Red is the New Black

No, this wasn’t last year’s provincial budget all over again, but you can be forgiven for thinking so.

DEREK FILDEBRANDT

Alberta Director of the Canadian Taxpayers Federation

No, this wasn’t last year’s provincial budget all over again, but you can be forgiven for thinking so. The government’s convoluted presentation of the books left opposition parties, journalists and non-governmental organizations once again banging their heads against the table trying to figure out one simple thing: ‘Are we spending more money than we are bringing in?’

That used to be a very easy answer until the last year’s budget, when Finance Minister Doug Horner presented three sets of books instead of the normal one. This year the government still takes billions of capital spending off the main set of books, and presents only an ‘operational balance’ of revenues and day-to-day expenditures only.

This number is essentially like your family’s income, less money for groceries, gas, cell phones and entertainment. That is, income less day-to-day (operational) spending.

With an extra billion dollars in health transfers from the feds and optimistic revenue projections, Horner pegs this ‘operating surplus’ at $2.6 billion.

(Slow clap for the government. We can finally pay for the groceries.)

But this doesn’t include the mortgage payments, the car loan or the line of credit to pay for home renovations.

Families might be getting something important with these loans, but they still cost money and have to be paid for.

Importantly, families work to bring their mortgage and other debt loads down year-by-year. By contrast, Alberta’s debt load is scheduled to increase year-after-year-after-year, from $8.3 billion right now, to $18.4 billion in 2015 and $21.6 billion in 2017.

Families who only ever grow their debt load – regardless of the valuable things they may purchase with the borrowed money – eventually see their available day-to-day (operating) spending crowded out by interest payments.

Alberta might be a latecomer returning to the debt game, but the interest payments will start to pinch very soon. In 2008-09 the province only spent $208 million in debt interest payments. In 2014, Alberta taxpayers will fork out $781 million. In 2015, this number will reach $1 billion, and in 2016, $1.4 billion. Those billions do not include paying a dollar towards actually reducing the debt. Nor do these billions of extra dollars end up building a single school, paving an inch of highway or creating a single family care clinic.

Every dollar spent on debt interest payments goes to bankers and bondholders.

How, you might ask, can debt interest payments be rocketing up while the government is running a $2.6 billion surplus? The truth is that what the government calls a surplus, most Albertans would call a deficit. Indeed, red is the new black.

Alberta’s total cash revenue is projected to be $42.9 billion in fiscal year 2014-15. Cash expenditures, including the $4.9 billion the government is borrowing to ostensibly pay for infrastructure, push Alberta’s total spending (operational, capital, emergency) to $46.8 billion.

That means that the Redford government is on track to run a budget shortfall of $3.9 billion in 2014-15.

Politicians might try and fudge the numbers to make themselves appear in a more flattering light. After all, they’re here for a good time, not a long time.

But families know better. When we spend more than we earn every single year, pain is to follow.

Families have to face the music for their debts, but politicians can pass the buck until the next Ralph Klein to come along.