Alberta joins provinces in debt, again

The provincial government presented its 2013 budget last week to mixed reception.

The provincial government presented its 2013 budget last week to mixed reception. After warnings from Premier Alison Redford there would be a $6 billion shortfall in oil revenues people braced themselves for the worst.

Despite the deficit, the government has $15 billion planned for infrastructure projects over the next three years, including with $5.2 billion this year. The purpose is to prepare for population growth over the next 17 years, said Minister of Finance Doug Horner during the presentation of the budget in the Alberta Legislature March 7. “This tremendous growth will have a significant impact on our province, on our public infrastructure, and on the way we as a government work to meet the needs of this much larger population.”

The Alberta government is borrowing $4.3 billion to help pay for the operational deficit of $451 million and to pay for capital projects amounting to $5.2 billion.

“That is one messy document,” said Lacombe-Ponoka MLA Rod Fox. “If I ever released something like that to the shareholders of the company I used to work for I would have been fired.”

One of the ways the budget has been presented to taxpayers is with separate capital, operating and savings budgets. This separation makes it difficult to determine where cuts and revenue streams are in the ministries, added Fox. “They’re not being clear and transparent with us.”

Some of the line items in the budget are unclear as to where funds are actually going and Fox feels taxpayers have a right to know where money is spent.

“We have to remember these are Albertans’ tax dollars not the government’s money to do with as they wish,” he stated.

MLA Rod Fox is now vice-chairman on the standing committee for Alberta’s Economic Future. “I’m very excited to be sitting on this committee.”

Understanding the budget

There is no operating expense increase forecast for 2012-13 and the province intends to cut spending on government salaries.

“Our government has shown leadership on this issue. Last month, we introduced a three-year wage freeze for all government managers,” Horner said during his speech. “We’re also planning to reduce the size of management by 10 per cent over the same three years, that’s almost 500 positions.”

It takes some time to understand this budget as there is an entire website dedicated to the budget. Each government department has its own business plan with an operational and capital budget.

For example Alberta Health Services (AHS), which is just under half of the $38 billion operating budget, received an increase of three per cent — almost $500 million — which amounts to $17.1 billion.

“This is lower than the 4.5-per-cent increase the health sector was expecting, but we believe AHS can provide better outcomes for better value by using its resources more effectively. AHS is also receiving $393 million for operating costs of new health facilities,” said Horner.

AHS board chair Stephen Lockwood and president and CEO Dr. Chris Eagle responded in a press release by saying they are looking at how to increase efficiency; $170 million in savings has been identified for this fiscal year. “We will identify additional savings for our 2013-14 budget.”

How this budget affects Ponoka

The Municipal Sustainability Initiative (MSI) has not changed for municipalities however with $846 million set aside — in the Municipal Affairs capital budget — for towns and counties to fund large projects such as recreation, roads, sidewalks and water.

Some municipal funding will be based on collaboration. “We will be shifting money into grants that encourage municipal collaboration,” said Horner.

Funds for the Regional Collaboration Program (RCP) have increased to $28 million from $9 million last year but the Alberta Emergency Management Agency saw a drop to $45.5 million in 2012-13 funding from $109 million last year.

Mayor Larry Henkelman is unsure how the changes will unfold but feels positive about the continuation of the MSI funding. “All municipalities should be happy they (Alberta government) maintained it.”

Some of the shift of funds goes to the RCP and he believes it is a benefit for municipalities such as Ponoka County and the Town of Ponoka who work with each other.

“I think that’s a good thing…But until you see what they’re going to do, we don’t know,” he added.

Another area affecting Ponoka is the decision to suspend the Summer Temporary Employment Program (STEP). Summer students are hired to maintain the parks and recreational areas and other public works during the summer and Ponoka budgeted $6,800 in STEP funds to hire these students.

“We have to find that for our budget or else we don’t hire students, which is bad because it’s always good to hire students in a town,” he added.

He believes students will still be hired but councillors must decide where to find the funds to pay for their services.

The pension boards are also reviewing four public sector plans: the Local Authorities Pension Plan, the Public Service Pension Plan, the Management Employees Pension Plan and the Special Forces Pension Plan. This review may affect Ponoka as some town employees are under the Local Authorities Pension Plan.

The Government of Alberta changes its reporting

Because the government has changed how financial statements are presented, taxpayers, opposition party and interest groups have had to learn the new system. One thing they agree on is the government is taking $2 billion from the Sustainability Fund (now the Contingency Account) and this is the sixth consecutive deficit budget.

The Wildrose party says there is going to be a cash shortfall of $5.5 billion. Wildrose leader Danielle Smith calls it a “debt budget.” The official opposition released a financial recovery plan stating areas the Progressive Conservative government could save money. The document also states the current government has a “spending problem.” It shows record revenues for the province last year but spending has increased.

The 24-page document calls the Carbon Capture Storage grant program “an indefensible example of corporate welfare.” Stating that $2 billion has been spent in grant programs to corporations.

Saving for the future

A new Fiscal Management Act requires the government set aside money in good times or bad, said Horner in his speech. “Our forecast total revenue in 2013-14 is $38.6 billion, that’s a reduction from our original forecast of $44 billion. Before we do anything else with it, we are putting $297 million into the Heritage Savings Trust Fund, our long-term savings account.”

The act also sets borrowing limits.

The Contingency Account is meant to act as a fiscal shock absorber to help during an operational deficit. Once the account reaches $5 billion for the first time, funds will be transferred to the heritage savings account.

Horner concluded by saying the Alberta government is adjusting to current realities and there are decisions that will not be popular with Albertans but the goal is to deliver the best outcomes. He has set a plan to have $44 billion in net assets by 2016. The Wildrose party says there will be a debt of $16.9 billion by the next election.