is expected to remain relatively flat for the next three years. 

But there will be cash for 14 new school construction or major modernization projects.

Potential revenues pummelled 

As might be expected during a pandemic, global recession and sinking demand for oil, Alberta's revenues will be way down next year.

Assuming a benchmark West Texas Intermediate oil price of $46 US a barrel, the province is on track to bring in $2.9 billion in non-renewable resource revenue in 2021-22, which is less than half of what it received two years ago.

Government officials said Alberta's economy will not rebound to 2019 levels until 2022, and a robust provincial economy like that of 2014 is at least two years away.

Alberta Premier Jason Kenney has ruled out the introduction of a provincial sales tax and said introducing other new taxes isn't an option when the economy is performing poorly. (Jason Franson/The Canadian Press)

The pandemic and an accelerated corporate tax cut have pummelled tax revenues. 

And as promised, there were no new taxes introduced in Thursday's budget. Toews said any new taxes would inflict too much economic damage while the province is trying to attract investment.

He has promised a study of the revenue side of the balance sheet, but not until the pandemic is over.

The government's election promise of balancing the budget within its first term is now an abandoned dream, with smaller deficits pencilled in for the next two years.

Excluded from the coming year's $18-billion deficit is any accounting for the potential losses from the halt of the Keystone XL pipeline project.

Alberta had committed a $1.5-billion investment along with a $6-billion loan guarantee in hopes the investment would create jobs for decades to come. 

WATCH | Finance minister, Opposition leader discuss 2021 budget:

Government on path to increased efficiency, finance minister says

CBC News Edmonton

2 months ago
1:28
Finance Minister Travis Toews says Alberta’s Budget 2021 is not about cuts, it’s about increasing efficiencies — but Opposition Leader Rachel Notley says otherwise. 1:28

Last month, newly inaugurated U.S. President Joe Biden revoked a cross-border permit for the pipeline, which was to run from Hardisty, Alta., to Nebraska before joining existing pipelines to the Gulf Coast.

As of this month, Alberta had invested nearly $1.3 billion in both equity and loan guarantees for the project. The loss is excluded from the budget because the government is still exploring its options to recoup some of that money, officials said.

The government has also pared back spending on the Canadian Energy Centre — the government funded, privately operated "war room" created to spread positive messages about the province's oil and gas sector.

Originally pegged as a $30-million yearly endeavour, the government cut spending on the war room last March when the pandemic hit. The organization was on track to spend $4.7 million this year, and its budget is $12 million for the coming year, said Kavi Bal, press secretary to Energy Minister Sonya Savage.

The government will also create an "environmental, social and governance secretariat" for $2 million a year.

Critics lament job cuts, spending trims

Opposition NDP leader Rachel Notley said she's disappointed both by the reduced level of spending and how the government intends to invest public funds.

She said the budget lacks a plan for economic growth and diversification.

"It's a little bit of a deer in the headlights budget. It's like they didn't know what to do. And the problem is, we are losing out in the meantime."

And while the government touts its record health spending, the expense is less per capita than it was under the NDP government if inflation is factored in, she said.

The government has said it wants to deliver health services more efficiently, including contracting out some services when cost savings are significant.

Although the government predicted job gains in the health sector, it expects 750 fewer people will be working full time for post-secondary institutions.

A multi-year plan to reduce the amount of money flowing to colleges, universities and polytechnics continued on Thursday with a $174-million reduction in operating funding to the 26 schools. Maintenance funding will also decrease.

Rowan Ley, president of the Council of Alberta University Students, said post-secondary education is the worst place to cut if the province is trying to attract a dynamic, innovative and educated young workforce.

"It's not just disappointing to students," he said. "It's disappointing to parents, who thought that they were going to be able to send their children to a world-class institution in Alberta, and their children will now have to go to B.C. or Ontario to get that education that they once could have gotten here."

The government is also continuing with its four-year plan to reduce the provincial government workforce by 7.7 per cent. The budget predicted a net reduction of 311 full-time jobs in the public service next year.

Guy Smith, President of the Alberta Union of Provincial Employees, said union members are prepared for labour unrest in the coming year. The government appears to have made assumptions about public sector wages that are still unsettled at the bargaining table, he said.

"It's another job-killing budget," Smith said. "How on earth are we ever going to get out of this economic crisis that we're in and get us through the health-care crisis that we're in if this government intends on cutting jobs and government services and in post-secondary and in other parts of the public sector."

MLAs are expected to debate the budget in the legislature starting the second week of March.

With files from Michelle Bellefontaine, Raffy Boudjikanian

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