Fiscal Management Commission Report Means $2 Billion in Cutbacks, says AFL

The Alberta Federation of Labour responded to the release of "Moving From Good to Great", the final report of the Financial Management Commission, by pointing out it is just more of the same old Tory approach of cutbacks and underfunding. The report recommendations will also guarantee a future of labour disputes like the teacher's strike this year.

"The Commission recommendations are a shell game. What they amount to are more cutbacks to health care and education," says AFL President Les Steel. "By moving all resource revenue to the new Heritage Fund, the Commission wants to starve health care and education by $2 billion a year."

Using government of Alberta figures, the AFL shows that implementing the Commission recommendations regarding resource revenue would lead to a $2 billion shortfall for health care, education and other program funding (please see attached backgrounder).

The AFL argues that the Alberta budget is dependent upon resource revenue for a sizeable portion of expenditures. The 10 year average dependency (factoring for inflation) is $4.6 billion, which is more than a billion higher than recommended by the Commission.

"Strip away the accounting games, and what this means to the average Albertan is more crowded classrooms and more hallway medicine," Steel adds.

Steel also points out that the Commission recommendations will create permanent labour strife with teachers, health care workers and other public sector workers. "The Commission wants to lock-in Lyle Oberg-style labour relations," Steel observes. "The government wants to call all the financial shots without getting its hands dirty at the negotiating table."

Since the government sets the budget for school boards and health authorities, they determine the amount of money available for salary increases. This limits the local authority's ability to negotiate. The Commission recommends that the government say to these employers that "the budget is the budget", and that no new money would be forthcoming to meet settlements.

"This is a carbon copy of Lyle Oberg's approach to the recent teachers' negotiations - and it led to a strike. I predict we will see much more of acrimonious relations under this approach to budgeting."

Steel also criticized the Commissions endorsement of Public-Private Partnerships (PPPs) for capital projects. "Everywhere PPPs have been tried, they have ended up costing the taxpayer more and operating without adequate accountability and transparency. Why is the government going down this failed road?"

"The Report seems mistitled. Rather than 'From Good To Better', it should be called 'From Bad to Worse'." Steel concludes.

*Backgrounder attached*

Backgrounder - July 8, 2002

Resource Revenue Dependency, 1993-2002

Year Resource Revenue ($millions, 2001 dollars)
1993 $2,651
1994 $3,374
1995 $3,954
1996 $3,191
1997 $4,528
1998 $4,194
1999 $2,566
2000 $4,512
2001 $10,833
April, 2002 $6,200

10 year average:  $4.6 billion


Commission Recommendations' Effect on Government Revenues

2001-2002 Actual

Non-Renewable Resource Revenue  $6.2 billion

Total Revenue        $22.0 billion
Total Expenditure    $21.2 billion
Total Surplus        $770.0 million

2001-02 Commission Recommendation1

Transfer From Heritage Fund  $3.5 billion2

Total Revenue        $19.3 billion
Total Expenditure    $21.2 billion
Total Deficit          ($1.9 billion)3

NOTE #1:  Impact on provincial budget if Commission Recommendations were implemented for the 2001-02 fiscal year.

NOTE #2: The Financial Management Commission recommends that all non-renewable resource revenues go into the Heritage Fund. A legislated amount would be transferred to general revenues for the purpose of funding programs and services. The Commission recommends $3.5 billion per year.

NOTE #3: Under the Fiscal Responsibility Act, the Alberta Government is not allowed to run a deficit. Expenditure reductions would be required to make up the difference.

For further information contact:

Les Steel, AFL President   @ 780-483-3021 (wk) / 780-499-4135 (cell)

Jason Foster, Director of Policy Analysis @ 780-483-3021 (wk)

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