On August 31st, the NDP government released its First Quarter Fiscal Update. That update is telling of the state of Alberta’s finances, and the picture isn’t pretty.
The provincial government is now on track to record a massive $9.1 billion deficit, the largest by far in Alberta’s history. Unless there is a drastic change in course, the deficit this year will surpass previous record deficits set by Alison Redford in 2012: $3.9 billion, Ed Stelmach in 2010: $4.9 billion, and Don Getty in 1986: 4 billion.
By the end of this year, Alberta’s contingency savings will be virtually depleted and future taxpayers will owe $14.5 billion of debt.
During his press conference, the finance minister laid the blame for much of the state of the province’s finances at the door of the previous PC government. Much of that blame is deserved: the PCs spent recklessly and ran eight consecutive deficits in a row, even when oil prices peaked over $100 a barrel.
But some of that blame is not deserved. The Prentice budget (which was never passed into law) projected running a deficit of $7.7 billion, even after proposing massive tax hikes on families. This portion of the deficit (84%) can fairly be blamed on the previous government.
But our government has not been operating inside of a bubble, and has contributed to the financial crisis currently facing the province. Their platform called for $1.4 billion in new spending that must be paid for.
Despite leaving in place tax hikes on things like gasoline imposed by the former government, the new government also stacked on a 20% increase in business taxes and a 50% increase on the top marginal tax rate on personal income. The NDP promised during the campaign that these measures would raise $1.5 billion in new revenue to pay for their spending promises, but economic reality is not so simple.
The NDP tax hikes are now only projected to collect $0.5 billion in new revenue, just one-third what they projected in their platform. This is because businesses and individuals faced with higher taxes will respond to the new market conditions and often reduce their economic activity, or move elsewhere to lower-tax jurisdictions. The NDP is getting a hard lesson in Economics 101 right now, and hopefully they learn soon.
With $1.4 billion in new spending promises but just $497 million in new revenue to pay for it, the NDP have contributed $1 billion to the deficit left them by the previous government.
As much as the previous government is to blame for the shoddy state of the province’s finances, it’s time to stop complaining about it and actually do something about it. The election is over, and they are the government. It’s time to stop playing politics, and actually get down to the work of fixing the problem.
In the spring session of the legislature, the NDP rammed through an $18 billion spending bill with just three hours of debate and providing virtually no details into how they would spend the money. The Wildrose Opposition demanded that the NDP government account for its spending and commit to at least give Albertans a proper budget in the fall.
Instead, the government is ragging the puck until after the federal election, refusing to give the province’s finances any sense of direction. It’s now unlikely that Alberta will have a budget passed until early November.
In the meantime, more than 35,000 Albertans have lost their jobs in recent months, oil and gas companies are pulling up stakes, taxes are going up and our debt is spiraling out of control.
Alberta’s government needs to do what it was elected to, stop playing political games, and get down to work.