EDMONTON — Alberta is blazing a new trail for its red-ink economy with a budget that preserves health and education funding but takes a big stick to cities, civil servants and universities.
The first financial plan from the United Conservative government elected in the spring projects a deficit of $8.7 billion on $50 billion in revenue for 2019-20. Debt is projected to rise to $72 billion by next spring.
It sets to reduce overall program spending by 2.8 per cent over four years to balance the books by 2023, while delivering tax incentives and corporate tax cuts to allow the private sector to improve an economy weighed down by sluggish oil and natural gas prices.
“It’s a good day for Alberta,” Finance Minister Travis Toews said Thursday. “Our budget theme is getting Alberta back to work.”
The budget keeps education and health funding stable, but university students, public sector workers and municipalities will bear the brunt of cuts.
The advanced education operating budget is set at $5.1 billion, down five per cent from last year. Starting next year, the province plans to tie funding for universities to how many students graduate and meet the needs of emerging job markets.
The freeze on tuition is to be lifted with increases capped at seven per cent to a maximum 21 per cent over three years. Student loan interest rates are going up from prime to prime plus one percentage point.
Municipalities are being told to do more with less. An initiative to help towns and cities with capital funding is to be reduced by $236 million over the next three years, equivalent to a nine per cent cut.
There is still to be $3 billion for rapid transit projects in Calgary and Edmonton, but most of that cash is to come after 2022. Rising federal contributions are expected to fill the gap. A new hospital in south Edmonton is to be delayed to 2030 from 2027.
Capital spending is being pegged at $24 billion over the next four years — about $1 billion less annually than the average over the last decade.
The public sector is to be reduced by 7.7 per cent over the next four years, mainly through attrition.
‘That’s not fair’: Opposition
NDP Leader Rachel Notley said the major change is that income tax brackets will no longer be indexed.
“This means Albertans will have to pay $600 million more in taxes over this term,” she said.
“They’re raising your taxes and cutting your benefits while they give $4.5 billion away to big corporations.
“That’s not fair, and that’s not what he promised Albertans in the last election.”
The austerity will hit some of Alberta’s neediest. Support spending remains stable for those with special needs, but programs such as the Assured Income for the Severely Handicapped will no longer be indexed to inflation.
The budget builds on the government’s flagship corporate tax cut that has already seen the rate drop to 11 per cent from 12 per cent. It’s to reach eight per cent by 2022.
The cut, along with expanded pipeline access expected from projects such as Trans Mountain, is the foundation of the government’s plan to improve the economy while minimizing service cuts.
But Toews said if financial conditions worsen outside the province’s control, the government will break out the scissors.
“We live in a world of great volatility,” he said. “This government is very prepared to take a look at our options and move in the direction of additional spending restraint.”
The budget fulfills an election promise by Premier Jason Kenney to take action on a string of multibillion-dollar deficits.
It forecasts shrinking deficits in the next two years before getting back to a surplus in 2023.
The budget was informed by the findings of a panel report headed by former Saskatchewan finance minister Janice MacKinnon.
The report urged immediate reductions to prevent crippling debt payments down the road. It added that Alberta is paying the most per capita for public services while in most cases getting comparably poorer returns.
The government has hiked the price of a carton of cigarettes by $5 to $55 and plans to implement a tax on vaping. The cost of a driver’s licence is to rise to $80 from $75.
Richard Truscott of the Canadian Federation of Independent Business said the budget delivers “tough medicine, but it’s certainly needed medicine.”
Guy Smith, head of the Alberta Union of Provincial Employees, said it’s the wrong prescription for a workforce that is already stretched.
“They haven’t been staffing up to the level of demand and this is going to make it even worse,” said Smith.
“Our members are getting angry because all they want to do is be able to provide good services to the people of this province — and it’s becoming harder and harder to do that.”
This report by The Canadian Press was first published Oct. 24, 2019.