Alberta to loosen purse strings to stimulate economy

Alberta Finance Minister Joe Ceci says billions in capital investment will stimulate the economy and could create as many as 37,000 jobs. The NDP will also reverse cuts to essential services proposed by the previous government.

Finance Minister Joe Ceci says his message to businesses is '2016 looks better than 2015'

Alberta Finance Minister Joe Ceci looks at Premier Rachel Notley as he delivers the budget in Edmonton on Tuesday. (Topher Seguin/Canadian Press )

Alberta's NDP government hopes a spending stimulus will boost the economy and help the province climb out of a record $6.1-billion deficit.

At the same time, the government will hike the markup on alcohol, increase cigarette taxes, spend more on lower-income families and try to create thousands of new jobs.

Starting at midnight Oct. 28, the price of a carton of cigarettes will increase by $5 per carton; a 750 ml bottle of wine or hard liquor will cost 18 cents more and a case of 12 beers will go up an additional 21 cents.

There are also tax measures aimed to help lower-income families, including up to $2,750 for eligible families with incomes lower than $41,220. This program will cost the government $195 million.

Finance Minister Joe Ceci says billions in capital investment will stimulate the economy and could create as many as 37,000 jobs. The NDP will also reverse cuts to essential services proposed by the previous government.

"This is the right budget for the right time," he said.

The spending priorities are in keeping with the NDP's campaign promises and mark a decidedly different direction for the province in the wake of a four-decade Tory dynasty.

For example, the government is pushing the limits of what it plans to borrow. The contingency fund, the government's savings account, will be drawn down to zero in the 2016-17 fiscal year.

That's when the government will borrow to cover operating expenses for the first time since 1993. Borrowing for operational costs is forecast at $712 million that year, increasing to $3.3 billion the following year.

In his budget speech, Ceci said his government is reversing the Progressive Conservative's mismanagement over the past 30 years and spending $49.9 billion to do it. 

Ceci praised the direction of the Alberta Progressive Conservatives under former premier Peter Lougheed, but said successive governments "lost their way" guiding the province.

"The government of Alberta set up the Alberta Way and then threw it away," he said.

Brian Jean, leader of the Official Opposition Wildrose Party, called the budget a "complete fantasy" and said "every Albertan will be poorer because of this budget."

Jean accused the NDP of using "risky economic theories" and raising taxes that are affecting every person in the province. 

"With this budget even the most optimistic Albertans have to be very, very concerned," he said. "The Wildrose is very concerned."

Schools, hospitals, roads win

The budget relied on advice of former Bank of Canada governor David Dodge, who was hired to make recommendations on infrastructure spending. The NDP is spending $34 billion on capital projects over the next five years to spur the economy, a 15 per cent increase or additional $4.5 billion from what the Tories promised in their last budget in March. 

By speeding up construction on roads, schools and hospitals, up to 10,000 jobs will be created, Ceci said.

Dodge said it's not unusual for governments to borrow in bad times when interest rates are low.

"In fact it turns out to be very usual at a point in time when the economy changes dramatically and revenues fall off," he told reporters.

Projects that will be sped up include:

  • $20 million for renovations to Edmonton's Misericordia and Royal Alexandra hospitals.
  • $3.8 billion for schools, including 200 new schools and modernization projects.
  • $1.6 billion for government buildings, including renovations on courthouses and wildfire towers.

In a nod to the NDP's campaign promise of creating more jobs, the government will give $5,000 grants to a business, non-profit organization or charity for each new job they create.

The two-year program will begin in January 2016 with the goal of creating 27,000 new jobs each year. Funding for the program is capped at $89 million per year and will be granted on a first-come, first-served basis. 

Ceci said his message to Alberta businesses is "2016 looks better than 2015."

The government will also increase the amount of capital available to ATB Financial by $1.5 billion, meaning Alberta businesses will have access to more money to borrow.

Health and education spending

The overall spending in health, education, advanced education and human services will increase modestly. Spending in those departments accounts for three-quarters of the government's overall expenses.

The NDP will spend another $25 million on family and community support services for vulnerable children and families, bringing the total to $101 million this year.

Starting in 2016-17, the NDP government will spend $120 million over two years on new long-term care spaces and $90 million over two years to expand home care.

"Over the past 10 years, the health budget has increased by an average of six per cent each and every year," said Ceci, adding "we need to manage that growth."

Debt to hit $36.6B by 2017

The 2015-16 budget laid out a plan that will see Alberta borrowing to pay for programs, salaries and day to day expenses of running the government. The total debt is expected to hit $36.6 billion by 2017.

The government is proposing legislative changes to allow extra borrowing. When Ralph Klein was premier, his government introduced an act that prohibited deficits and limited how much the government could borrow.

That changes with this government.

Bill 4, set to be tabled Tuesday, will allow Alberta to borrow up to 15 per cent of the province's nominal gross domestic product. By 2017-18, the total amount of borrowing for capital projects and infrastructure is projected to be $36.6 billion, or 10 per cent of GDP.

The Alberta treasury is losing $5.7 billion in revenue this year, mostly due to a deep and sustained drop in the price of oil and lower corporate taxes. The deficit this year is projected to be a record $6.1 billion.

While the government is attempting to diversify the economy, it will still rely on resource royalties for most of its revenue, making the projected price of West Texas Intermediate crude oil an important figure.

The government is basing the 2015-16 budget on $50 a barrel oil. That figure is forecast to rise to $61 in 2016-17 and $68 in 2017-18.

Last week, Ceci said the government will balance the books by 2019-20, a year later than promised because of low oil prices.

As previously announced, the NDP has put a two-year freeze on the cost of post-secondary tuition.

Ceci is proposing a salary freeze for cabinet ministers, MLAs and political staff for the entire term of the legislature. The hiring freeze started under former premier Jim Prentice will continue under Premier Rachel Notley.