Alberta's fiscal update reveals the gaping hole in Alberta’s revenue stream and means trouble for Albertans

Recently, the UCP government unveiled the 2020-21 First Quarter Fiscal Update and Economic Situation.
The Kenney government has posted the largest deficit in Alberta’s history. In Finance Minister Travis Toews’s speech to the legislature, which convened for a special one-day sitting, he promised cuts – deep cuts – during a massive recession when Albertans need public services the most.

Basically, the UCP government’s revenues took a nosedive, due to their huge tax cut to profitable corporations, lost bitumen royalties and the COVID-19 pandemic’s effect on Alberta’s economy, although the federal government has been providing the majority of relief funding. Here are the key numbers:

  • A $24 billion budget deficit, $16.8 billion higher than forecast
  • An $11.5 billion drop in revenue, led by $3.9 billion drop in resource revenue ($2.5 billion of that from lost bitumen royalties)
  • Normal government spending up slightly, but the COVID-19 response added another $2.5 billion in spending
  • The province’s economy is expected to be in a huge recession this year with a 8.8 per cent drop in GDP

The only “bright spot” in the fiscal update was cannabis fees and royalties were up by $11 million from budget.

What does this mean for Albertans?

The huge deficit, and a conservative government like the UCP with an austerity agenda, mean we can expect deep cuts to programs like health care and education, as was their plan all along.

During his address to the Legislature, Minister Toews repeatedly said that Alberta has a “spending problem” despite the huge drop in government revenues.

To justify the idea that Alberta spends too much on government, Minister Toews referenced the Blue Ribbon Panel report by Janice MacKinnon. This was a panel chaired by Dr. MacKinnon, established to give the Kenney government cover for deep and unnecessary cuts.

The MacKinnon recommendations do not promote the interests of Albertans in building a prosperous economy and enhancing their quality of life. Instead, the recommendations promote an ideology of a smaller and less effective government that only serves the interest of the wealthy elite.

In fact, the Alberta Federation of Labour (AFL) found that the Kenney government wrote an article on behalf of Janice MacKinnon proving that she was not an independent voice for cuts.

The AFL also found that MacKinnon used discredited propaganda from the Fraser Institute on hospital wait times to justify privatizing health care. Government officials characterized Fraser Institute’s report on hospital wait times as “horrible”, “poor quality”, and “highly inaccurate.”

The MacKinnon Panel’s basic thesis is Alberta is an “outlier” when it comes to public-sector spending when compared to the spending of other provinces. But this is an absurd position. But the fact is, Alberta’s public sector workers are paid about the same as Alberta’s private sector workers.

And relative to other provinces’ economies, Alberta’s spending is below average.

The Kenney government ignores revenue and recession

The Fiscal Update showed a huge drop in revenue, and a small increase in COVID-related spending. But instead of addressing the loss of revenue, the Kenney government doubled down on its intention to cut public services.

The AFL has long called for revenue reform. It’s been clear, that since the Ralph Klein era, Alberta has been overly reliant on oil and gas royalty revenue.

The logic of Alberta’s obvious revenue problem is lost on the Kenney government. They will cut public services and those cuts will hurt even more, now that we’re in a historically large recession.

Last year, the AFL hired an economist to crunch the numbers of the impact of the Kenney government’s budget. The result: Kenney’s budget would tip Alberta into a recession, which will be even greater now.

The province’s deficit is huge and we’re in a historically large recession. But the last thing Alberta needs is Kenney’s cuts that will increase unemployment and hurt Alberta’s economy, workers and communities. What Alberta needs now is public spending to support the vital safety net Albertans turn to when they are in need the most, health care and education.