Edmonton·Opinion

Alberta's dismal financial update sets us on path to a 'fiscal reckoning'

We know the Alberta government is in a fiscal mess. But we don’t know what this means for Albertans.

Discussion about government finances is unbalanced, with focus on spending instead of revenue

Alberta Finance Minister Travis Toews, left, delivers the budget as Premier Jason Kenney watches on February 27, 2020. Toews said Thursday that Alberta's debt is projected to hit nearly $100 billion by March 2021. (Jason Franson/The Canadian Press)

Graham Thomson is an award-winning journalist who has covered Alberta politics for more than 30 years. This column is an opinion. For more information about our commentary section, please read our FAQ.


Ok, now what?

We know the Alberta government is in a fiscal mess. But we don't know what this means for Albertans.

Thanks to the fiscal update from Finance Minister Travis Toews on Thursday, we learned the Alberta government will run a $24.2 billion deficit this year, bringing the total provincial debt to $99.6 billion.

While those numbers are both disheartening and unprecedented for the province, they weren't exactly shocking. After all, Premier Jason Kenney had been saying for months we're headed for a $20-billion-plus deficit this year thanks to the pandemic and a catastrophic drop in oil prices. You could add up a $100-billion debt yourself by doing the math.

But what does this troubling news mean for Albertans? Most importantly, what does this mean for the "fiscal reckoning" Kenney keeps talking about?

Kenney first tossed out the ominous warning in his sombre televised pandemic message to the province in early April.

"Alberta's budget deficit this year may triple from $7 billion to almost $20 billion," said Kenney. "We will face a great fiscal reckoning in the future."

Oh, boy.

"Fiscal reckoning" has been playing in the background of Alberta political discourse ever since. But what does a fiscal reckoning look like?

Toews wasn't much help answering the question on Thursday.

"It looks like a province that delivers government services most efficiently," said Toews. "A government that is no longer an outlier in terms of the cost of delivering services to its residents." When pressed, he said, unhelpfully, "Stay tuned for Budget 2021."

Alberta faced 'triple black swan event': Travis Toews

1 year ago
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CBC Edmonton News at 6 host Nancy Carlson discusses the financial woes of Alberta with Finance Minister Travis Toews. 5:19

This harkens back to the recommendations from the MacKinnon panel report of last year that declared Alberta per-capita spending was above those of major provinces such as Ontario and British Columbia and thus required cuts.

Focus on spending

When pressed again to give examples of how he would deliver services more efficiently, Toews pointed vaguely, and no doubt ominously if you're a civil servant, to "the cost of the public sector."

The problem with the one-dimensional report was that it only dealt with spending, not income.

As reporters pointed out on Thursday, if you want to call Alberta an "outlier" when it comes to spending, you have to recognize it's also an outlier when it comes to revenue. And that's the crux of Alberta's fiscal problem as indicated starkly by Thursday's fiscal update. Our revenues have collapsed.

Corporate taxes are expected to be down by $2.4 billion this year, personal income taxes by $1.9 billion and non-renewable resources by $3.9 billion.

At the same time, the Kenney government has further reduced revenues by fast-tracking cuts to the corporate tax rate. And the Alberta, of course, has no provincial sales tax.

Should we finally be looking at introducing a sales tax?

"This is not the time to be talking about raising taxes," said Toews. But he did once again hold out the tantalizing prospect that perhaps he'll be open to that debate later: "In terms of the discussion around revenue structure, income tax structure, that will be an important discussion in the future."

For now, though, the discussion about government finances is unbalanced, inordinately focused on spending, not revenue.

Turnaround?

It's also focused on a turnaround in 2021. While economic growth is expected to drop 8.8 per cent this year, the government is forecasting a 4.6 per cent rebound next year. That will still leave us in the hole, just a more shallow hole. But even then it doesn't take into account the possibility of a second wave of COVID-19 that could swamp our economy again.

This is where the government seems to be in a tug-of-war with itself. It is pleading poverty this year and demanding $4 billion from the federal fiscal stabilization program. At the same time, Toews believes better times are on the horizon: "I'm optimistic that our economy will recover."

Alberta on track to record-setting $24.2B budget deficit

1 year ago
2:46
Alberta Finance Minister Travis Toews presents highlights of the first-quarter fiscal update. 2:46

But that's pretty much what Toews said when he delivered his budget last February on the eve of the COVID-19 crisis that sent our economy over a cliff. Even after the pandemic hit and the government projections were tossed out the window along with the price of oil, the UCP government rammed its out-of-date budget through the legislature rather than deal with the new and sobering reality.

Well, we now know what that reality looks like thanks to the updated government budget numbers. We know we have a record deficit and debt.  We know the government has no idea when it will wipe out that deficit and balance the budget. We know the government is not looking at raising taxes or introducing a provincial sales tax to help cover spending. We know the government is fixated on the MacKinnon report recommending cuts. We know Kenney keeps talking about a "fiscal reckoning."

We know a lot of things.

We just don't know yet what the "reckoning" will look like or what it will mean to Albertans.

ABOUT THE AUTHOR

Graham Thomson is an award-winning journalist who has covered Alberta politics for more than 30 years, much of it as an outspoken columnist for the Edmonton Journal. Nowadays you can find his thoughts and analysis on provincial politics Fridays at cbc.ca/edmonton, on CBC Edmonton Television News, during Radio Active on CBC Radio One (93.9FM/740AM) and on Twitter at @gthomsonink.

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