Alberta government focuses on high debt, not improved deficit, revenue numbers in Q1 update
Government says debt would have been $120B by 2024 under previous NDP plan
Alberta's United Conservative government sent a strong signal about possible cuts in the October budget Tuesday in the first-quarter fiscal update by focusing on spiralling debt and interest costs.
Finance Minister Travis Toews said the update doesn't paint a "rosy picture." He said Alberta is paying an extra $93 million on debt-servicing costs instead of using the money on services and programs.
"Our year-over-year revenue has remained flat but we're burdened with cost pressures and compounding debt left by previous governments," Toews told a news conference in Edmonton.
Under the previous NDP government's plan, debt was projected to hit $120 billion by March 2024, the government said. The debt was $62.7 billion on March 31, 2019.
Toews said the pattern of increasing debt needs to change.
"As a province, we must live within our means and curb expenses," he said.
The government's plans will be revealed when Toews tables his first budget in late October. A report on Alberta's finances prepared by a panel led by former Saskatchewan finance minister Janice MacKinnon is aiding the government with its budget preparations.
Toews said his plan is to return the province to balanced budgets within the government's first mandate, then start paying off the debt
David Eggen, the NDP MLA for Edmonton-North West, was suspicious about how Toews was characterizing he province's finances, saying the fiscal update provides a "flimsy excuse" for making cuts this fall.
Eggen said the update shows Premier Jason Kenney's claim about the terrible financial situation his United Conservatives inherited from the previous government to be false.
"This fiscal update shows that we are in a tenuous position but certainly the path to balance that our government set out is there," Eggen told reporters. "It is not a dire circumstance that would require cutting nurses, teachers and essential social services."
Tax cuts staying regardless of results
While the government focused on debt, other indicators defied the government's narrative of a treasury in crisis.
Revenue was nearly the same as the same quarter last year — $13.4 billion. Revenue from personal and income taxes was $166 million higher than Q1 of 2018. The government attributed that to "growth in household income and corporate profits."
Resource revenue was up too — by $164 million, mostly due to a narrower differential between light and heavy oil prices.
Expenses were $364 million lower than in the same quarter of 2018.
Toews said increasing cost pressures and flat revenues combined with increasing debt equals trouble. He ruled out the prospect of a provincial sales tax, which some economists say would help curb Alberta's dependence on fluctuating resource revenues. He said the UCP has committed to not increasing taxes during its time in government.
The NDP Official Opposition claims the government's staged decrease in corporate taxes from 12 to eight per cent by January 2022 would add $4.5 billion to the deficit.
Toews said he was confident the tax cuts would stimulate the economy and add to corporate tax revenues over time. Asked if he would reverse the tax cuts if they don't work as planned, he said he would not.
"One of the greatest things you can do to actually discourage investment is to create uncertainty," he said. "We've committed to reduce corporate taxes. We will follow through on that."
The Alberta government is required by law to publish updates each quarter of the fiscal year. Usually, Alberta Treasury Board and Finance produces a booklet with fiscal and economic forecasts.
Usually, fiscal updates compare the government's financial results to the budget. Since the last budget was released in March 2018, finance officials decided to compare the results from this quarter to the same quarter of 2018.
Government officials on Tuesday declined to provide forecasts on Alberta's economy nor a current debt-to-GDP ratio.